Estate Planning: Do You Have these Documents Prepared?

Estate planning is an emotionally and financially complex process that investors need to consider. It includes legal and tax implications, investment strategies, and personal questions to help ensure your estate is set up efficiently.

Let’s look at some of the most important estate planning documents you should have prepared.

Wills & Trusts

Wills and Trusts are some of the most important documents to consider in estate planning. A will spells out your wishes regarding the distribution of your assets and care of any dependents you may have. A trust is a way to arrange ownership of your assets and allows a third party to hold these assets on behalf of a beneficiary.

By preparing these documents, you can help protect your legacy and make the transition of assets easier when you are gone. There are two subsets to these documents to consider: 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. Some investors choose to implement a living trust into their estate strategy because it is revocable (meaning that it can be changed,) and it may allow your estate to bypass probate, which can be a long and costly process.

What is a Living Will?

A living will is a directive to physicians that explains your end-of-life medical preferences. If you’re unable to communicate, a living will helps doctors and family members make decisions about your care based on what you would prefer. (e.g., CPR, mechanical ventilation, tube feeding, organ donation.)

In your living will, you may also specify a healthcare power of attorney, an agent who can make important healthcare decisions on your behalf.

Beneficiary Designations

A will or trust explains how you would like your assets distributed among beneficiaries, so you’ll need to decide on beneficiaries while building your estate plan. You should have a contingent beneficiary stated on all insurance and retirement accounts, as well as contingent beneficiaries stated in your will or trust.

Be sure to review your beneficiaries as things can change – marriage, divorce, kids, grandkids, etc. – and having an outdated plan can be a recipe for disaster.

If no beneficiary is stated, your estate may end up in the hands of the court, where your wishes will have no influence over how your assets are divided.

Power of Attorney

Power of Attorney (POA) is given to the agent or person you designate to act on your behalf and oversee your will if you are unable to do so. It’s important to designate a POA, if you don’t the court may decide how your will and assets should be managed.

Letter of Intent

A letter of intent might cover other details that aren’t included in a will, such as funeral arrangements or a decision for a particular asset. Unlike a will, most letters of intent aren’t legal documents, but they provide supplemental information for your estate, and the more information you have for your beneficiaries, the better. A letter of intent can help supplement gaps in a will and answer questions your beneficiaries or probate court might have.

These are just a few of the important documents you should consider adding to your estate planning strategy. Talk with your financial advisor about everything you need to know when getting your estate in order.

Read More:

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Is All Fair in Love & Inheritance? How Careful Estate Planning Can Cool the Drama

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Gifting versus Inheritance: Which Is Better For My Beneficiaries?

Top 5 Duties of an Estate Executor: And How to Carry Them Out

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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