Estate Planning: Do You Have These Documents Prepared?

Are you wondering if you need estate planning or what exactly an estate is? The good news is that estate planning can be straightforward and easy. However, it can also be complex and challenging. The key is understanding your current situation and identifying your needs.

Most importantly, estate planning is a process we all go through. It involves creating or reviewing legal and tax implications, investment strategies, and personal considerations to ensure your estate is set up efficiently.

As we approach the halfway mark of 2024, let’s review some of the most important estate planning documents you should have prepared.

Wills & Trusts

A crucial part of your estate planning is establishing a will or trust. A will outlines your wishes for the distribution of your assets and the care of any dependents. A trust, on the other hand, could be a tax-advantaged way to maintain control of your assets while allowing a third party to hold them on behalf of a beneficiary.

Any competent estate planner will likely recommend incorporating both of these documents into your estate plan. By preparing these essential documents, you can protect your legacy and ease the transition of assets after your passing.

There are also two specific types of these documents: living trusts and living wills.

What is a Living Trust?

A living trust is a legal document that places your assets in a trust while you are alive and designates where these assets will go upon your death. Many investors include a living trust in their plans because it is "revocable," meaning it can be changed. A living trust can help your estate bypass the lengthy and costly probate process.

What is a Living Will?

A living will is a directive to physicians that outlines your preferences for end-of-life medical care. This document becomes crucial if you are ever unable to communicate your wishes. A living will can guide doctors and family members in making decisions about your care based on your preferences, such as CPR, mechanical ventilation, tube feeding, and organ donation.

In your living will, you can also designate a healthcare power of attorney, this person can be the agent authorized to make important healthcare decisions on your behalf.

Beneficiary Designations

While a will or trust outlines how you want your assets distributed, it's also crucial to keep your beneficiary designations up to date as part of your estate plan. Ensure that you have named contingent beneficiaries for all your insurance and retirement accounts, as well as in your will or trust.

Life changes, such as marriage, divorce, the birth of children or grandchildren, or new in-laws, make it essential to regularly review and update your beneficiaries. An outdated estate plan can lead to complications and unintended consequences.

If you fail to name a beneficiary, your estate could end up in probate court. This process can be lengthy and impersonal, as the judge handling your case will not be familiar with you or your wishes. Regularly updating your beneficiary designations helps ensure your assets are distributed exactly as you intended.

Power of Attorney

A Power of Attorney (POA) allows you to designate someone, known as an agent, to act on your behalf and manage your affairs if you are unable to do so. It's crucial to appoint a POA because, without one, the court may decide how your will and assets should be managed.

Your chosen POA does not have to be a family member. You can select a trusted friend or financial advisor, especially if they have a strong background in financial and estate planning.

Additionally, you may want to create a letter of intent to cover details not included in your will, such as funeral arrangements or specific wishes for particular assets. Although most letters of intent are not legal documents, they provide valuable guidance for your beneficiaries and can clarify your wishes. This additional information can help fill any gaps in your will and address questions from your beneficiaries or the probate court.

These are just a few of the important documents you should consider adding to your estate planning strategy RIGHT NOW. Schedule a call with one of our financial planners today to talk about everything you need to know when getting your estate in order.