The Estate Planning Checklist that has been accelerated by COVID-19

Amar Pandit , CFA , CFP

One of the fundamental things COVID-19 has done is given most people “Time to Think”. The time that we did not have or the time that we did not make for many critical things is no longer a constraint. You can literally e-meet some of the busiest people now. One of the trends that I am seeing worldwide is a sense of urgency felt by many people to get their Estate Planning in place. I will explain what Estate Planning is and why is it important even if you have very limited assets.

Before I start getting into Estate Planning, an important word to understand is Estate.

What is an Estate?

The sum of all the assets of a person, less his liabilities becomes his estate. In short, all properties, bank accounts, investments, insurances, and collectibles, less the liabilities of a person, are collectively called a person’s estate. Today your assets are not just restricted to physical assets as we live in a virtual world and hence every person has Digital Assets.

What are Digital Assets?

Some might think of Digital Assets as Cryptocurrency, but it is not just limited to Bitcoins, Ethereum, and other currency related stuff. Manuscript in Digital format is a digital asset for an author so are creatives, designs, and even something as basic as your Online Books, Digital Music, Email Accounts and so on.

Estate Planning in simple terms means distributing your Estate (All Assets – Liabilities) to your legal heirs.

Ask anyone in a room of 100 if this is important and everyone will raise their hands. Ask how many have done this and you will only get a few hand raises. This is because we (myself included) are all used to procrastinate some of the most important things that affect us. We have all seen how a visionary entrepreneur passed away without a will leaving his 2 sons to fight publicly over the father’s empire. We have all seen cases of real estate disputes between legal heirs in our extended families when someone dies without a written document that spells out his wishes. We call this document a Will (I will not get into the different types of Will or the simplicity /complexity of it).

The point that I was making is that people world over are realizing that it’s important to take action on this front now (This is because a Clear and Present Danger is staring at us every day).

Here is a basic checklist for you.

  1. Nominations
    This is the first thing to do for most people. Ensure that you have filled your nomination on all your investments, insurances, bank accounts, housing society records and so on. You will be surprised to know how many people have no nominations in their housing society records. Once you have got this in place for yourself, help your parents with the same exercise. Guide them to make nominations everywhere.

  2. Documentation
    This is the next most important thing that you must have in place. This means having an excel sheet with details of everything you own and owe in one place. We have created a product called as “My Life Happily Documented” to help families with all their physical paperwork (filing this in 18 Master Files and a system that allows you to get any document you need within 2 minutes). The idea of mentioning MLHD is not to pitch the product but to guide you to have some system that enables your legal heirs to figure out everything you had or owed. I have seen families spending months and months (not to mention the emotional loss that one goes through on losing a loved one) and getting overwhelmed about not knowing the real picture.

  3. Will
    A Will is a document that helps to transfer your estate according to your wishes. A will can be simple as well as complex depending on your situation. Since I prefer a simple document (does not mean poorly drafted) but situations can be complex such as kids from a previous marriage, divorces, tax implications, multiple legal heirs, no heirs, application of law according to your religion, and so on.

    I would encourage you to talk to a lawyer or your advisor who can guide you to a lawyer to get your will drafted. This is something that is not DIY (Do it Yourself). Some people will tell you “Why pay a Lawyer? I did it myself”. Do not listen to this crap and get a good law firm to work on this for you. You are entrusting your entire life’s work on this document so make sure you do this well.

  4. Power of Attorney
    A power of attorney (POA) is an authorization to act on someone else’s behalf in a legal or business matter. The person authorizing the other to act is the principal, or donor (of the power), and the one authorized to act is the agent (receiver of the power). Power of attorney can be general in nature or can be very specific such as for opening a bank account or making an investment or representing someone in a real estate transaction.

  5. Medical Power of Attorney
    Like a POA above, the medical Power of Attorney is to give someone the power to carry out your medical wishes in case you cannot communicate those decisions yourself or lack the mental capacity to do so. Typically, it is made in anticipation of a medical emergency but is an important document, nevertheless.

I will not get into Trusts (just to sound intelligent) or any other complex structures of Estate Planning as this basic checklist should suffice for 99.9% people.

One caveat: It does not mean that just because you have your Estate Planning in place, everything will go smoothly. It all depends on the people involved. However, one thing I can say with certainty is that not having basic Estate Planning in place will rock your boat. More importantly, your wishes are likely to go unfulfilled.