Diary of a CFP® Pro: October — Ensure Your Legacy with Estate Planning

This month’s insight from Marguerita Cheng, CFP® Pro: In times of uncertainty, be it a global pandemic or a family emergency, we see how important it is to have an estate plan. Estate planning is crucial to leave a legacy for your family, no matter your health status. But more than half of Americans – 56% – don’t have an up-to-date estate plan.

Reality check: A good estate plan can ensure your property ends up in the hands of the person you feel is most deserving. It can also eliminate the stress of complex decision-making for already grieving family members and friends. Here’s what you need to know.

What is Estate Planning? Estate planning is a powerful phrase with a simple aim: To create a plan to protect yourself and your loved ones in the event of sickness, accidents, or death. It’s not a luxury reserved for the wealthy. Suppose you’re a spouse, parent, single person, part of a blended family, homeowner, or business owner and want to control your health care and assets if you become incapacitated or pass away. In that case, you need to answer important estate planning questions.

  • Estate planning can include everything from the type of health care you want to receive, who is allowed to make medical and financial decisions, and whom you want to inherit your assets after you pass away.
  • Despite its importance, many adults overlook estate planning, perhaps because considering your mortality is uncomfortable.
  • No one wants to think about life after they’re gone, but you also don’t want to leave your family without the guidance they need to care for you, your health, and your assets if you become unable to manage it independently.

Why You Need an Estate Plan: Rather than letting your family fight among themselves to decide how to distribute your property and assets, your estate plan can spell out your wishes after your death. There are also estate planning laws to consider. Without a plan, the state’s probate laws could determine how your property is divided after your death, leading to unwelcome surprises.

  • Each state has its probate code that governs how a decedent’s property is distributed after death. It’s essential to understand the laws of your jurisdiction and how they could affect your assets.
  • For instance, without an estate plan, Michigan law requires the deceased spouse’s belongings to be equally distributed between you (the spouse) and his parents if you and your spouse don’t have children together. You’ll designate the beneficiaries to receive your assets.
  • Otherwise, your property could be dispersed to unintended parties by default through the complicated probate process.

Photo by David Morris, flickr.com creative commons

What’s Included in an Estate Plan: Estate planning involves many legal documents and processes. It also requires a comprehensive understanding of the laws in your state, which is why it’s recommended to seek the help of an attorney who specializes in probate and estate planning. It’s also helpful to educate yourself on what you need to include in the plan. While no two estate plans are the same, several similarities exist among even the most complex situations. Most estate plans include:

  • Last will. A will is the principal component of every estate plan, whether you have substantial assets. In your choice, you name who receives your property, your children’s guardian, and an executor to oversee the probate process.
  • A durable power of attorney. A standard power of attorney gives another person the authority to act on your behalf in financial or legal matters. A Durable POA will remain in effect if you become mentally incapacitated.
  • Living will. A living will be not only applicable for end-of-life care. It allows you to specify your desires regarding life-prolonging measures if there’s no hope of recovery.
  • Trust. A trust can transfer your property without going through probate. Because probate records are public, a trust is a better option if you have privacy concerns. It also can control your assets while you’re still living and after your death.
  • Another standard part of estate planning is beneficiary designations. Assets such as 401(k) plans, life insurance, bank accounts, and investment accounts typically allow you to name a beneficiary to receive the funds once you pass away. You don’t need to include the asset in your will or trust by designating a beneficiary because it can skip the probate process.

Legacy Day: Photo by Henderson State University, flickr.com creative commons

Get Started with Estate Planning: It’s easier than you think to establish your estate plan. It starts with a comprehensive look at your possessions and your family’s needs.

  • Inventory your belongings, including real estate, vehicles, collectibles, personal items, checking and savings accounts, life insurance policies, retirement accounts, and business assets.
  • Consider your family’s needs by ensuring you have enough life insurance, name a guardian for your children, and document your wishes for your children’s care.
  • Ask a financial professional to refer you to a qualified estate planning attorney. You can also ask family and friends or check local listings.
  • Interview several candidates and understand the fees involved before making your final decision. Once you hire an attorney, work with them to review your beneficiary designations and establish your estate planning documents.
  • Remember: The attorney has the legal expertise, but it’s your estate plan. If you’re not comfortable with the attorney’s suggestion, make your concerns.

Keeping Your Estate Plan Up to Date: Setting up your estate plan is only half the process. Like other areas of financial planning, your estate plan should evolve. Your assets, beneficiaries, and wishes can also change as life changes. It’s a good idea to review your estate plan regularly or at key life events:

  • The birth or adoption of a child or grandchild.
  • When a child or grandchild reaches the age of majority.
  • Death or a change in circumstance of the named guardian for your minor children.
  • Marriage or divorce.
  • The purchase of a home or other significant asset.
  • If you start or close a business or experience a career change.
  • Federal or state law changes regarding taxes and investments.
  • If a beneficiary passes away or becomes disabled.

Your estate plan can become more complicated as you experience life-changing events. Review your estate plan independently and with an attorney to get the legal advice you need to set up your estate plan. Then, revisit it regularly, at least once every five years, to keep it up-to-date and ensure it reflects the legacy you want to leave for your family.

The bottom line: Estate planning isn’t new. The passing along or distribution of property has been around for as long as people have had property. However, laws have changed regarding inheritance, investments, and taxes. As a result, we must change how we protect and pass along our assets.


Photos by Judith Jackson, flickr.com creative commons (top) and from Legacy Day at Henderson State Collect, flickr.com creative commons (center) and (bottom) by David Morris, flickr.com creative commons

Stay tuned for next month’s installment of Diary of a CFP® Pro!

About Marguerita M. Cheng, CFP® Pro: Rita is the founder and Chief Executive Officer of Blue Ocean Global Wealth.  She has also been a spokesperson for the AARP Financial Freedom Campaign and a regular columnist for Investopedia & Kiplinger. Previously, she was a Financial Advisor at Ameriprise Financial and an analyst and editor at Towa Securities in Tokyo, Japan.

Certifications: CFP® professional, Chartered Retirement Planning CounselorSM, Retirement Income Certified Professional®, and a Certified Divorce Financial Analyst. As a Certified Financial Planner Board of Standards (CFP Board) Ambassador, Marguerita helps educate the public, policymakers, and media about the benefits of competent, ethical financial planning. She serves as a Women’s Initiative (WIN) Advocate and subject matter expert for CFP Board, contributing to the development of examination questions for the CFP® Certification Examination.

Awards: Ameriprise Financial Presidential Award for Quality of Advice and the prestigious Japanese Monbukagakusho Scholarship. In 2017, she was named the #3 Most Influential Financial Advisor in the Investopedia Top 100, a Woman to Watch by InvestmentNews, and a Top 100 Minority Business Enterprise (MBE®) by the Capital Region Minority Supplier Development Council (CRMSDC).

Rita volunteers for several organizations: CFP Board Disciplinary and Ethics Commission (DEC) hearings, she has also served on the Financial Planning Association (FPA) National Board of Directors from 2013-2015 and is a past president of the Financial Planning Association of the National Capital Area (FPA NCA).

Click here to learn more about Blue Ocean Global Wealth and here to email Marguerita!

Blue Ocean Global Wealth headquarters:

9841 Washingtonian Blvd., #200
Gaithersburg, MD 20878
301.502.5306 / 888.731.3117 (fax)