Every individual needs some form of an estate plan to protect their wishes and loved ones. Your estate consists of everything that you own (aka your assets), and although death may seem far away, it is never too soon to get your estate plan in order. Estate planning is the process of making arrangements for your incapacitation or death, including deciding who your assets will go to, stating the type of end-of-life care you wish to receive and designating a person who will be responsible for executing your requests. You are never too young to start making these arrangements, and the process does not need to be complicated or expensive.
Before you can make a plan for your assets, you need to first list out what you actually have. This may include: cash, real estate, retirement and investment accounts, vehicles, life insurance policies, businesses and other personal belongings. Also, list any outstanding debt, especially debt that has co-signers or joint ownership, as that will not disappear upon your death. Most individuals meet with an estate attorney to execute the necessary estate planning documents, but for simple cases, you can easily create these documents online through platforms such as Trust & Will or LegalZoom in less than 30 minutes.
The basic components of an estate plan include:
Last Will & Testament
Name a guardian for children and pets. Who do you trust to care for them if you passed away? Designate a backup guardian just in case, and document your wishes for your children’s care.
Establish an executor. This is the person that will be responsible for ensuring your wishes in your estate plan are executed. Consider establishing a digital executor as well for your digital assets.
Determine how your assets will be distributed. You can leave all of your assets to a specific person, multiple people or to charity. You can list specific gifts to be distributed and exclude certain individuals from receiving anything, if desired.
State your final arrangements, including you final resting place, ceremony type and any special requests.
Specify your wishes for medical care in the event you can no longer make those decisions for yourself, including methods to keep you alive, pain management and organ donation.
Power of Attorney (POA)
List an individual that you trust to handle your affairs and act on your behalf if you are unable to do so due to permanent illness or disability. You can limit the power that your designated POA has by listing out specific authorizations and/or time periods.
A healthcare power of attorney grants an individual the ability to speak with healthcare staff, make decisions on your behalf for medical treatment and care and can be required to make end-of-life decisions. Expressing your wishes in your living will can make this process much easier for your healthcare POA.
A financial power of attorney allows your appointed individual to make choices about your property, finances or investments, depending on the scope that you list, including writing checks, completing tax returns and managing investments.
HIPAA (Health Insurance Portability and Accountability Act of 1996) Authorization
Allows those listed to access your private medical records when needed.
Most estate planning documents need to be signed with witnesses and notarized to go into effect, and certain documents and requirements vary state to state. More complex family or business situations may involve adding a trust or other estate planning strategies to provide greater control over the distribution and timing of your assets, as well as avoiding probate. Always consult with an estate planning attorney if you have questions or need guidance with creating your estate plan. You can find one in your area on the American College of Trust and Estate Counsel website.
Don’t forget to review and update your will and beneficiaries every few years and with any major life changes. Always make sure your beneficiaries on your retirement accounts and insurance policies are up to date, as those usually override a will. Name contingent beneficiaries in case your primary beneficiary passes away before you do.
It is never too soon to prepare for you and your family’s future. You will have peace of mind, and your loved ones will thank you.