It’s a brand-new year, so if you haven’t thought about your estate plan in a while, now is the time to make a resolution to do so. Family dynamics change; people relocate, get married, divorced, have children or grandchildren. All of these life events affect your estate plan.
Unfortunately, making New Year’s resolutions is almost as big of a tradition as abandoning them. In fact, surveys have found that around 80% of New Year’s resolutions fail.
So, first let’s look at why so many New Year’s resolutions fail. After that, we can identify some clear, attainable estate planning resolutions that will help you in the coming year.
Sticking to Your New Year’s Resolutions
What’s to blame for the horrible failure rate of New Year’s resolutions? Well, often resolutions are unrealistic, over-ambitious, or simply too vague to be achievable. These kinds of resolutions set you up to fail since it’s almost impossible to know what success looks like.
A better approach is to identify goals that are practical, attainable, and have clear objectives. To borrow a phrase from the business world, you need to focus on leading indicators, not lagging indicators.
Imagine a software company whose resolution is to increase sales. Instead of framing the goal as the end result (a lagging indicator), it could identify and focus on the steps that lead to that desired outcome (a leading indicator). So, one of the company’s resolutions could be “make 10 sales calls each day.”
Similarly, if you want to lose weight, you would be better off resolving to, for example, “walk 20 minutes a day” (leading indicator). Doing so gives you daily, achievable goals, that ultimately produce the result you want.
Resolutions for Better Estate Planning
Based on what we just learned, a resolution to “fix my estate plan” or “protect my assets” is likely to fail because it focuses on lagging and not leading indicators. Instead, you want to make estate planning resolutions that are concrete and that you will follow through on.
However, estate planning is a highly specialized field, so you may not know what kinds of resolutions to make. That’s why we are here to help.
Below are some estate planning resolutions that focus on achievable goals and that are critical for the long-term effectiveness and health of your estate plan. Feel free to choose one, some, or all of these resolutions. Or, if you want to develop some estate planning resolutions that are entirely bespoke, simply call (561-998-2362) or email (Paul@PLabinerEsq.com) to schedule a time for us to talk.
Pro Tip: All the resolutions below are worthless unless you already have an estate plan in place. If that is not the case, your most important resolution for this year should be to talk to an estate planning attorney about a comprehensive estate plan.
I Resolve to…
- …Review and Revise My Will: In the past 5–10 years there have been a number of changes to estate planning–related laws and statutes. For example, the 2017 TCJA and the 2019 SECURE Act had wide-ranging impacts on estate planning, asset protection, and tax planning. Moreover, family circumstances are constantly evolving, and your will should reflect the current situation. You should plan to review and revise your will as well as your revocable trust, healthcare proxy, and other estate planning documents to reflect new legal and family circumstances.
- …Update My Power of Attorney: A Power of Attorney (POA) is a document that grants the capacity to manage your finances and property, make financial decisions, and conduct financial transactions in the event that you are unable. Woefully out-of-date POAs may fail to include the necessary terms to reflect 21st-century financial transactions and assets (e.g. cryptocurrencies). Additionally, you should review to whom you have granted this power to make sure they are willing and capable to execute these duties.
- …Fund All My Trusts: Trusts are powerful estate planning tools, but the trust by itself is worthless if you haven’t fully funded it. Especially when using online services or downloadable forms, people unknowingly leave their trusts half-finished, which haunts them down the road. Regardless of the effort you expend to create a revocable trust, special needs trust, or life insurance trust, if the correct assets are never transferred to those trust entities, these instruments will not accomplish what you intended to accomplish.
- …Review How My Assets Are Titled: Properly titling your assets is a critical estate planning and tax mitigation measure. After you’ve catalogued your assets, review how they are titled (i.e. who owns them). So, are assets that should be transferred to trusts actually transferred? Are savings and checking accounts properly listed as jointly owned? Are real estate assets owned by you alone, jointly by you and a spouse, by an LLC? Again, improper asset titling can quickly derail even the best plans.
- …Organize My Digital Assets: Digital assets, in short, are any computer-, internet-, or digital technology–based account that requires login credentials. Identifying and accessing all of these digital assets will be a critical job for the executor of your estate, but without a comprehensive list of the platforms, usernames, and passwords, managing these assets will be very difficult. Even though some digital assets won’t have significant economic value, they may have massive emotional value to your family. Take the time to catalog your digital assets, including online banking and investment accounts, retirement accounts, mortgage and loan portals, email accounts, streaming platforms, social media accounts, and more.
- …Include My Crypto Assets in My Estate Plan: Because the technology is new and the regulations are in flux, people don’t have experience in managing cryptocurrencies long term. You should resolve to incorporate into your estate plan specific directions for the safekeeping and tax-efficient transfer of these digital assets. First off, crypto assets are subject to estate and gift taxes and will go through probate, unless you plan accordingly. Second, to access and manage your cryptocurrency holdings, your executor will need login information for exchanges or broker platforms, two-factor authentication credentials, passwords for personal crypto wallets, and/or location of physical paper or hardware wallets. You should resolve to record all these credentials in a safe and secure place for your heirs, integrate the assets into your current estate plans, and explicitly designate in your power of attorney, will, or revocable trust who should receive custody of these assets.
- …Discuss My Estate Plan with My Family: A big benefit of an estate plan is the ability to forestall intra-family conflict about how you wanted your estate handled. But, even if you might think your estate plan is self-explanatory, it may still be confusing to your family, leave them with unresolved questions, and lead to infighting. Estate disputes can be horribly damaging to the value of an estate and to family cohesion. The way to avoid this is to discuss the choices you’ve made with your family so they aren’t blindsided by provisions in your will.
- …Review My Fiduciary Designations: The proliferation of new trust and estate planning techniques have led to an equal proliferation of fiduciaries and other positions. When you created your plan, you designated (among others) a personal representative, trustee, and agents to act as your power of attorney for financial and medical decisions. Resolve to review these various fiduciaries to ensure the individuals are still willing and capable of discharging their duties. Revisions to your fiduciary designations are necessary to avoid situations where your ex-wife’s brother is listed as a trustee or you have had a falling out with the person designated to make healthcare decisions for you.
- …Review My Beneficiary Designations: Beneficiaries are your designated recipients for retirement accounts (401k, IRA), life insurance policies, and others. Because assets with beneficiary designations transfer by operation of law, i.e. outside of your will, it’s critical that you review and revise them periodically, especially as these assets tend to account for a large portion of most estates. Out-of-date beneficiary designations are dangerous; you don’t want your ex-husband to receive your 401k or your life insurance policy to go to a child instead of a trust.
- …Administer My Plan Properly: If your estate plan involves trusts, it is critical that you properly administer those entities. The protections afforded by these instruments can be ruined if you allow unauthorized signers to execute documents, make inappropriate distributions, ignore filing income tax returns, don’t make required annual trust accountings, or fail to keep orderly financial records. Make a plan to understand and follow the legal formalities for your trusts and other estate planning instruments. If you are unclear about any of the terms of administration or what needs to be done from year to year, resolve instead to discuss your plan with your estate planning attorney. I understand that this is probably the most unexciting resolution of them all, but it may also be the most important.
Let’s Talk Resolutions
Resolving to improve your estate plan is fantastic, and we are here to help you decide on the right resolutions and stick to them.
If you want to discuss any of the New Year’s resolutions outlined above—or want to make some unique ones—don’t hesitate to schedule a complimentary Financial Legacy Review. Call me at 561-998-2362 or click the button below to request a consult.