Estate Planning Fundamentals

Estate planning can sometimes be thought of as a tool for the wealthy or elderly. But at its core, its purpose is to allow for a smoother transition of assets to the ones you love. Having the necessary documents in place ahead of time and communicating your plans with those close to you can help both you and your family feel prepared. 

Key Documents

Keeping vital documents accurate and up to date can help protect your assets and ensure that they are going where you want them to. Plus, having this essential information on hand can make things easier for your family when the time comes.The following are some of the fundamental pieces that make up an estate plan.

Last Will and Testament

A Last Will and Testament ("Will") is a legal document naming guardians for your minor children and directing the distribution of your assets upon your death. While a Will can be contested and does go through the probate process, it is the bare minimum legal protection you need. Without a Will, the court will  appoint guardians for your children without regard to your preferences and will distribute your property in accordance with the intestate provisions of applicable state law rather than in accordance with your wishes. 

Personal Property Memorandum

When writing your Will, one of the most important tasks is to identify who should inherit your personal property. Do you want to leave everything to your spouse, for example, or do you have  items that you would like to leave to different relatives and friends? One solution is to draft a separate document, called a "Personal Property Memorandum," which is simply a signed list of items along with the people you wish to inherit them.

A Durable General Power of Attorney

This legal document gives a person, your agent, the power to make financial decisions on your behalf.  You name an agent (this person does not need to be an attorney) who steps into your shoes, legally speaking. Should you become incapacitated, your agent can maintain your financial affairs until you are again able to act, without any need for court involvement.

Without a durable general power of attorney, your closest blood relative—who may not be your choice and may not know your wishes—would generally have the right to be appointed as guardian and would be given the  authority to manage your financial affairs.

A Living Will

This document is your declaration that you do not wish to receive extraordinary life-sustaining treatment if there is no significant hope of recovery. Even if you are young and in good health, you may want to consider having a living will. Not having a living will can lead to tremendous emotional and financial costs for your family.

A Health Care Proxy/Durable Medical Power of Attorney

While a living will is your legal declaration not to use extraordinary life-sustaining measures, a health care proxy is designed to grant the person of your choice the legal power to make medical decisions for you, if you are unable to make them on your own. As with a durable general power of attorney, if you don’t have a health care proxy, your closest blood relative would have the right to be appointed as guardian and would generally be called upon to make medical decisions for you.

Communication Is Key

It is vitally important that you communicate the details of your estate plan to your children and periodically revise your estate planning documents as circumstances change (e.g., marriages, births, illnesses or changing financial status). When parents communicate with their children about their values and expectations for the family nest egg, children are more likely to be prepared when they receive it, and may also better understand their parents’ motivations.

As you navigate these important steps and decisions, a Financial Advisor familiar with your family’s unique circumstances can assist your attorney in creating a comprehensive estate plan that reflects your goals and the legacy you envision.