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07.10.2020

How to prepare for estate planning

Today is as good as any to start estate planning. For some, this post may be a reminder to focus on the topic they have been procrastinating for years. For others, it may be the first time to think about wealth in light of their temporality.

Since we regularly deal with the issue, we thought it might help share some insights on where to start. You may think that the tools for estate planning are the most critical part. Yes, drafting a will, settling a trust, signing a life insurance policy, and assessing all the correlated legal and tax implications for sure have value and relevance. However, we believe that your groundwork and empathy are equally important to leave a lasting legacy and ensure that your estate is distributed according to your wishes.

The inventory

It may sound trivial to you, but a comprehensive and detailed overview of your wealth is crucial for successful estate planning. What exactly do you own? Outline all sources of wealth and income. Then list all your assets and investments and allocate them to financial asset classes, movable properties, real estate, business and participation, credits, life insurance and annuities, pension plans, collectibles, and luxury items. Wherever possible, this should include the original title of ownership, the current value and past acquisition value, co-ownership information, eventual pledges, mortgages, or other third party rights and information about location and access to your wealth.

Assess all your pending liabilities, loans, mortgages, and tax obligations to allow for a calculation of your estate's net value. The inventory has several benefits: it gives you an idea of how your wealth should be distributed. The discussions with your advisors will be more efficient based on a comprehensive asset overview, and ultimately it will make your successors' job more comfortable when dealing with your estate.

Digital estate planning

Many people overlook this part. It would be a mistake to do so. We are talking about electronically stored (either online or on physical devices) information and data, and all online accounts for email, social media, platforms, and applications. Such assets may have an economic or sentimental value, and that's why you should consider them in your estate plan. Without an estate plan, your successors may have to go through a lengthy process of proving their entitlement to your digital assets. Again an inventory is required, including the location of your digital assets and all access information. Suppose you hold cryptocurrency, coins, or tokens or any other form of digital cash. In that case, these digital assets require a dedicated estate planning strategy, and you may already want to structure and store them in light of future events. Who should benefit from your crypto assets may not be an expert in the asset class, and that's why you should consider simplifying the access and transfer process.

How to deal with complexity

In our experience, there are two main types of complexity in estate planning: your wishes and your assets. You can overcome both. Consider that you will not be there to assist people in understanding your wants, and thus we recommend to keep them concise and straightforward. Regarding your assets, with clarity about your wishes, your trusted advisors can assist in wealth structuring in light of future events.

Your wishes

Define your wishes with an open mind and an open heart. If you seek legal advice for the definition of your desires, we believe that estate planning's human element deserves much more attention than mere legal considerations. The entire process is about your legacy and the persons that should benefit from it, in most cases, your loved ones. If you have unfinished business with some of them, it may be a perfect moment to start the discussion. You may also want to think about fairness in your decisions, which does not necessarily mean distributing in equal parts.

Further, it would be best if you considered how your successors would perceive your arrangements. Empathy for their worries and pressures will contribute to your lasting legacy and how they will keep you in their memory. We take it that your values have been guiding you until here, so upholding them in the estate planning process is another step towards your unique heritage. It's also a perfect moment to reflect on the purpose of wealth in your and your successors' life. Explaining the meaning wealth has for you, and the reasons for your decisions and wishes can console those affected by the loss of their loved one. And you may want to consider which role charitable giving should play in your estate plan. Finally, your wishes should also include an advance healthcare directive and a provision for your financial representation in the event of inability.

Share your plans

With clarity about your wishes, it's time to share them with the beneficiaries. Provided you don't want a Hollywood movie scene where an executor reads your will to first surprised and then stunningly disappointed heirs, we suggest sounding your decisions with the beneficiaries. Estate planning is a results game, and the beneficiaries will evaluate which result has been achieved. In our experience, all too often, disappointment among heirs can lead to devastating fights within the family and result in wealth consumption due to court cases. There will be no second chance to do things right, and thus, talking about your estate plan with your loved ones gives you peace of mind to make the right choices for your lasting legacy. You can enable people with your last will, but only if you know what they are heading for in life. We appreciate that this is an uncomfortable topic. You may evaluate if a direct or indirect approach, with each beneficiary individually or with the entire family, or with the assistance of an impartial advisor, suits your specific situation. In most cases, the outcome for all involved parties will be comfort and ease. If not, you can still revise your estate plan.

Lifetime gifts

If things are complex and complicated, lifetime gifts can be an option to simplify estate planning. Some heirs may appreciate your financial support right now. If you doubt their lasting gratitude for some assets such as real estate, you may keep the usufruct during your lifetime while transferring ownership directly. Just make sure that you keep documentation on lifetime gifts since the information may be needed at a later stage for legal and tax purposes.

Some practical issues

Plan well ahead and agree on the mandate with those who should assist you in the event of incapacity, medical decisions, and end-of-life care. It would help if you let your loved ones know where and how they can access the documents. We further advise keeping a copy with your trusted advisor or notary. Life is full of life events, and thus you should consider estate planning as an ongoing process that adapts to changes in your and your family's life. A regular review will keep your wishes and arrangements up to date and ready for execution.

To conclude

No matter your age or financial situation, it's always a good time to begin estate planning. While your focus may be on the legal nuts and bolts, we want this post to remind you that it's also much more than that. We believe that estate planning's human element deserves the most attention to create a lasting legacy and best results in providing for loved ones. Your advisors may have empathy for the topic but still mainly focus on their technical estate planning part, which is also essential to reach the envisaged outcomes. Thus, it's up to you to shape your unique heritage, which can become the role model for the following generations. Finally, if you approach estate planning with an open mind and an open heart, we trust that you will be on a path to creating ease and comfort for all involved parties, including yourself. 

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