Essentials to Estate Planning

Essentials to Estate Planning:
Important Pieces of Preparation


Nobody likes to think about estate planning. It is morbid and somewhat boring at the same time. The elements of an estate plan are also somewhat dull. Few people get excited about minimizing estate taxes or providing an inheritance for those you leave behind. Most individuals already have a long to-do list filled with the everyday matters of life. The gutters are full of leaves and the kids need fall clothes. Why worry about power of attorney or creating a trust right at this moment?

Humans have a difficult time of placing the proper amount of weight on events that will occur in the future. For some reason, we tend to operate under the mantras of “Those parts of life will take care of themselves” or “I will take care of that eventually, just not today.” 

But, if the worst should happen and your financial affairs are not in order, you could very well leave behind a big headache, and possibly a financial burden. None of the people close to you will be worried about home maintenance, but they will be forced to make crucial decisions about your estate at an emotionally charged time. 

It is easy to fall into the trap of procrastinating, assuming that an estate plan isn’t necessary today. The elements of an estate plan seem so far away. It is easy to believe that the different elements of an estate plan are not urgent. An estate plan is a tool that does its work after you have passed. It will hopefully carry out your wishes in an efficient and effective manner.

Each individual or family will have specific needs, yet there are some common pieces that every one should consider including in an estate plan. Addressing these basic elements will lessen the burden on loved ones and give you peace of mind.


Draft a Will

Your will is the document that will provide those you leave behind with directives and guidance. This is one of the most important elements of estate planning.

One of the most important parts of a will is choosing an executor. This person will be responsible for carrying out your wishes. You may choose an attorney, a friend, or a relative to take on these tasks. Closing an estate can be an arduous process, so ensure that you choose someone who is loyal and trustworthy.

Fortunately, you won’t have to think long about those you desire to name as beneficiaries. Naming beneficiaries is usually easy but always keep these names current and up to date.


Ask an Advisor about a Trust

A trust is another method of estate transfer. If you establish a trust, your estate can bypass probate along with the cost and hassle associated with this process.

A trust is a fiduciary relationship in which you give another party authority to handle your assets for your beneficiaries. It is called a living trust because it is created while you are still living. You are able to change it at any time, in the event you create a revocable trust. You will maintain ownership of the property held by the trust, but upon your passing the trust and its directives will begin taking action to carry out you wishes. 

Trusts are fairly inexpensive to create. The trustee named in the document will control the distribution of assets according to your wishes and will act in accordance with the trust document. Unlike a will, a living trust passes property outside of probate court. This means that there will be no court or attorney fees once the trust has been established. Your property can be passed immediately and directly to your named beneficiaries.


Assign a Power of Attorney

There are two types of power of attorney, financial and medical. Many people are aware of medical power of attorney, which will allow an individual to make decisions concerning your health care. Fewer are aware of financial power of attorney, which will allow someone to access checking/savings accounts, retirement accounts, brokerage accounts, etc. on your behalf. 

These two types of power of attorney don’t necessarily have to be the same person. Since the two types require vastly different skill sets and knowledge requirements,  it may be prudent to choose individuals who have specific areas of expertise so that your wishes will be carried out most effectively by individuals have knowledge specific to those needs.


Create an Advance Directive

This document will lay out your end-of-life preferences. It will likely incorporate elements such as a living will and ‘Do Not Resuscitate’ directives. 

You will likely have to have this document witnessed in order to make it official.


Set or Update Beneficiaries

The beneficiaries named on your 401k, insurance policies, and other financial accounts will take priority over any statement or directive made in your will. For example, if you would like to leave one of these accounts to your children, but the listed beneficiary is your local university then the funds will go to the university.

You should review listed beneficiaries every so often, especially if a major life event has occurred. Additionally, make sure to choose a contingent beneficiary. This puts a plan in place in the event that the primary beneficiary passes before you do.


Organize Paperwork

Do you know where your tax returns, insurance policies, brokerage and 401(k) statements, and mortgage paperwork are? If you are unable to find the variety of different documents and pieces of information, then your loved ones won’t be able to find them either. In some cases it is crucial to act quickly, and you do not want to leave those executing your estate scrambling to find one or any of the important pieces.

Put every element together in one place. Then make sure to tell your spouse or closest family member where you have decided to store all of the tangible documents. Aside from the documents mentioned in this piece, also consider including your Social Security card, any health insurance or Medicare cards, plus contact information for your doctor, lawyer and financial advisor.