Preparing for Estate Planning: Steps

1) Find, sort, organize and store

If you have not already gathered all your records for storage in one place, do so now. Designate a file drawer — two, if necessary — for “The Estate of Mary

and John Dough.” Don’t put it under a bed or in the garage. It should be in plain view and labeled so an executor can find it.

2) One account per folder

Don’t put things in file folders labeled “Insurance” or “Mutual Funds,” with several accounts intermixed. Neither you nor those who may have to sort through the myriad pieces of paper will enjoy going on a scavenger hunt. If you have an insurance policy, a mutual fund and an IRA account with the same institution, each should have its own folder: “Acme Insurance,” “Acme Mutual Fund” and “Acme IRA.” Similarly, if you and your spouse or companion each have an account with the same institution, each of you should have your own folder.

3) Bottom-up organization

When you pull out a folder, it is useful to know that the top item is the latest report or accounting you have received from an institution. Conversely, the bottom item in the folder should be a copy of the originating paperwork that launched an account or policy — the one that tells you the starting date, the starting value, the beneficiaries you designated, etc. When removing an item from the folder for any reason, place a Post-It note or a piece of colored paper at the point where the item was removed and note what the item was.

4) Review and update beneficiaries.

A 40-year-old insurance policy you haven’t looked at for a long time may designate a beneficiary (or contingent beneficiary) who is no longer living, or whom you no longer care to designate. Call your agent, stockbroker or banker and request a “Change of Beneficiary” form. Failing to update beneficiaries may cause problems when you go to re-write your will or establish a trust, because you may be leaving a trail of conflicting directives that only a court can resolve.

5) Summarize your estate on one page.

Listing all your assets in various categories on one page (well, two if you are really wealthy) is a wonderful tool for you and the professionals who help you because you can see at a glance where your wealth resides, and in what categories. To say that you have an estate of $3 million is interesting. But to be able to see $2.8 million of that is yours and $200,000 is your spouse’s is a real signal to reallocate your assets to reduce the bite of estate taxes. Similarly, that one-page summary may help your advisers to see that you are “overexposed” in one category of assets and not taking advantage of another category.

6) Fully articulate your estate inventory.

Here is a project that will take some time. You need to spell out each and every asset in terms of the date when it was acquired, the price or “basis” of the asset, the address of the institution where the asset resides, your contact at that institution, his or her phone number and/or e-mail address, and information about the history of the account. (See examples provided in following sections.) This archeology and documentation will be appreciate by you when your memory has faded, by your spouse when you have departed, and by your executor.

7) Provide your inventory to key people.

Your spouse, executor, children, lawyer and financial planner should — at the very least — know where to find your inventory if and when you become indisposed. You may feel comfortable providing everything in full to everybody involved. Or, you can provide a summary, with specific amounts not disclosed. Unless you are a curmudgeon or you wish to plan a punitive disposal of your estate, discuss what you have done to this point with your significant others.

8) Select a cycle for updating your inventory.

You may wish to review and update your inventory each year at tax time. Or in the late fall in order to decide whether assets should be reallocated before the end of the tax year. Or on your birthday. Whatever. Just plan to do it regularly. If you are keeping track of the worth of your assets, you might want to review and update your inventory after a period when the stock market has been particularly bullish or bearish.

9) Define your estate objectives.

This step wouldn�t have been possible if you hadn�t done the previous steps. Or, it might have been based on false assumptions. If you simply go to a professional and ask, “What should my estate plan be?,” there is always the possibility the estate-planning professional will suggest a “one-size-fits-all” approach or will push products and services that are lucrative to the professional whether or not they serve your needs. Skip this step at great risk — it�s the key to successful and rewarding estate planning. (See next section for the estate objectives of Mary and John Dough.)

10) Select your professional resources.

Assemble your estate-planning team by talking with friends and colleagues who have used lawyers, accountants and investment advisers. At times these people may have to work with each other, so try to find professionals with whom you feel comfortable and whom you feel others would find compatible. When you work with three or four different individuals, you are bound to get conflicting advice on occasion. You’ll have to decide whether one professional is your dominant adviser to whom all others must fit their work, or whether you are able to decide whose advice is paramount in various situations.

Preparing for estate planning. It’s a lot of work. But it’s highly rewarding if you like the feeling you’re in charge of what happens to your assets, whether you’re planning to use them yourself, pass them to children or contribute them to charity. And, if you don’t do the work, the federal and state government will exact what they decide is their share of your estate.


This material was prepared by Todd Hunt, director of the Retired Faculty Association of Rutgers University.