The Guide to the Estate Documents You Need to Have

Retirement Planning | Estate Planning

 Plancorp team By: Plancorp team

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While it may be a challenging subject to approach, we all know that eventual death is a certainty. What will happen to our house, cars, bank accounts, retirement plans, and other personal belongings when that occurs? What if some or all these items have outstanding debt? What if they don’t? And who gets what?

The questions can pile up quickly, leaving those left behind to deal with what can be a time-consuming and stressful process. That’s where an estate plan comes in to play.

An estate plan helps you manage and preserve your assets while you’re alive and conserve and control their distribution after your death. Everyone’s estate plan will vary based on different factors, such as their wealth, the type of assets they own, the size of their family. Regardless, everyone should have an estate plan and most, but not all, will have a few estate planning documents in common.

Estate Planning Documents

Here are examples of estate planning documents that can accomplish your goals and drive the overall direction of your estate plan: 

Will-Based Estate Planning Documents 


A will distributes property owned in your name (without a beneficiary designation) as you wish after death. Without a will, disbursements are made according to your state’s intestacy 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 yours is well written and meets the signature and execution requirements  to be valid and enforceable under your state’s laws.

Trust-Based Estate Planning Documents 


A living trust (also known as a revocable 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 – not to mention emotionally taxing – for your heirs. Furthermore, your details about your estate become a public record by going through probate but having a trust in place generally protects your privacy and prevents public knowledge of your estate.

A pour-over will is a particular type of last will and testament used if you’re doing a trust-based estate plan. If you forget to transfer some of your property into your trust over the years, it provides that these assets will “pour-over” and be transferred to your living trust so that the distribution of these assets will be consistent with your intentions as stated under that document.  Without a pour-over will, anything that you didn’t transfer to your trust will be treated as “interstate” when you pass, and assets will be distributed under your state’s intestate law.  given to certain heirs by law. 

Other Important Estate Planning Documents 


Whether you use a will-based or trust-based estate plan to provide direction on the administration and distribution of your assets at death, it is also important to address potential lifetime incapacity when creating your estate plan.  Incorporating the documents summarized below into your estate plan will help ensure a comprehensive plan both during life and at death.

A living will, a type of advanced medical directive, is used to instruct care providers if you can no longer make decisions for yourself. The living will inform which treatments you may want and whether you wish to donate organs or tissues in the event of your death. A health care durable power of attorney is used in conjunction with your living will and names an individual or individuals to make health care decisions for you when you are unable to do so and allows this individual to speak to doctors and other health care providers regarding your care. These documents will provide guidance and help shield your family members or friends from uncertainty when making difficult choices about your care while also providing for situations not specifically addressed in your documents.

A financial durable power of attorney is a legal document that grants a trusted agent the authority to act on your behalf in financial matters if you are unable to do so during your life. The document can be created to become effective should you become ill or otherwise incapacitated or could be drafted more broadly to provide a trust individual to act for you should you be traveling or otherwise not present or available to handle your financial matters yourself. The person you designate to serve as your agent can pay bills, file tax returns, direct investments, and complete important money management tasks on your behalf.

How to Organize Your Estate Planning Documents 


If you’re thinking about creating an estate plan, it’s essential to also think about how you will organize your documents in a way that works for you and will help those you have named to carry out your plans when the time comes for them to step in. After all, a key benefit of creating an estate plan is to avoid delays and inefficiencies so you likely don’t want your loved ones scrambling to find your will or trust.

In order to help with this process, you may want to consider writing a letter of instruction. The letter of instructions is a non-legal document that accompanies your other estate plan components to express personal thoughts or directions – such as where to find your documents, the contact information for your estate planning professionals and even specialized instructions for caring for certain assets. You’ll want the letter of instruction to be easy to locate, especially, so consider giving a copy to your trustees, executors and/or estate planning professionals so they can pass it on to the appropriate people at the right time. 

You should store this memo and your other documents in easy-to-access places. You may want digital copies on a zip drive and hard copies in a well-organized binder in your files, for example. If that doesn’t work well for you, just remember: think about the best way to organize your estate planning documents in a way that will help your family, friends, and other loved ones after your death. For any help with this step or any of the documents listed above, consider reaching out to your financial advisor or asking them for advice on finding a reputable estate planning attorney.

Learn more about the 5 essential documents necessary to build a solid Estate Plan in this video from Senior Wealth Manager, Sara Gelsheimer and by downloading our Estate planning guide

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Disclosure:

This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

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