Welcome to the 15th issue of Metrix that Matter, a weekly newsletter from WEALTHMETRIX that helps you focus on what matters most for building and sustaining wealth. Every Saturday, we share an educational essay with actionable takeaways to guide you on your journey to financial independence.
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What you’ll learn in this issue:
• The easiest place to start with your estate plan
• The essential documents you need in place
• When to review your estate plan
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There are so many financial planning tasks that are easy to put off to another day.
Saving for retirement. Saving for college. Getting life insurance.
Despite the long-term benefits, each of these require short-term sacrifices. And in our busy world, there is always something else that feels like more of an immediate need.
Above all, there is one task that gets delayed more than any other: taking care of your estate planning needs.
It’s easy to understand why. Estate planning is a process that involves answering a series of uncomfortable questions about end-of-life situations and circumstances. Most of us would much rather avoid the conversations altogether.
But no matter how uncomfortable you may feel about it today, it will be even more uncomfortable for your family and beneficiaries in the future if you pass away without proper planning in place. The last thing you want is for someone else to feel the weight of making decisions that might not align with what you would have wanted for yourself, your family, and/or your assets.
In this way, estate planning is the most valuable thing you can do for your family. By doing so, you will feel a huge sense of relief that your family won’t have to navigate a legal and financial maze during a very emotional time of their lives.
Today, we're talking about the essential estate planning moves every family should make.
Start with your accounts: the easiest place to begin
Your first step is updating beneficiary designations on all your accounts. This is often free, takes just a few minutes per account, and most importantly, beneficiary designations typically override your will if there are differences.
Also, beneficiary designations give your heirs much quicker access to money without having to wait months for probate.
Let’s walk through each type of account and what you need to do:
Liquid Accounts
These are your accessible accounts – checking, savings, and non-retirement investments.
First, understand how your accounts are registered. Are they individually or jointly owned?
For individual accounts, you’ll want to add beneficiary designations:
• POD (Payable on Death) for bank accounts
• TOD (Transfer on Death) for taxable investment accounts
For joint accounts, the surviving owner automatically inherits the account, but you should still add beneficiaries in case both owners pass away in a common accident.
Always name both primary and contingent beneficiaries on accounts. If your primary beneficiary is no longer alive, the money goes to your contingent beneficiary instead of getting stuck in probate.
Qualified Accounts & Life Insurance
This includes your 401(k), 403(b), 457(b), IRA, HSA, and life insurance policies. These accounts already require beneficiary designations, but many people set them up once and never review them. The same rule applies: name both primary and contingent beneficiaries.
529 College Savings Plans
These college savings accounts work a bit differently. When you open the account, there is an account owner (usually a parent) who controls the account and a beneficiary (usually a child) who the money is for. If the original owner dies, the beneficiary will remain the same. But you should name a successor owner who will take control of the account.
Simple, but powerful
Even though beneficiary designations seem simple, they’re one of the most overlooked steps in estate planning. It is not uncommon for families to have six or seven-figure accounts with beneficiaries they no longer want, such as an ex-spouse. Taking an afternoon to update all your beneficiaries can prevent some very costly mistakes.
The essential estate planning documents
Once you’ve updated your beneficiaries, it’s time to tackle the legal documents that will guide everything else you own and ensure someone else can make decisions for you if you can’t.
These documents are the instruction manual for family and medical professionals during the most stressful times imaginable. Without them, your family faces expensive court battles and agonizing decisions during emergencies.
Here are some essential documents every family needs:
Last Will & Testament
Your will is the foundation document that covers anything not handled by beneficiary designations. It names an executor to handle your affairs, specifies how your assets should be distributed, and most importantly for parents, names guardians for minor children.
Even if most of your wealth transfers through beneficiary designations, you still need a will for personal property, final arrangements and expenses, and to ensure nothing falls through the cracks. Without a will, state law determines what happens to your assets and dependents.
Letter of Instructions to Executor
This isn't a legal document, but it's incredibly valuable. It's your personal guide to your executor explaining where important accounts and documents are located, account passwords, personal and professional contacts, final wishes for funeral arrangements, and other details that aren't appropriate for a formal will. Your executor will be grateful for the additional information and instructions.
Medical Power of Attorney
This document lets you appoint someone to make medical decisions on your behalf if you're unable to make them yourself. Without it, family members may not legally be able to make treatment decisions, even in obvious emergencies.
Advance Directive (Living Will)
This document outlines your wishes for end-of-life medical care. It guides doctors and family members on decisions about life support, feeding tubes, and other medical interventions when recovery isn't possible.
HIPAA Authorization
This allows specified people to access your medical information. Without it, even close family members may be blocked from getting updates about your condition from doctors and hospitals.
Durable Power of Attorney
Similar to a medical power of attorney, this allows you to appoint someone to handle your financial and legal affairs when you can’t make decisions yourself. Your agent can pay bills, manage investments, file tax returns, and handle other financial matters.
When you need to review your estate plan
It’s important to review your estate plan when you go through major life or financial changes. This includes family changes, such as marriage/divorce, birth/adoption of children, or death of a family member. It also includes other transitions, such as moving to a new state (where estate planning laws may be different) or receiving a large inheritance. Even if you haven’t gone through major life changes recently, it’s good to review your estate plan every few years anyways.
Ultimately, you want to ensure that during the most difficult moments of your family's life, the practical and legal framework is already in place to handle decisions smoothly.
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WHAT TO FOCUS ON THIS WEEK
When is the last time you reviewed your estate plan? Recently? Years ago? Never?
If it’s time for a review, start by making sure all your accounts and life insurance policies have the correct beneficiaries. Then, look to potentially work with an estate planning attorney to draft and/or revise your documents to reflect your wishes.
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