Essentials of Estate Planning


No one wants to discuss the dreaded topic of their own death. Despite the inevitability of death, it is something that most people will go to great lengths to avoid talking about it. Usually, the topic is brought up by an attorney, financial advisor, or a loved one. There are many steps in the process of legacy and estate planning, some of which require a professional. How prepared are investors for their end-of-life and estate planning needs? Unfortunately, many investors are not as prepared as they need to be, so it is important to accomplish the essential components of legacy planning.

One of the most basic components of estate and legacy planning is making a list of all investment, insurance, and bank accounts. This provides families with a location to reference upon the event of a loved one passing away. This document should ideally include all relevant information for an investor’s family to be able to claim the assets or policies. This process may be time consuming to gather every account number, insurance policy, and consolidate the information into one place, but it is a necessary first step in the estate planning process. Despite how important this step is to accomplish, only 56 percent of investors have created a list of all investment/banking and insurance information, according to Spectrem Group research on investor preparedness for estate planning. Over a quarter of investors, 27 percent, plan to do this in the future, however.

Continuing the topic of lists would be creating a list of all non-investment assets such as collectibles, real estate, or any other valuable non-investment related asset. This can be slightly more challenging than compiling account numbers as it involves cataloging assets that are not easily compiled in an account or document. Forty-two percent of investors have made this list of all non-investment assets, while 30 percent plan to do this in the future. This step also makes the inheritance process much smoother for family and loved ones. Part of this process is discussing with family and loved ones an investor’s wishes for all personal effects and all other non-investment assets. Making the lists are not helpful if wishes are not shared with beneficiaries, which is something that 44 percent of investors have done.

Identifying beneficiaries is another simple step investors can take in the estate planning process. This applies to all accounts, and whenever possible it is critical to identify not only primary beneficiaries but also contingent beneficiaries. This makes it very clear who the investor wishes inherits their accounts and makes the inheritance process smoother. Over two-thirds, 67 percent, of investors have identified beneficiaries for all their accounts, and 21 percent of investors plan to do this in the future.

Creating wills or trusts are a legal step that an investor should take during the legacy planning process. Only 61 percent of investors have created a will, and 32 percent have created a trust. Over a quarter of investors plan to create a will or trust in the future. This step would require an attorney to ensure the document is properly drafted. It is also important for investors who create a trust to change the titling on any account that would be included in the will.

There are many other components in the estate planning process, however these are a few good first steps. Investors who have not done any estate planning should begin the process and start discussing these critical steps with their financial advisor.