Amy Theisen, CFP®
Senior Strategist, Estate and Legacy, Client Needs Research

Home ownership is an exciting dream for a lot of people. While estate planning may not be a dream, like home ownership, it is something very valuable for you and your family.

Surprisingly, there are many parallels between home ownership and the estate-planning process – beyond the fact they’re both major milestones for individuals and their families. With that in mind, we see three common steps with the estate-planning process.

  1. Build a strong foundation Just like your home, make sure your estate plan has a strong foundation. Your foundation is the starting point for all activity and must be carefully designed and built.
  2. Customize to fit your needs – No one wants a cookie-cutter home – or estate plan. Personalize your estate plan to your individual situation just as you would when you decorate your home. You want to match your plan (and your home) to your family’s lifestyle.
  3. Update and maintain – You update and maintain your home to keep it current and avoid unwanted problems. The same applies to your estate plan. Ignoring required maintenance or reviews has the potential to create future problems in both scenarios.

Build a strong foundation

Putting a set of core estate-planning documents in place is essential to protecting yourself and your family. So, what does a strong foundation look like? It’s more than just a will or a will and trust. A strong foundation encompasses putting multiple documents in place that go beyond how your assets will pass and naming who would care for your children. It also addresses who can make medical and financial decisions on your behalf, if needed, incapacity planning, and it also defines health care directives.

You’ll need to work with your attorney to ensure you have a combination of a will or a will and trust, a medical and financial power of attorney, and medical directives/living will. This core set of documents can define:

  • How you would like your assets distributed at death
  • Who you would like to be the guardian of your children and dependents
  • Who could make decisions on your behalf, should you not be able to do so or become incapacitated
  • Your desires related to medical and end-of-life care

If you are a business owner, you will also want to discuss what additional documents are appropriate based on your individual situation. As each state is different, work with a qualified estate-planning attorney to draft and execute those documents most appropriate for your situation.

Customize your plan and incorporate your specific wishes

When you’re establishing your documents, there are a number of decisions related to how you can customize your estate plan for your family’s specific situation. A well-thought-out estate plan incorporates your specific wishes and directives based on the known facts.

Who do you want to name in your documents as your executor or trustee? Who would you like to act on your behalf if you are no longer able to do so (e.g., make medical decisions)?

Naming individuals in your documents is an important consideration as well as a serious responsibility. Carefully consider you who appoint in each role and discuss their responsibilities to ensure they are comfortable with what you are asking them to do. Consider these issues:

  • What is the age of those you have named in your documents to perform duties? Are they mature enough to handle the decisions that may need to be made? Could their age or knowledge/maturity impact their ability to fulfill their duties?
  • Where do those named reside? If you have named someone out of state to be a guardian, does that meet your family’s needs? Would they be able to accomplish their required duties if they do not live locally?
  • Will your selections create conflict with other family members? This is a very delicate subject. It’s important to name individuals you trust and that you know could fulfill the role. However, be aware that without communicating your thought process, there could potentially be hurt feelings, unintended consequences and misunderstanding.

Be sure to discuss these responsibilities with those you’ve named in your documents. It’s equally vital to share the location of these documents – and any relevant passwords – so the paperwork is accessible. Providing insight into why these individuals were selected and what you are hoping to achieve will allow them an opportunity to ask questions and clarify your wishes.

Leaving assets to heirs

When leaving assets to heirs, there are a number of considerations as each situation is unique. 

Do you want to leave assets outright or in trust?

One consideration when passing assets to heirs is how the assets will be distributed. You’ll need to think about not only the specific dollar amount and who receives what, but also if you want to pass the assets outright with no restrictions or you would like to place the assets in a trust. A trust will allow a greater amount of flexibility and may also be needed to execute some tax-planning strategies.

Outright gift

While an outright gift may be simplest, there are a few items to consider.

  • Are my heirs mature enough to receive the assets and not squander them?
  • Do I foresee any concerns related to creditor protection, substance abuse, divorce?
  • What are the ages of my beneficiaries? Will the assets spoil my heirs and impact their work ethic?

Leaving assets in trust

Many choose to leave assets in trust rather than give them outright. A trust could provide you with more control over how the assets are distributed, but again, there are a few items to consider. 

  • What are the costs associated with a trust? Would the costs associated with providing trust services be appropriate based on the asset balance?
  • Do I have someone who can/will act as a trustee?
  • Will my heir(s) resent me? Will they think I don’t see them as responsible?

Leaving assets in trust requires additional thought, administration and expense. When you select someone to act as a trustee, review the responsibilities to ensure they are comfortable. If you do not have an individual to act in this capacity, consider naming a corporate trustee, such as the Edward Jones Trust Company. Note: Many corporate trustees have minimum fees as well as restrictions related to the class of assets they will accept for administration.

Whether you choose to leave your assets outright or in trust, consider a few other items as you think about how to personalize your plan.

Equal vs. Fair

One of the questions many individuals grapple with is the equal versus fair decision. If I have two children, should each child receive half of my estate? On the other hand, perhaps one child is an attorney and the other provides care for their disabled child. Does it make sense to provide for the two equitably or differently? There is no right answer. Should you choose to provide for your children differently, consider sharing your thoughts on how you chose to distribute the assets. In the absence of communication, heirs will create their own narrative, which may or may not have been a factor in your decision.

Equalizing the estate – are all assets created equal?

Many individuals select specific assets to distribute to heirs. For example, you may consider leaving one child your cash account, another an IRA and the third a piece of rental property. On paper, the three assets have a similar fair market value, but are they all “worth” the same? 

  1. The cash account is the most liquid asset with a determinable value. Should your heir need to access these funds, they would be immediately available.
  2. The IRA value may be the same as the cash account, but the tax treatment may be different. It is possible there will be some associated federal income tax on its distribution. Did you take the income tax obligation into account?
  3. Key factors to consider when leaving someone real estate are liquidity (how easy it is to monetize the asset) and the funds needed to care for the property (maintenance and real estate taxes). If your heir needs to access the value of the property quickly, would that be possible? An immediate need to liquidate the property during a market downturn could make for a situation where the property may be sold well below what was initially anticipated.

Shared ownership

Your family has great memories of spending time together at the family lake house or cabin, and you would like to pass this property on to your heirs to enjoy together. Is shared ownership of a property a good idea? 

  • Who will make the decisions on how to manage the property? How will conflicts be addressed if everyone has the same ownership percentage?
  • Who will pay the maintenance expenses? Will expenses be paid based on ownership interest or usage percentage? Perhaps one heir is not interested in using the property because they live far away; will they want to pay their “fair share” of the expenses?

Leaving a property in shared ownership has the potential to create conflict. Assumptions are made, and your thoughts may not be consistent with those of your heirs. They may not love the property as you do. The key is to think through the implications for your decision and discuss with the involved parties. Should you choose to leave property in a shared ownership structure, consider a document that addresses usage, maintenance expenses and real estate tax. If there are heirs who have strong feelings related to keeping a property in the family, you could set aside a separate fund to provide for the care and maintenance of that real estate.

Maintain your plan and update as needed

Similar to homeownership, you can’t put your estate plan on autopilot. Those things in life that are most important to us require care and attention. Putting an estate plan in place is a great accomplishment, but it requires monitoring and attention. Many changes in circumstances or goals could have significant implications on your plan and would require an update. As a rule, you should review your estate plan every three to five years (or sooner if there are tax law changes or changes to your personal situation). When you meet with your financial advisor annually, it is a best practice to confirm your goals have not changed and review how your assets are titled. Should you acquire any new assets or open new accounts, verify they are titled and coordinated to complement your estate plan.

Common triggers for a review/update:

  • Birth, marriage, divorce or death
  • Change in residency
  • Inheritance
  • Change in tax law
  • Business sale or change of employment

Don’t forget to sign and execute

Blueprints direct the builder how to construct your dream home. But the blueprints are just the first step; you still need to build the house. Similarly, your attorney drafts your estate-planning documents, but you still need to sign and complete all action items to execute your documents.

A final key part of the planning process that’s often neglected are the steps in the execution of the documents.

  • Once you receive your final estate-planning documents, work with your attorney to ensure everything is properly signed.
  • It’s not uncommon for your plan to require additional administrative paperwork such as opening new accounts as well as potentially retitling some of your assets or accounts. Your financial advisor will work with you to open – or make changes to existing – Edward Jones accounts.
  • Don’t skip any steps in the process.
  • If you are unsure of any aspect related to execution, clarify with your attorney.

You've worked many years to build your legacy, and you’ve partnered with advisors to craft your plan. Make sure to take the process to the finish line, and don’t forget to review it periodically to keep it current.

Amy Theisen

Amy Theisen is the Senior Strategist for the firm's Estate and Legacy guidance. She is a member of the firm's Investment Policy Committee Client Needs Working Group, which oversees the financial planning and advice for the U.S.

Amy has a master’s degree in accounting with a taxation focus from the University of Kansas.

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Important information:

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.