Important Documents for Estate Planning

You cannot know what the future holds, and that’s why there is never a wrong time to take the steps necessary to plan your estate. If you haven’t given much thought to the idea of passing on your assets to a loved one or family member after your death, you may not know all the many key documents that are necessary for the creation of an estate. Knowing the important aspects of estate planning and completing them early on can help you to avoid leaving your family with a difficult situation when you are gone.

Will or trust

Arguably the most important component of estate planning is the establishment of a will, which legally guarantees the distribution of assets after your death in accordance with your wishes. You can prepare your own will if you prefer; The Motley Fool notes that software like Quicken’s WillMaker Plus allows you to do so quickly and inexpensively. For a decision so important, however, it may be best to secure the services of a lawyer who is more familiar with the process and who is better able to ensure that there are no loose ends or unforeseen issues.

Michael Chamberlain, writing for Investopedia, notes that the execution of a will can be expensive and time-consuming if the process of probate is necessary. To avoid this, he recommends a living trust as a preferred alternative. With a living trust, you provide specific instructions for what becomes of your assets while you are living and well, if you should become incapacitated and if you should die. The Balance’s Julie Garber notes that any assets held in your living trust will avoid probate at the time of your death. Still, you will want to maintain what’s known as a pour-over will; this document acts as a safety net to provide instructions for any assets not governed by your living trust.

Additional key documents

Whether you’re looking at planning an estate around a will or a living trust, there are three key documents that Garber says are necessary for the process: a living will, an advance medical directive and financial power of attorney.

Different from a last will and testament or pour-over will, a living will expresses your preferences in the event that your family needs to make a decision about your care — for example, if you wish to be kept alive with assistance or not if you should fall into a coma. An advance medical directive, or medical power of attorney, allows you to choose an agent who will make medical decisions on your behalf if you are unable to and designate a guardian who will look after you if you become incapable of caring for yourself.

Financial power of attorney also has you designate an agent to act on your behalf, only they manage assets like your accounts and property if you are no longer able to do so yourself. There are effectively two kinds of power of attorney: durable power of attorney, which takes effect upon the signing of a document, and springing power of attorney, which only takes effect if you should become incapacitated.

There are several other steps you can and should take in the establishment of an estate, including creating a list of your assets and updating your beneficiary forms as needed. To ensure that you are checking every box, seek out a professional and be certain that no stone is left unturned.


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