Organizing the Estate
Below is a really nice article on typical estate planning mistakes. This article focuses on the “messy estate” problem. What happens is that the heirs will make one of a couple of mistakes. First, they will miss things. For example, there are a lot of extras in many estates, like life insurance, old pension plans, old 401(k) plans as well as reward points. These things can be missed if the paperwork is not in order. The second thing that happens when you have a messy estate is that the heirs will just hire someone to deal with it – which leads to a substantial reduction in value for the heirs.
Estate Planning Mistakes: Leaving A Messy Estate
Perhaps the last and best test of how much you care about your survivors and legacy is the level of organization of your estate.
There are two parts of your estate to consider. The first part is your physical estate. For most people it is the home and personal possessions.
I’ve talked to many people who’ve dealt with the physical estates of their parents, and most have stories about how much stuff they had to sort through and dispose of. Many people accumulate stuff over their lifetimes and rarely streamline it. Their possessions compound over the decades. Most of them decide, deliberately or by default, to let their children deal with the accumulation. Unfortunately, the children will be doing this while also grieving.
The survivors will feel obligated to sort through all the stuff, because we’ve all heard stories of people hiding cash or valuable items. One family told me they found a $20 bill in every coat, jacket, and sweater in their parents’ house. It added to a nice amount, but they also had to sort through each item of clothing and always wondered how much they missed.
It’s not unusual for the surviving children to spend days, weeks, and even longer dealing with the stuff. One family told me they decided the task was so large they agreed to set aside one weekend a month for a year to meet at their parents’ house and clean it up.
Don’t save stuff because you think the children or grandchildren might want it someday. They won’t. Even family heirlooms don’t stir much interest these days. Don’t think you’re saving it for charity. Most charities now are very selective about the donations they’ll take. It’s the same way with second-hand stores. They won’t take a lot of items, because they can’t sell them.
Margareta Magnusson introduced the world to The Gentle Art Of Swedish Death Cleaning. In her book, Magnusson says part of Swedish culture is for people over age 50 or so to begin streamlining their possessions. It’s done partly as a courtesy to survivors and partly to make your life easier and simpler.
The streamlining process can take a long time. You shouldn’t delay, because it will become harder the older you are. If you haven’t de-cluttered your life for decades, expect this to be a long-term process, not an event. Set aside a day or weekend per month to work on one small part of your house at a time.
I think you’ll feel better throughout the process, and your heirs will be appreciative.
The second part of the estate is your legal and financial estate. It’s also a good idea to organize and streamline your financial assets.
Many people opened accounts at different financial firms over the years and have 401(k) accounts or other retirement plans at different employers. It’s a good idea to consolidate accounts and assets. Consider selling smaller investments and real estate holdings to streamline the estate. You’ll find it easier to manage your assets, and your executor will settle your estate more quickly and at lower cost.
If you don’t organize and streamline, assets are likely to be lost or misplaced. If your executor and heirs don’t know what you own, they won’t look for the paperwork. Even if your heirs locate and claim all your assets, they might have to spend a lot of resources in the effort if you haven’t streamlined and cleaned up the estate.
Most financial services firms have accounts whose owners they haven’t heard from for years. Often, these accounts are transferred to the state, a process known as escheat. It’s easier for you than your heirs to prove ownership, so you should check to see if any of your assets have been escheated to any of the states you lived in.
In addition to streamlining your accounts and investments, have your paperwork organized and easy to find. Leave your executor and heirs a roadmap to your estate. This would include a list of all your assets and liabilities. You should include details for each account, such as the firm that has custody of the account, account number, any online access codes, contact persons, and other information that would be helpful to the executor. One way to organization this information is by using my workbook, To My Heirs: A Book of Final Wishes and Instructions.
The organization of your possessions and estate is one factor survivors will remember. Decide if you want to leave a messy burden or a more pleasant legacy.
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