Steps To Take After You Execute Your Estate Plan
You put in the time and effort to create an estate plan – congratulations! Considering that 55% of Americans die without an estate plan in place, you are well ahead of the curve. While taking the first step to protecting your loved ones and your legacy is exceptional, estate plans should be revised and modified when certain life events occur. This leads to the question: What steps should I take after I execute my estate plan?
As a major provider of comprehensive estate planning services in Washington state, our experienced estate planning attorneys work alongside our clients to ensure that their plans are up-to-date, and that all post-execution requirements are met. Properly maintaining an estate plan is the key to effectively protecting your assets, property, and, most importantly, your family. To learn more about how we can help you execute and sustain your estate plan, consider contacting Baxter Legal Services at (425) 686-0574 today.
What To Do After Executing Your Estate Plan: 4 Key Considerations
Immediately after executing your estate plan, there are four key action items that you will want to take into consideration. These action items are important to ensuring that your estate plan is well protected yet accessible to loved ones and that you have accounted for all necessary assets in your plan. In turn, you can rest assured that your assets and belongings are inherited by the people you choose, and that the inheritance process is smooth for your loved ones.
Ensure Proper Storage and Access
One of the most salient issues to address after executing your estate plan is how you will store and ensure access to all of your estate planning documents. There is often a great deal of paperwork associated with creating an estate plan, and it is essential to keep these documents safe after the fact. Moreover, Washington state law requires that the original Last Will and Testament (Will) of a person must be filed with the court following their death. It is therefore important to ensure that all necessary parties are able to access your Will, as well as your other estate planning documents, in the event of an emergency.
Your newly created estate plan should address nearly all aspects of your financial affairs as well as dictate how personal matters are handled following your death. The first step to ensuring proper storage and access to your plan is compiling all the necessary documentation in one place. When organizing all estate planning paperwork, ensure that the following documents are accounted for:
- Original copy of your Will
- Relevant estate planning documents, such as a power of attorney, trusts, and advanced healthcare directives
- Insurance, beneficiary, and relevant tax information
- Digital logins and passwords
- Proof of identity documents, such as copies of your social security card and birth/marriage/divorce certificates
- Titles and property deeds
- Information regarding insurance policies or retirement accounts
- A list of your financial accounts and institutions
Using a combination of storage locations can help ensure that this information is accessible from anywhere. Some of the safest physical locations to store your estate planning documents include:
- A fireproof and waterproof safe within your home
- Your attorney’s office
- Probate court or in the court administrator’s office in your town
- A safe deposit box at a bank (ensure that this is accessible to trusted loved ones such as your spouse, children, parents, and/or siblings)
When choosing where to store your estate planning documents, consider both the safety of the storage device and the ease of accessibility. If your loved ones are unable to access your vital documents, aspects of your plan may be rendered useless. It can be helpful to make copies of the most important paperwork included in your estate plan. Even more effective is creating digital copies of these key documents as well, which can be uploaded to an encrypted online storage vault. If you opt for electronic storage, ensure that your loved ones have access to any usernames and passwords associated with the storage platform or, alternatively, are aware of where you store the relevant hard drive or flash drive.
Finally, it is important to note the benefits and disadvantages of relying on electronic storage for your estate plan. While online storage tools, such as online cloud systems, allow for streamlined organization and access of your estate planning documents, it is vital to maintain physical copies of these documents as well. Some financial and medical institutions require original, paper-signed documents, and electronic copies will not suffice.
Account for Non-Probate Assets
Regardless of whether or not a person dies with an estate plan in place, many of their assets will be held in probate before they can be distributed to beneficiaries. Probate is a legal process in which assets are collected, valued, and distributed to beneficiaries according to the estate plan or the laws of the state. In Washington, there are specific nonprobate assets that are exempt from the process. Through estate planning, it is possible to leverage this technicality to your advantage.
In Washington, the following assets are not required to go through the probate process and, therefore, can be transferred directly to beneficiaries:
- Property held in joint tenancy, including personal vehicles, boats, and real estate. If, for example, a home is jointly owned between couples and there is a right of survivorship, the surviving spouse can obtain the other half of the ownership interest without needing to go through probate. Establishing a right of survivorship is key.
- Joint bank accounts (with a right of survivorship)
- Bank accounts with a payable-on-death beneficiary
- Any trust that becomes effective upon the death of the grantor
- Property held in a Community Property Agreement
- Specific small assets, such as bank accounts up to $2,500 in value, remaining unpaid wages up to $2,500, or unpaid social security benefits up to $1,000
Accounting for nonprobate assets is essential, as failure to do so can make the distribution process more difficult and burdensome for your loved ones. A comprehensive estate plan will be designed to specifically address these assets, ensuring that beneficiaries receive their inheritance quickly and easily.
A Note on Leveraging Trusts to Avoid Probate
When creating an estate plan, many people express interest in avoiding probate, largely due to time and cost considerations. Often, individuals wish to see their assets directly transferred to named beneficiaries rather than subjecting them to a lengthy, arduous probate process. This can be accomplished through careful estate planning. One of the most valuable tools for individuals who wish to streamline the distribution process and protect their assets from probate is the trust. Trusts, which come in many different forms, are designed to transfer property and assets prior to and post-death in a more flexible and efficient manner.
Create an Estate Inventory for Your Loved Ones
A person’s estate is made up of their assets, property, and liabilities. When a person dies, the totality of their estate must be assessed and valued. While estate planning tools such as Wills and Trusts can help to express the value of specific assets, they are not usually sufficient in reflecting the full estate of an individual. For this reason, following the execution of an estate plan, it is vital to create a full and comprehensive estate inventory for your loved ones.
The thought of an estate often conjures up an image of the assets and property that a person owns. An asset is any resource owned or controlled by an individual or corporation that possesses economic value. Assets can be tangible or intangible, as long as they hold current value or future economic benefit. The vast majority of people own at least a handful of assets, which together comprise a person’s estate. After executing an estate plan, the organization of paperwork, assets, and property is a chief concern.
Simply put, an asset list is a complete listing of a person’s or business’s owned resources. While a Will is a legally binding document that is used as a roadmap for your loved ones to navigate the distribution process, an asset list is not a formal legal document. Rather, it is a tool that can help streamline the process of closing an estate by organizing key information and classifying the property that you own.
Assets come in a variety of different forms, and no two estates are alike in this regard. Some common examples of assets found in an estate include:
- Bank accounts or investment accounts, including brokerage accounts, health savings accounts, and margin accounts
- Retirement savings and 401K accounts
- Real estate and land
- Digital assets such as social media passwords or photographs online
- Collectibles, antiques, and furnishings
- Life insurance policies, including disability insurance and long-term care insurance
- Intellectual property, including copyrights, patents, and trademarks
- Business entities
Compiling a list of all the assets and property that you own is one facet of creating a comprehensive estate inventory. After you pass away, your loved ones will be responsible for fulfilling any outstanding debts and liabilities using your estate. To help expedite this process, organizing a list of all pertinent liabilities can be beneficial. When creating a liabilities list, consider the following:
- Real estate mortgages
- Outstanding business and personal loans
- Private student loans
- Automobile loans
- Open lines of credit
- Outstanding tax debt
- Unpaid court judgments
- Medical debts
It can be helpful to note that the person in charge of evaluating and distributing your estate will be tasked with identifying who specific debts are owed to, the balance owed, and whether or not collateral was used to secure the loan. It is almost important to note that all assets and liabilities should be included in the estate inventory, regardless of how small. Additionally, if you are married, it may be helpful to create a list of the assets that you own together and the ones you own independently.
Organize Your Online Accounts and Portfolios
In the current digital age, more and more people are utilizing digital estate planning tools in tandem with traditional strategies. A great deal of our lives and financial portfolios are contained online, making it important to account for these assets and plan for how your loved ones will inherit them. Unfortunately, in the event of an emergency, many families find themselves locked out of these accounts and unsure of how to gain access. By organizing your online accounts and utilizing digital platforms to grant access to specific people, these challenges can be avoided.
First and foremost, it is important to take note of your online data. Many people scatter their usernames and passwords across sticky notes, spreadsheets, and other digital tools. This can make it difficult to protect your information and access your accounts when necessary. After executing your estate plan, consider identifying key accounts that you consider valuable. The following accounts may be included on this list:
- Checking and savings
- Student loans
- Tax services
- Cloud storage platforms
- Pension, 401K, or other retirement accounts
- Email and social media
- Website hosting platforms
- Other miscellaneous online services, such as Netflix, airline companies, or music streaming platforms
There are electronic password databases available to secure your digital life, protect your online accounts and portfolios, and ensure that your loved ones are able to access your information in the event of an emergency. Some password databases deliver time-sensitive codes to bypass two-factor authentication, which can be helpful.
After organizing your account information and setting up a password database, it is imperative to consider how your data will be handed over. Some password managers have sharing capabilities, allowing you to grant access to specific loved ones. Other services automate the process of handing over access to your accounts. With these platforms, you can specify a timeframe which, if you fail to log into your accounts before the timer runs out, notifies a pre-determined contact(s). Otherwise, it may be necessary to simply leave instructions to the appropriate family member about how to access the database and/or your online accounts. It is possible to write these instructions and leave them with your physical estate plan documents.
Best Practices with Assets
Every estate plan is unique, accounting for a person’s individual financial portfolio, family dynamics, and long-term goals. Even though an estate plan should be tailored to suit your needs and objectives, there are some best practices for establishing an estate plan and protecting your assets. These practices apply generally and can be helpful considerations regardless of how far along you are in the estate planning process.
- Assemble a team to help you create an estate plan. Depending on your goals and financial portfolio, it can be beneficial to seek assistance from an estate planning attorney, financial advisor, and/or a tax professional. Each person in your team can serve a critical purpose and help you avoid common estate planning pitfalls. By working with professionals, you can better maximize your loved ones’ inheritances and, in some cases, reduce the tax burden associated with your estate.
- Leverage different estate planning tools to protect your assets and specify your wishes. A comprehensive estate plan includes more than a Will. While this is an important document, other tools can serve additional purposes and better protect your legacy. For example, a financial power of attorney allows you to specify the person who will make financial decisions in your name if you are incapacitated. Similarly, a medical care directive can be used to outline your healthcare preferences and assign a loved one the ability to make medical decisions for you. Different types of trusts can also be used to hold assets on behalf of a beneficiary and mitigate tax burdens.
- Review account beneficiaries. Some assets may not be accounted for in your Will. Rather, you are given the chance to name specific individuals as beneficiaries. Oftentimes, this person will be guaranteed to receive these assets regardless of what is stated in your Will. Due to the gravity of these issues, it is imperative to regularly review your account beneficiaries and ensure that they are listed according to your preferences.
- Consider guardianship preferences for dependents. If you have minor children or a loved one under your care, it is critical to specify a guardian to care for your dependents within your estate plan. If this is unaccounted for, the decision of guardianship may be left to the court. Before naming a guardian, ensure that you obtain their consent. Moreover, it is important to note that the named guardian does not necessarily have to be the same person who will manage your dependents’ inheritance. Through estate planning, it is possible to name a third party to oversee these assets until your child is of age (legally an adult).
How you manage and account for your assets depends largely on your goals and the types of assets within your estate. A person who holds significant real estate may require different estate planning tools than a person who does not, for example, and a business owner will have different considerations from a pension-holding public worker. The best practices that you implement within your estate plan should be tailored to you and your family, accounting for the specific estate that you worked so diligently to build.
Why Should You Regularly Update Your Estate Plan?
Often, estate plans are made up of complex legal documents that protect large financial resources and dictate major personal circumstances, such as guardianship arrangements. Due to the importance of these matters, it is essential to continue updating your estate plan on a regular basis. Failing to do so can render your estate plan outdated and ineffectual.
Estate plans require maintenance and upkeep to fully optimize their effectiveness. This involves more than simply reviewing your Will, however. If you have a comprehensive estate plan in place, you likely have a variety of legal documents that work to protect your assets and property in different ways. For example, you may utilize a Will to specify your wishes, a revocable living trust to protect your privacy and minimize tax obligations, and a power of attorney to grant a loved one control of your finances in case of an emergency. If you own a business, for instance, you may also have an independent plan to account for the transfer of ownership.
Moreover, even though your estate plan is entirely yours, there are other people involved in the process who you rely on to carry out your wishes according to plan. These people will be responsible for liquidating your accounts, transferring ownership of your assets to named beneficiaries, paying your outstanding debts, and filing your taxes, among other obligations.
When Should You Update Your Estate Plan?
Estate planning attorneys can provide personalized recommendations regarding the frequency of these reviews, but an ideal rule of thumb is every three to five years, or when major life changes occur. Furthermore, it may be necessary to date your estate plan after major legal changes, such as adjustments to tax law or state estate law. For example, in 2019 the SECURE Act was passed, which greatly altered rules surrounding inherited IRAs and 401K accounts.
What Changes in My Life Will Trigger the Need to Modify My Estate Plan?
Certain changes in your life will trigger the need to modify your estate plan in order[MH1] . A well-tailored and effective estate plan is a living document that must be consistently amended to suit your changing financial and personal needs. After experiencing a major life change, it is advisable to review your estate plan and ensure that your named beneficiaries and proxies are up to date. As such, the following are common instances when an estate plan may need to be modified and updated.
Marriage, Divorce, or Death of Spouse
The presence of a spouse has a significant impact on your life, finances, and the way that your assets will be distributed following your death. There are a variety of different marriage-related scenarios that can incite a change in your estate plan. If you have recently gotten married, you may wish to reflect this change in your estate plan, naming your spouse as a primary beneficiary of your estate. Perhaps you have gotten recently remarried and want to ensure that any children from your first marriage are accounted for as well as your new spouse.
Additionally, after getting married, it is important to note that your new spouse will automatically become the beneficiary of several assets of your estate. For example, you may hold assets with joint ownership with “rights of survivorship” including real estate or bank accounts, for instance. In the event of your death, the ownership of these assets will pass directly to your surviving spouse. If you have a pension or retirement account, your spouse may be automatically entitled to receive a portion of these benefits regardless of your beneficiary designation. It is important to keep these factors in consideration when creating and reviewing your estate plan following a recent marriage.
Similarly, revisiting your estate plan is often necessary following a divorce. You likely wish to remove your former spouse as the beneficiary of your estate plan. Some life insurance companies and retirement account providers may automatically nullify a spouse’s share after a divorce is final, but not all. For this reason, it is important to check all retirement assets, pensions, and life insurance policies to ensure that your information is up to date.
The death of a spouse can also trigger estate plan modifications. It is common for married couples to name their spouse as their power of attorney, healthcare proxy, or the trustee of any established Trusts. If your spouse passes away, you may be required to make major alterations to your Will and other relevant documents in your estate plan.
A Note on Long-Term Partners
If you are not married but in a long-term partnership, it is important to note that Washington law generally does not account for partners as it does married spouses. All pertinent information should be explicitly listed in your estate planning documents, as there are not as many legal protections for long-term partners. State-registered domestic partners, on the other hand, are legally considered equivalent to married spouses. Senate Bill Report 2SHB 3104 greatly expanded the rights and responsibilities of state-registered domestic partners, granting domestic partners specific inheritance rights under the law.
Children and Adoption
Having or adopting children is one of the most impactful life events that a person can experience. Regardless of how they enter your life, children substantially alter the way your estate will be handed down after you pass. Financially, it is possible to allocate assets to children through your Will or any Trusts that you establish. While adopted children are considered to be legal heirs under Washington law, stepchildren and foster children must be designated in your estate plan as a beneficiary to receive any inheritance.
Moreover, there are special legal requirements that must be considered for children who are minors at the time of inheritance, and these factors should be accounted for within your estate plan. Moreover, it is possible to nominate a guardian for your child who will assume care of them in the unfortunate event of your death. Finally, you may also want to consider reviewing your estate plan after the birth of grandchildren.
Purchasing or Selling Real Estate
By and large, purchasing or selling real estate can have a considerable impact on the size and value of your estate, therefore affecting the way your assets and property will be distributed in the event of your passing. After purchasing real estate, it is vital to reconsider your estate plan and account for the new asset, ensuring that the division of your property will be conducted according to your desires. Similarly, if you recently moved to a new state, it can be valuable to consult an attorney to ensure that all aspects of your estate plan are still legally valid.
There are estate planning tools that can be beneficial after purchasing real estate, such as the revocable living trust. With this type of trust, you are able to transfer property directly to beneficiaries following your death and/or divide real estate assets proportionally. This can benefit your loved ones greatly, saving time and money while mitigating the likelihood of disputes. A knowledgeable attorney can provide insight regarding how to establish a revocable living trust to protect your home and other real estate property.
Starting or Selling a Business
Starting a business is a momentous life event, often changing a person’s financial portfolio permanently. It is important to address this new asset in your estate plan and ensure that the succession of this business is planned for well in advance. Through your estate plan, it is possible to name the individual(s) who will manage your company in the event of disability and who will inherit the business or be given first right of refusal. As estate planning and business attorneys, we understand how to properly account for business succession through careful and strategic estate planning. To learn more about how to establish or update an estate plan to streamline the transfer of ownership or leadership of your company, consider contacting the experienced estate planning attorneys at Baxter Legal Services.
Receiving an Inheritance
Any major changes to your financial accounts, including receiving an inheritance, may trigger the need to review and update your estate plan. Any time you open a new financial account, you likely want to consider how the title of the account will be transferred after you pass. You may wish to name a joint title owner or establish the beneficiary of the account to expedite the distribution process and avoid probate. Receiving an inheritance can significantly impact your net worth, making it important to consider how you will protect these newly acquired assets.
Diagnosis or Worsening of a Medical Condition
Any serious medical diagnosis, sudden worsening of an existing medical condition, or unexpected accident should bring about an estate plan review. Suddenly, it may become important to ensure that the proper individuals are nominated to make financial or healthcare decisions if you cannot make these decisions yourself. Financial and medical institutions will rely on the power of attorney and healthcare designation documents in these cases, making it vital to review and modify your estate plan, if need be.
Why Should You Consider Visiting an Attorney When Circumstances Change?
Estate planning is a legally complex area of the law, touching on inheritance, succession, taxes, and the formation of contracts. A comprehensive estate plan includes more than just a Will – rather, it is comprised of an array of legal documents that work together to protect the assets, property, and wishes of a person and their family. For these documents to be considered legally valid, they must meet certain requirements and uphold specific standards of Washington state law. For this reason, crafting an estate plan without the help of an attorney may be unwise.
The following are some of the most common reasons to consider visiting an attorney when circumstances change:
- To leverage specific knowledge of applicable state law. Estate planning is a state-specific system, requiring a careful look at the relevant state legal code to ensure that all documents are drafted accordingly. The legal requirements in Washington, for instance, differ from those in Oregon or California. An experienced attorney will be able to navigate these laws with ease, ensuring that all legal requirements are met to ensure that your estate plan is valid and enforceable.
- You have a large, blended, or unconventional family. Having unconventional family dynamics can complicate your estate plan, as it is often necessary to name a range of beneficiaries and divide assets among a group of people. Without an estate plan in place, only your immediate blood relatives will inherit your estate, which is based on Chapter 11.04.015 of the Revised Code of Washington. It is not uncommon for a person to name other heirs outside of their immediate lineage, including cousins, aunts or uncles, or close family friends. Without a well-crafted and thorough estate plan in place, it is impossible to ensure that these individuals will receive a portion of your estate.
- A family member is likely to contest your Will. Family disputes are relatively common during the estate succession period and can delay the process completely. In many cases, involving an objective third party can reduce the likelihood of these disputes by offering an unbiased perspective. Similarly, an experienced attorney can craft estate planning documents with these potential issues in mind, ensuring that your plan is airtight and precise.
- You own a business or investment properties. Some law offices, such as Baxter Legal Services, offer dual-focused services, handling matters related to both business law and estate planning. Business owners or individuals with major investment properties have distinct considerations when creating an estate plan. They must account for the succession of their business or property and ensure that these valuable assets are handled according to their wishes. Failing to account for a business or major investment property within your estate plan can have dire consequences, preventing your loved ones from losing their stake in these assets.
- Tax considerations. When estate planning, it is critical not to overlook the burden of taxes. While Washington state does not have an inheritance tax, there is an estate tax on the right to transfer property at the time of death. Depending on the value of your estate, these taxes can quickly accumulate. Moreover, these taxes are progressive and increase as the value of your estate increases. The Department of Revenue provides a computation of Washington estate tax, which range from 10% to 20% depending on the size of the estate.
- You have assets in other states or countries. As previously mentioned, estate planning in state specific. This means that if you have assets or property in other states or countries, jurisdiction changes, and these assets must be specifically addressed in your estate plan. Some people mistakenly assume that assets held in foreign jurisdictions are irrelevant to their United States- or Washington-based estate plan. As long as you are a United States citizen, however, you are subject to taxes on all your worldwide income and assets, regardless of where they are located. This area of estate planning is highly complex, leading many to seek legal assistance.
- You have a family member with special needs. Individuals with family members who have special needs often utilize different estate planning tools to ensure that their loved ones are cared for after they pass. For example, you may have a child with special needs who will lose access to public benefits if they inherit assets outright. Fortunately, there are estate planning tools that can be utilized to avoid these challenges. A special needs trust, for example, sets aside inheritance so that government benefits will remain unaffected.
Seeking guidance from an experienced estate planning attorney can provide a sense of peace of mind knowing that your estate and legacy will be protected long-term. Absent an estate plan, the distribution of your assets and property will be conducted according to state law and is subject to judicial discretion. Consulting an estate planning attorney can help avoid improper estate succession, mitigate tax burdens, and ensure that your loved ones receive their inheritance as quickly and efficiently as possible.
Contact Baxter Legal Services Today
In the same way that our family dynamics change, and our financial portfolios expand, our estate plans must be adjusted, revised, and reworked to match. Executing your estate plan is merely one step of the process. Many people express the desire to protect their loved ones and ensure that the distribution of their estate goes smoothly and without error. One of the most effective ways to reach this goal is through careful organization and planning.