Make an Annual Effort to Discuss Estate Plan Roles and Responsibilities
The purpose of your estate plan is to ensure your wishes are fulfilled in the event of your passing. But your estate plan can't fulfill you wishes, the key people you name in your plan will. Within your estate plan there are four key individuals that will be in charge of fulfilling your final wishes; the executor of your estate, the guardian of your children, your medical power of attorney, and your financial power of attorney.
These four people will be responsible for ensuring your wishes are carried out. Many people choose these key people very carefully, but don't talk with them on a regular basis about their responsibilities. Choosing the key people in your estate plan is not a set it and forget it decision.
Check to Ensure They Are Still Willing
Every year, you should contact these four individuals to discuss with them the responsibilities and to reconfirm they are both willing and able to fulfill the responsibility. No matter how excited they were when you first asked them, over time their lives may have changed, reducing their willingness or ability to perform the duties.
The first person to talk to is your executor (or executrix). As the person who will execute the wishes outlined in your will, your executor will have a significant amount of work and stress. In addition to dealing with the legal aspects of executing your will, you executor will also likely have to deal with the psychological, social, and family relationship issues that often emerge when settling an estate.
After confirming they are still willing, update your executor on any changes to your estate including changes to your will or beneficiaries. Provide him/her with an overview of those changes and why you made them so that they understand your thinking. You should also update the executor on any major changes to your assets or debts. If you have sold, transferred, or purchased any major assets, even transferring retirement accounts from one brokerage to another, your executor should be updated so they have a basic familiarity of your estate.
You should also update your executor annually about any major changes to debt, such as paying off a mortgage or taking out a new mortgage on a property. These assets and debts will be things the executor will need to deal with, so making them aware of these major changes will help them to more efficiently execute you will.
Finally you want to have a conversation with them about whether or not they feel comfortable managing and handling your type of assets. Most people will be comfortable handling cash assets, stock portfolios, and a single-family home. If you own a business, have rental properties, or have other complex assets that require a deeper skill level to manage, you will want to make sure that the executor feels comfortable managing these assets and has the time to do it.
You may also wish to provide your executor with a summary of these changes so that they can keep them filed for quick use when the time comes. Keeping your family up-to-date on your wishes will also help make the executor's job easier as it will keep family members from questioning the executor's actions.
Your Children's Guardian(s)
The next person on your list to talk to is the guardian of your children. Take some time to discuss the responsibilities and confirm they are still willing to take care of your children upon your death. Regardless of how much they love your children and how strong your relationship is, changes in their life can impact not only their willingness but their ability to take on the significant responsibility of raising children.
They may have recently had children of their own, making it harder to take on the responsibility of raising additional children. Going from zero to two children may be just fine, but going from two children of their own to adding two more could be more than they can handle. Marriage or divorce can also affect whether a guardian is willing or able to take on the responsibilities of caring for your children. Even a major career change or moving to another city may impact whether or not they can serve as a guardian.
In addition to reconfirming their desire and ability to serve as a guardian, it is important you also keep them updated on the finances you have set aside for the care of your children. For example, let them know about any investments you have made to pay for college, the approximate balance of those investments, and your wishes about how the money is to be used. Changes to life insurance should also be communicated if the children are the beneficiaries or you intend the money to be used for the care of the children.
If you have children with special needs or who have developed medical issues, make sure the guardian is informed about the needs and any funding you've established to provide for the child. In the event of your death, the guardian will be responsible for taking care of these conditions and it will be important that medical care not be interrupted as your guardian figures things out.
Finally, use this time to talk with the guardian about how you wish the children to be raised and make sure the guardian is still comfortable with your desires.
Medical Power of Attorney
The third person to update annually is whoever is your medical power of attorney. This is the person that will make medical decisions for you and direct your medical care should you be unable to make decisions yourself. Update them on changes in your desires for medical care, such the care you want if you are in a vegetative state. Communicate those changes to the person directly rather than just updating the legal document.
You should also keep them up-to-date on any developments with your medical conditions. Ideally this person will be familiar with your medical history and be able to begin making decisions immediately should they need to. The last thing you want is for someone to be making medical decisions on your behalf while they are also trying to catch up on your medical history.
Of course, part of this discussion is making sure they are still willing to serve in this capacity and are capable of traveling to you if required. Making medical decisions for another is a significant responsibility and people may become uncomfortable as they realize the full scope of this awesome responsibility.
Financial Power of Attorney
The final person to talk to is your financial or general power of attorney. This is the person who will have access to financial accounts so money can be used by the executor, guardian, or medical power of attorney as they fulfill your wishes. This person should be kept up-to-date on changes in your overall financial situation and the financial institutions your moneys are deposited with.
Additionally your financial power of attorney should be kept up-to-date with all of the wishes you've expressed to the other three key individuals. Your financial power of attorney will be responsible for making assets and finances available to the other key people to allow them to do their jobs. You don't want your financial power of attorney and the guardian of your children arguing over what school expenses are acceptable or your medical power of attorney and your financial power of attorney arguing over what medical treatment you would want.
Talk with Them Every Year
Planning an annual conversation with each of these four people will ensure they are aware of your wishes. Having everyone on the same page as you is the best way to guarantee what you want to happen is actually what happens.
In just a few minutes a week, you can achieve your financial goals. Each week you will receive a simple action item to take to improve your financial situation. Visit our financial challenge page and commit to building your financial plan one week at a time.