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For decades the only person I worried about was myself.
This Xrayvsn-centric philosophy, which served me well during my young adulthood, came to a screeching halt the moment I came eye to eye with a 7 lb package bearing my last name.
The center of the universe shifted from me to her in an instant.
I knew as a working physician I could provide for her and make sure she never wanted for anything.
However I also knew firsthand that life is not guaranteed, so contingency plans had to be made.
I knew that it was of vital importance to have documents in place to ensure that my daughter would be taken care of long after I was gone.
I get it.
No one wants to face his or her own mortality.
Some may even fear that speaking of one’s own mortality somehow can set things in motion to bring about the end that much quicker.
For example, I have seen patients who have not visited a medical provider in order to avoid confirmation of what they already know to be true, that the growing mass inside of them is cancer.
I do not share the belief that speaking of one’s death will precipitate it.
However I often fell victim to another issue that often delays enacting an appropriate and timely plan, that of procrastination.
Everyone assumes that they will live a long life, so there is no pressing need to get one’s affairs in order as a young adult.
Although it wasn’t planned, it seemed like I took a very extended timeline to construct an adequate estate plan for the heirs I may have.
I was 34 years old when I first had my daughter.
Now, 15 years later, I just finished signing the final documents necessary to have my estate in place.
First step, life insurance.
Getting a life insurance policy for me was probably the least intrusive step in my estate plan project and therefore was the easiest one to tackle first.
Everything was done within the comforts of my home with both the life insurance agent and, a few weeks later, a visiting nurse (for lab work and physical evaluation) making the track to my rural location.
I ended up buying my first life insurance policy before my daughter turned one and added a second one several years later.
The combined value of these life insurance policies (which still remain in effect even after I reached financial independence and debated whether or not to end the policies) would ensure that my daughter would be well provided for in case something happened to me.
One of the great benefits of a life insurance policy is that you can name a beneficiary who can then receive the funds without having to go to probate.
Avoiding probate will be a recurring theme in estate planning and for good reason as probate can tie up assets and incur large costs.
By making my daughter a beneficiary of my life insurance policy I knew that within a relatively quick time period she would have access to money to support herself.
I was quite pleased with myself finishing this first step but I could not rest on my laurels as I was definitely not done.
Where there is a will there is a way.
The next step in my estate plan journey was to create a will.
It was about another year before I ended up taking this crucial step.
I knew a will was important now that I had a family and started accumulating assets.
I ended up using a lawyer who was the wife of a work colleague.
There was an initial meeting at her office where I was given homework that needed to be completed before she could draft the official will:
- List of all assets and how I would like them distributed
- Contingency plans for caring of my daughter if both parents were deceased and she was a minor.
- Choosing an appropriate executor for the will.
The process of creating a will and completing the assigned tasks for the first time made me face my own mortality, much more so than the life insurance policy step.
I think it was primarily the contingency plan requested for the care of my minor daughter that really drove things home.
But I knew it was an important step so I pressed on.
At this stage in the game I still did not have much assets to my name so that was fairly easy to organize for my lawyer.
After that it was as simple as going back to her office, reviewing what she had drawn up and signing my name.
My first Will and Testament was created while I was married so my wife at the time stood to inherit it all if I had passed away.
One of the first things after I got divorced was to get my will updated and remove my ex-wife’s name from everything.
Although I did this relatively soon after the divorce was finalized, I later found out I forgot to remove her name from the beneficiary policies of several retirement accounts and my life insurance policies.
Fortunately I was able to correct this error in time as I really would have been tossing in my grave if I knew my ex received any further assets from me.
Important Tip: If you have a change in marital status it is important to update all beneficiary information for retirement accounts, life insurance policies, and any previous will that you may have created.
I succumb to Newton’s First Law of Motion.
After finally getting my will in place, as well as adequate life insurance coverage, I did rest on my laurels.
I original justified my lack of progression in estate planning during this period because I felt like I really did not have enough assets to warrant formalizing a true estate plan (around the time of divorce, just prior to turning 40, I had a negative net worth of over $800k).
I figured if something did indeed happen to me, my heirs would receive a substantial life insurance payment that would allow them to continue without skipping a beat while the assets that I designated in my will would likely be distributed without having to go through probate (though that was just an assumption, not a given).
Sadly, as my assets started to grow substantially in my mid to late 40s, to the point where I clearly had an estate that needed to be managed, I still was not moved to have anything more put in place.
Years and years passed.
It was almost 10 years later before I got inspiration to finally get the last step in my estate plan, the creation of a trust.
What was the impetus for this change of heart?
There were actually several factors that came into play that, when combined, finally allowed me to break the bonds of inertia and take action:
- The global pandemic.
- After seeing story after story of how COVID-19 claimed yet another life, especially hitting healthcare and front line workers hard, I could not help to think again of my own mortality.
- Approaching my 50th trip around the sun.
- As mentioned in a recent post about turning 50, hitting this milestone re-ignited thoughts of my own mortality as that was the age my father was prematurely taken away from me.
- A little nudge from Passive Income MD. Peter Kim, of Passive Income MD, was kind enough to organize and host the first ever Leverage And Growth Virtual Summit For Physicians last year.
- There was one presentation in particular from the week long event that gave me the call to action, a talk by Clint Coons, Esq., a partner at Anderson Legal, Business, and Tax Advisors, who eloquently discussed estate planning and trust formation.
- When the talk was completed I decided I would make it a priority to create a trust and complete my estate plan after putting it off for almost a decade.
[Disclaimer: I have now become an affiliate of Anderson Legal, Business, and Tax Advisors after becoming a client and being thoroughly impressed with the help they provided me in creating my trust.]
I ended up calling Anderson within the week and scheduled a consultation with a lawyer with the firm, to explain what assets I had and what I was trying to accomplish.
The whole process was a lot less onerous than I thought it would be and what I had been putting off for years took a little over a month to have enacted.
Because this post is getting a bit long in the tooth and the topic of forming a trust and what steps I took merits a post in its own right, I am going to break it off into a 2nd post that I hope will go live next Tuesday so please stay tuned.
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If there is no plan in place for distributing the assets, they must go through the probate proceedings. In essence, probate cost in a particular case is generally related to the assets’ value.