November 15, 2021 / Insight from Angus Watt, Senior Wealth Advisor
When I was a kid, most people didn’t talk openly about their money. They didn’t talk about finances in front of the family, and they certainly didn’t discuss dying. Those conversations were too taboo to have out in the open if they happened at all.
I’m glad that as years have passed people now see greater value in having these conversations. Adult kids today are often less afraid to ask their parents questions like “What can we do for you as you age, or after you’re gone? What are you worried might not happen, and how can we make sure it does?”
These questions lie at the heart of estate planning. If financial planning is managing our money now and, in the future, then estate planning is about what happens to it after we’re gone. Think of it like an audit at the time of death. Your books get opened, assets and liabilities get tallied, and what’s left is distributed according to your wishes.
Is it really that simple? As with most things in life, the answer depends. Comfort comes from preparation. A well-rounded program answers tough questions with a personalized plan of action.
There are many facets to estate planning, but three hallmarks of a responsible approach include personal directives, insurance coverage, and naming and clarifying the role of your executor.
Personal directives answer questions about what you want to happen if you are suddenly incapacitated. The absence of personal directives can harm families by failing to instruct family members (who may have conflicting opinions) about your wishes on critical health care decisions, like whether to maintain life support. Personal directives often name a person to act on your behalf for non-financial, personal, and health-related issues. They will also name a power of attorney, for someone to act on your behalf in legal matters of your estate while you are alive. Reluctance to define personal directives and lay out these details is a barrier preventing people from developing effective estate plans.
Insurance coverage aims to unburden your estate as much as possible from financial obligations and to answers questions about things like premature death and debt servicing. For example, your estate should have sufficient insurance to supplement income for a family that cannot earn and replace the amount of income needed. A solid estate plan will include an honest and transparent assessment of your debt picture.
Lastly, and perhaps most importantly, is the identification of an executor of your estate. This is a trusted person who will act on your behalf when you’re gone. Executors have a big responsibility to take care of everything from asset management and disbursement, to ensuring your estate is handled how you want in your will. A common pain point that estate planning helps address is clarifying the role of executor, and compensation entitlements that recognize the time required for this role, and the stress it can place on the executor and their family, and others grieving your death.
Estate planning offers certainty, clarity, and confidence to people so that they can focus on what’s most important for them after you’re gone: celebrating your life and sharing in your legacy.