Estate Planning Made Simple: Key Documents and Steps for Securing Your Legacy
Authored by Kendall Benner, CFP®
An estate plan is a crucial part of your financial plan to protect your legacy and wishes. While it may seem like a daunting and difficult process, it is quite simple once you understand the documents, their purposes, and the necessary follow up actions.
The first step is to locate an estate planning attorney in your area. Reach out to your financial advisor, trusted peers or search for a local attorney via the American College of Trust & Estate Counsel Website. Prior to the meeting you should outline the objectives and goals you hope to accomplish with your attorney during the process and identify several trusted individuals that could be named to serve on your behalf.
Understanding the Key Documents
Your estate plan can be simple, or complicated, depending on your situation and goals. However, these are the documents that we would consider vital to every estate plan.
- A Power of Attorney authorizes a person or persons to act on behalf of the individual.
- A Durable Power of Attorney remains in effect even if the individual becomes incapacitated.
- A Non-Durable Power of attorney is invalid once the individual becomes incapacitated.
- A Power of Attorney for Health Care authorizes a person or persons to make medical decisions on behalf of the individual named in case of incapacity.
- An Advance Medical Directive lays out the measures and situations that someone would or would not want to receive life sustaining treatments, if they are incapacitated.
- A Will is a legal document that outlines the distribution of the individual’s assets according to their wishes, instead of defaulting to the state’s intestacy laws. A Will also outlines guardianship for minor children.
- A final document that is common but not applicable in every situation is a Trust. There are many different types of trusts that serve different purposes. We recommend discussing with the attorney to determine if a trust is applicable to your situation.
Finalizing the Documents
Congrats! Your documents are prepared -- now don’t forget to finalize them by signing them (with witnesses and a notary, if applicable)! Once the documents are completed, we recommend the following:
- Store original documents in a secure location, such as a fire-proof safe.
- Store an electronic copy of the documents that can be accessed easily.
- Send copies to your Financial Advisor.
Post-Planning Actions
It is a common misconception that the work is done once you sign your estate documents, but this is not the case. Some assets transfer outside of a Will and require additional steps after the documents are signed. These assets may have a named beneficiary, a pay/transfer on death designation, or be set up with rights of survivorship. These features allow the account owner to directly specify who will receive the asset upon their death, independent of the Will's instructions. Listed below are a few of the assets that can transfer outside of your will through a different set of laws, such as title, contract or trust law, if set up correctly.
- Retirement Accounts (IRAs, ROTHs, 401(k)s)
- Investment and Bank Accounts with TOD/POD
- Life Insurance (privately owned and employer sponsored)
- Property Deeds
- Car Titles
Since these assets may transfer outside of your Will, if the beneficiary named on the asset and the Will are not aligned – the beneficiary contract or pay on death designation supersedes the Will. The caveat to this feature is that these contracts and designations are not automatically updated when a Will is established, they must be manually updated.
While completing estate planning documents, your attorney will likely provide a letter of instruction detailing the necessary updates. Create a checklist of all assets and accounts to review, ensuring they are updated correctly. Contact the institutions where the assets are held to determine the required paperwork or steps to add or update the beneficiaries. Review these documents every 3-5 years to ensure they are still in line with your goals and objectives and make any necessary updates.
By diligently following through with completing your estate documents and updating your account beneficiaries, you ensure your wishes are honored and your legacy is protected.
Any opinions are those of Concentric Wealth Partners and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
