By Dr. Julie Alonso, WCI Columnist
Last summer, my husband and I decided to update our wills and trust. Easy, right? Well, I thought so until I started delving into the process. My children are nearly 14 years old, and as they are quickly approaching adulthood, some key questions arose. When my children were 2 years old, we made our first wills with what I now understand was a “contingent trust,” meaning that the trust would automatically be created if the will had to be enacted but otherwise did not really exist in the present.
At the time, we felt pretty good that we’d taken care of that task, shared copies with our family, and kept the original in our safe deposit box. But now, as we had accumulated more assets and financial knowledge over the intervening 10+ years, I felt like this was the time to refresh our estate plan.
Arguably, we should not have waited even two years to do this the first time, but after giving birth to twins during fellowship, making two interstate moves, and starting my first attending physician job, we did our best. We used the legal plan I subscribed to through my job at the time to find a lawyer, and most of the cost was covered by the plan. One of the most important tasks we did in our estate planning was obtaining non-employer-sponsored term life insurance for my husband and me while I was pregnant, so that was already completed. About five years ago, we doubled our life insurance coverage to feel even more secure in our contingency plans. I also have additional life insurance and AD&D through my current job, but I think of that as more of an extra and not my primary coverage.
I know of a colleague who was between jobs when they were diagnosed with a terminal illness and only had employer-sponsored life insurance. They ended up without any life insurance benefits to leave their family.
In talking to friends and acquaintances even recently, I have encountered several with older kids or teens who do not have wills in place. They just have not gotten around to it. Leaving the distribution of my estate to a court to decide is definitely not something I would ever want. Particularly when it includes my most precious assets—the care and welfare of my minor children.
So, what were the tips, tricks, and highlights of the whole process of going through another round of estate planning?
Determine Your Estate Planning Goals
For many, the goal is to leave your heirs with a sense of financial security and/or to leave a legacy behind with charitable giving. Taking time to think about this on your own and/or discuss it with a partner if you have one or a trusted family member or friend can be helpful to get into the right mindset.
Finding an Estate Planning Attorney
There are lots of options out there these days to help with estate planning. Of course, you could use an online legal service that specializes in wills and trusts. It seems like those abound these days, but there are limits to those services if you want to customize your directives and/or have a deeper understanding of the options and process. A good route of referral would be to ask colleagues or friends who have had positive experiences.
I found an attorney through my local medical society, which has affiliated professionals who it vets and recommends for various services. I read online about this attorney’s philosophy and professional experience and also looked at who was recommended in the local doctor groups on social media. The key is that you must feel a sense of fiduciary trust and personal comfort with the attorney before proceeding. Our attorney also offered a discount to medical society members, and his rates seemed on par with other professionals in the region, which ranged from $3,000-$4,000.
We did an initial free consultation and a first meeting on Zoom. We had another in-person meeting to ask a lot of questions and make our wishes known, and we had some e-mail exchanges back and forth to clarify things before meeting in person again to execute the documents with witnesses. Another nice aspect was that he was a mobile attorney, traveling to his client’s houses for in-person meetings. It seemed to make a potentially overwhelming experience less so. He also included any changes we wanted to make to the documents within the first year as part of the package and a deeply discounted rate for future updates since we would not be starting from scratch.
More information here:
My Children’s Inheritance
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Questions to Consider with Children
Trust distributions can be as simple or complex as you want to make them. If no stipulations are made, the default would be that when a child turns the age of majority, they will inherit their portion of the trust as a lump sum. For many, it's not the ideal scenario for a newly minted adult to come into a potentially large sum of money and other assets all at once. There are multiple strategies to approach this conundrum, and it depends on how granular you want to get. The “what if” scenarios can spiral out of control if you let them. I tried not to get too lost in the details and endless options.
The other main choice is doing a “phased inheritance.” You can give a pre-determined portion of assets held in trust when a child turns 18 and then other portions when they graduate from college, when they turn a specified age (25, 30, 35, etc.), or when they reach a life milestone (getting married, having a child, wanting to buy a house, etc.). You can also stipulate that they may need to be pursuing higher education in some form or fashion. The distribution can be specified as a percent of the total assets or a specified amount. The former seems to make more sense given the unknown of how much one’s portfolio may be worth at any given time. These are all just examples to think through. I found talking to the attorney about what he has seen as well as reading about distributing trust assets to your children to be helpful.
There can also be considerations of issues that may put your heirs at risk of blowing through the trust money—such as substance addiction, gambling, severe mental illness (mania), or other issues. Another special situation would be creating a lifetime trust for a child who has special needs, a disability, or another medical condition that may require lifelong care.
We ended up doing a phased inheritance as follows: 10% at 18; 15% at 22 or upon college graduation, whichever comes first; 25% at 25, 25% at 30, 25% at 35. We figured if they were old enough to run for president, they were old enough to manage their affairs. And if they were not mature enough by that point, would a few extra years really make a significant difference?
For people without children, these principles can still be applied when leaving assets in trust to another relative (niece, nephew, sibling, etc.).
More information here:
When to Give Inheritance Money to Your Kid?
Age-Appropriate Money Conversations: Teaching Kids Financial Literacy
What About Pets?
I had not given a thought to what would happen to our beloved dog if something happened to us. We did not have a pet when we made our initial wills years ago, but we adopted her in 2019 and she has been like our third baby. We all adore her, and we would want to know she is well taken care of no matter what.
I found a pet care calculator where you could estimate the yearly cost of taking care of your pet including food, grooming, veterinary care, etc., while factoring in their expected lifespan. Based on this, we designated what we thought was an appropriate amount to ensure our sweet dog would be well taken care of for the rest of her life. We also designated multiple options of who would care for her if our children could not because they were living in a place that did not allow pets, like a dorm. Any leftover money would go to our children’s trust.
Charitable Designations
Many options are available for leaving a portion (or all) of your estate to a charity that you want to support. You can designate a percentage or flat amount from your estate to go to the charity or a portion of your life insurance benefits. You can create an endowment that could continue to sustain your giving perpetually. You can even specify how you want the money spent by the charity, whether it be for a preferred sub-category, scholarship, or something else.
“My Crystal Ball Is Cloudy”
As a child psychiatrist, I may think about this aspect more than most. While we cannot predict future behavior, we can look to past behavior and temperament in viewing one’s potential heirs. As a parent, I have a lot more insight into my children’s strengths and weaknesses, impulse control, risk-taking vs. risk-averse nature, ability for emotional regulation, and decision-making at age 14 than I did when they were 2.
Just for fun, when they were 4 years old, I gave them the classic “marshmallow test” (a test of receiving a bigger reward for delaying gratification), and they both passed with flying colors. Of course, we know that executive functioning does not fully mature until around the mid-20s, but as they grow, I can see glimpses of what they may be like as adults. In Piaget’s theories of cognitive development, it is around age 11-12 when the “Formal Operational Thinking” stage begins and continues into adulthood. This involves the development of logical thinking, the ability to formulate hypotheses, the ability to approach problem-solving in a systematic way, and the capacity to think abstractly. As my children are squarely in this stage, I can also give them the skills, knowledge, and financial literacy to be better equipped to handle a worst-case scenario.
More information here:
The Gender Role Reversal: Being the High Earner of My Family as a Woman
Justifying and Cash-Flowing a ‘Selective Extravagance’
Designating a Trustee
Who will manage the trust? Easy, just pick someone you trust (pun intended)! Truly, we are lucky to have multiple people in our lives who we felt could take on the role of trustee. But the important thing was asking them to make sure they were comfortable taking on this role and were aware of the responsibilities. We made multiple designations in case one or more of the people we picked could no longer serve in that capacity. Again, we had to be cognizant not to get lost in thinking of too many hypothetical scenarios.
Final Tasks for Estate Planning
Our attorney gave us a blank form where we could list out any specific items like jewelry or collectibles we wanted to go to a particular person. This can be updated as needed. We also had the option to designate a medical Power of Attorney (POA) and a Living Will. We also have to store the will and trust documents in a safe place.
In the process of doing all of this, I mentioned it to a few close friends which led to some meaningful conversations. One very close friend asked if my husband and I would be listed as guardians for their children in their will. Another friend asked us if we would help guide their children’s religious upbringing if they were no longer here. We agreed to both of these asks.
A key step at the end was to change the beneficiaries of our accounts to the name of the living trust. This was pretty easy for many of the accounts, involving a simple online request or update. For our life insurance policies, we had to fill out a multi-page form and mail it in, but it still wasn't too onerous. Although updating our will and trust took more time, thought, and consideration than I figured it would, it gave us emotional peace knowing that we have our wishes in place and a plan we are comfortable with going forward.
Have more questions about estate planning or protecting your assets? Hire a WCI-vetted professional to help you sort it out.
Have you had to redo your estate planning? What was your experience like? What other tips do you have for those who haven't gone through this process? Comment below!
