5 Estate Planning Documents You Need

Retirement Planning | Estate Planning | Financial Planning | Succession Planning | Blog Home

 Peter Lazaroff By: Peter Lazaroff

Estate planning is a little different for everyone.  While you are alive, the estate planning process allows you to manage and preserve your assets.  At death, your estate plan allows you to conserve and control their distribution after your death according to your goals and objectives.

There are five documents that you should consider regardless of your age, health and wealth:

1. Durable power of attorney (DPOA), which authorizes someone to act on your behalf should you become physically or mentally incompetent to handle financial matters. The person you designate in the DPOA can pay bills, file taxes, direct investments, etc. on your behalf.

2. Advanced medical directives allows you to specify the medical treatments you desire in the event you can’t express your wishes and appoint someone to make decisions for you. Without this document, medical care providers must prolong your life using artificial means, if necessary. Advanced medical directives are also referred to as “living wills”.  In addition, advanced medical directives can be combined with health care powers of attorney which name the individual or individuals that you would like to make your health care decisions if you are incapacitated (including end of life decisions).

3. Will. A will distributes property owned in your own name (without a beneficiary designation) as you wish after death. Without a will, disbursements are made according to state law, which might not align with your priorities. In addition, a will names an executor to manage and settle your estate as well as a legal guardian for any dependents.  Since this is a legal document, it is crucial that your will be well written and articulated so that it is properly executed under your state’s laws.

4. Letter of instruction is a non-legal document that may accompany your will to express personal thoughts and directions. Unlike a will, the letter of instruction remains private and its directions are not binding.

5. Living Trust (also known as a revocable or inter vivos trust) creates a separate legal entity to own property. The primary benefit of a living trust is that your assets avoid probate, which can be costly and time consuming. Until the probate process is completed, your assets can’t be distributed to your beneficiaries.  In addition, probate can interfere with the management of a closely held business or stock portfolio.  Probate documents such as your will and statements of assets/property become public record, so having a trust in place generally prevents public knowledge of your estate.  Probate can also be costly due to fees imposed by the courts, statutory fees provided to attorneys and statutory fees provided to executors.

Trusts can be used to avoid the court fees and avoid the statutory fees for attorneys while specifying potentially lower fees provided to the executors.  It is a common misconception that one must be wealthy to have a trust in place.  Because trusts are designed to avoid probate, they are useful for a large percentage of individuals regardless of their respective levels of wealth.

New call-to-action



Related Posts

Peter Lazaroff, Chief Investment Officer, first took an interest in investing when his grandmother gave him a single share of Nike stock for his 13th birthday. Today, nearly 20 years later, his investment insights are highly sought after by local and national media. More »