Part 2: Estate Planning Amidst a Recession

Last week’s post brought reflection upon the last ten months and how 2020 has spurred new urgency to financial planning amidst a recessionary environment. While the principles of financial planning have not changed, it is important to review the five pillars of wealth in their entirety any time changes to your financial plan may occur.

Continuing on in our five-part series, today we will cover pillar number two – estate planning. An estate planning review is especially valuable for those in education, as I often see educators who have climbed the ladder in their respective industry, moved from state to state, and looked back in the rear view mirror to find assets scattered across the country, an aged estate plan, and a realization they need something updated in the state in which they currently reside. This example is all too common, and today I will outline the five steps of beginning the conversation around an estate plan review.

Step 1 – Review the execution date and state

There is no hard and fast rule as to how often you should review the planning you have put into place. The ideal review moment is when a life event has taken place. Life events are broadly defined, but in this case, it can include marriage, divorce, a birth of a child, an adoption, death of a family , or the receipt of an inheritance If anything within this category is realized, it should trigger an automatic need to review the estate plan between you and your financial planner. The other item that should trigger a review is the life event that comes with setting up residency in a new state. As I mentioned before, this is quite frequent for educators who begin to climb the ladder in higher education. It’s not long before you find yourself teaching or coaching in a new state, with a new house, and transitioning your banking relationship to a local bank, etc. This event can come with needed changes to your estate plan that must be fully understood between you, your financial planner, and an estate planning attorney. If the year is 2020 and you live in Nebraska with an estate plan that was created in the year 2000 while you lived in Florida, that would call for a review. Not only has a lot happened in federal estate planning laws in twenty-years, but Florida and Nebraska themselves have experienced changes in their state laws which could cause an issue if the estate plan had to be called upon for any specific reason.

Step 2 – Review the beneficiaries

I have lost count the number of times I have reviewed beneficiaries with clients, only to realize the beneficiary of the thirty-year old life insurance policy is not a spouse or a child, but a brother or sister. Imagine the surprise of my clients, let’s call them Jim and Julie, when we sat down to consolidate and review all the accounts and beneficiaries this fall.

Example: Jim’s first job teaching had been in Kentucky twenty-five years ago. He had spent five years at the institution and had accumulated a small 403(b) balance while there but had left it in the equity focused investment allocation the entire twenty years he’d been away, and it had grown nicely. When we gathered the paperwork to review everything, we noticed the beneficiary listed was not his wife of nineteen years, but his mother who had died five years ago. Of course this was not intentional, but merely a biproduct of how easy it is to lose track of something over time. If Jim had died, the hoops Julie would have had to go through to simply inherit what was meant for her would have been extensive. Simply reviewing beneficiaries can bring forth the obvious need to take a deeper look at the estate planning to make sure it matches your current situation.

Step 3 – Review the agents/the guardians

A review of the beneficiaries should also trigger a review of the powers of attorney you have listed on your current estate plan. Just as the seasons change, so does life. Are the current agents you have in place for your financial and healthcare power of attorney documents, the ones you still want in place? Are they local and able to make medical decisions for you quickly? If you live in Texas, but your sister (primary agent) lives in New York, is that the best individual to talk with your doctor if decisions need to be made? The same scenario applies for financial decision making. If you and your wife are incapacitated while living in Iowa, is your brother who lives in Arizona the best person to be communicating with your bank and your financial planner?

The same questions must be asked for the guardianship provisions. If you have minor children and something happens to you and your spouse, are the guardians you have in place still appropriate?

I am acutely aware of how difficult these decisions are, as my wife and I have updated our planning within the last twelve months, and the decisions didn’t get any easier. The clock is ticking on our next update too, as our parents each play pivotal roles in our estate plan, and they aren’t getting any younger. Is it appropriate for my father, when he is in his 80s to be required to make decisions on my behalf if I cannot? In our case, no it’s not. This requires me to be very cognizant of the timing of our updates.

Step 4 – Review the document type (Will or Trust)

There is an enormous misconception among the families I’ve planned with that a is only for the “wealthy”. This could not be further from the truth. A living trust is a vehicle that provides very specific guidelines and barriers placed around the estate of a family or individual and is appropriate for any type of wealth. It is the not the net-worth that should decide the tool, it’s the directions of the estate. Reviewing what you have in place now, and what you desire for your assets will be the determinant on whether or not a will or a living trust, or even another estate planning vehicle is appropriate. Whatever estate planning tool you use, allow your wishes to drive the conversation and the decision.

Step 5 – Review your account titling

This error is incredibly popular, unfortunately. I have said this phrase, at least one-thousand times over the last decade: “just because your estate plan is signed, doesn’t mean the work of coordinating it is done.”

You have an estate plan. It’s new, it’s updated, it has been executed in the state in which you live. Wonderful! That is step one. Now all of your accounts must be coordinated with your plan! Your bank accounts, your IRAs, your 403(b)s, your house, your vehicles, etc. If it’s an asset, it must coordinate with the expensive documents you just completed. If you execute a living trust, but do not place a POD (Payable-On-Death) designation or retitle your bank accounts, those bank accounts will skip the trust if you pass away and go through probate. That’s a huge reason as to why you executed a trust – to avoid probate – don’t allow it to happen because you forgot to complete the next step of estate plan execution! Taking the time to review how your assets and accounts are titled is a great step in understanding how necessary an estate plan review is.

To be candid, the year 2020 has brought attention to a lot of areas of our life. We have reflected upon and evaluated our education system, how we run meetings, how we travel, how we shop for groceries, and many things in our life. Evaluating our financial plan should not escape our moments of reflection – because if 2020 has taught us anything – it is that life changes in an instant.


Our team of wealth advisors here at BerganKDV are fee-only fiduciaries who are dedicated to helping you navigate all areas of your financial life. Want to learn more about what we can do for you? Start here.


Diversification and asset allocation do not ensure a profit or guarantee against loss.

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.





CATEGORIES: Wealth Management
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