7 Foundational Estate Planning Documents
Estate planning does not have to be scary or complicated. Most people believe it is only for wealthy people who have a large estate to divvy up when they die. This is not true. The foundational documents in an estate plan are typically affordable and can be created very quickly. It is possible that not having the basic documents will end up costing your family a lot more money when you pass than had you prepared during your life. Unfortunately, the greatest cost could end up being the grief your family will have while sorting through your estate and dealing with your loss at the same time. There are many good reasons to create and maintain a few simple documents to save your family money and, more importantly, the pain of losing their loved one. Here are few I highly recommend getting started on today.
A Will
This well-known document is very important to help you specify how you would like your assets and belongings to be distributed after your death. If you end up dying without an official will, your estate will be put through a process called probate. Probate is when the state decides how to distribute your assets and, in many cases, it will not be done the way that you would have preferred. The more specific the will, the better. For example, if you don’t want any of your assets to go to a particular person, make sure you mention that in the will so they don’t challenge your will and hold up the distribution of the assets going to the designated beneficiaries. Tying up the estate in a will contest could rack up a lot of costs to the estate, which means there will be less to be distributed in the end.
Working with a qualified estate planning attorney will help you with the necessary wording in the will to ensure it follows your exact wishes.
Advanced Healthcare Directive/ Living Will
This can be a part of the Power of Attorney but is considered a separate form. This document states how you would like medical professionals to handle medical decisions in the case of your incapacitation. This document could help relieve your family or POA from having to make a tough decision regarding your health or even your life. This may be a depressing topic to discuss but is a simple form and usually is revisited if there are advances in medicine that would influence a change in your previous elections in this document.
Durable Power of Attorney
This document designates an Agent as a person who can act on your behalf in the event of your incapacitation. This arrangement terminates upon the death of the principal and is revocable at any point by the principal if the principal is physically able and mentally competent. The Agent is given the power to enter financial transactions, operate the principal’s business, make legal decisions, and other operations as if they were the principal. You can also assign an Agent to make healthcare decisions for you which is called a Healthcare Power of Attorney. This would be necessary if the principal were to become incapacitated and decisions would need to be made. This could even mean whether to allow the doctors to remove life sustaining treatments to prevent you from staying in a vegetative state.
You need to be certain the person you choose is a person who thinks the way you do, will respect your wishes, and is someone you can trust. They could end up having your life in their hands.
Beneficiary designation
This one is easily overlooked. Having a properly executed beneficiary designation for your retirement/investment accounts and life insurance contracts is a high priority. These forms typically take precedence over wishes stated in a will. Be sure the will and the beneficiary designations agree with each other or there could be a contest to the estate. Be sure to sign and receive confirmation from the custodian as proof of a properly executed designation. Without this simple form it could end up going to a person chosen by the state. Luckily, these forms are usually available on the custodian’s website to easily assign your beneficiary. Make sure you print and save the confirmation after completing the form.
Pro tip: Don’t forget to assign a contingent beneficiary in case your primary beneficiary predeceases you.
Lists
I’m a big fan of lists, but some are more important than others. There are some lists that will help your executor stay organized when the time comes to process your estate.
A list of people involved with your assets is very helpful. For example, your broker for your investment and retirement accounts, accountant, lawyer, insurance broker, family members, POA agent, debtors, and others. List them along with their contact information will help gather the right people to help the process go as smoothly as possible.
Also, a list of all your assets, debts, and belongings that are meant to be distributed or cancelled if they are reoccurring bills. These could be your investment accounts, insurance policies, utility bills, credit cards, mortgage statements, lockbox and key locations, real estate, automobiles, jewelry, and other valuables that you plan on giving to others. Knowing the locations of all your assets and belongings will help your executor give exactly what you specify to the correct person. Organizing the list to show its value, who it will go to, where it is, and other information is also very helpful. Plus, you get a look at what you have accumulated in your inventory.
Pro tip: attach your most recent statements to this list so the accounts, bills, loan statements, insurance policies is easier to value and find when it needs to be processed.
Letter of intent
This could be considered a backup will but with more private details. This could clarify, in your own words, what should be going where and how it should be taken care of. Or this private letter could tell your executor to dispose of some skeletons in your closet, so your family doesn’t think of you differently after you have passed. This could be something completely innocent but if you aren’t around to explain, your friends and family may come up with their own theories. This letter could also contain special requests for things such as your funeral, taking care of a garden that you cherished, or anything sentimental. These are a great way to connect with your beneficiaries and make everyone feel at ease after losing a loved one.
Guardianship Designation
Choosing a person to take care of your minor children after your unexpected death is very important. Once again, if you don’t choose then the state will. You can make this choice now and have someone you truly trust take care of your kids. The guardian you choose should be financially, physically, and mentally capable of taking care of your children. They also must be willing to take care of your children, so be sure to talk with them before randomly assigning them as the guardian. This is typically a clause in a will but it is important enough to highlight it here.
All these documents are very important and very simple to create. As always, I suggest finding a professional to help you create and execute these documents. There are many online places that create a form to use for these purposes, but a program will not provide the experience that a real person can. Integritas Financial works with a network of experienced attorneys who can help you with these documents. Send me an email or schedule a call so we can get started right away!
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