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The 4 Most Important Estate Planning Documents

One of the biggest financial mistakes people make is not having a defined estate plan in place. While it may leave some feeling a bit uncomfortable, setting up an estate plan in the event of your incapacity or passing can help make the process easier on your loved ones — and help clear up any confusion as to how to handle your assets.

Remember, you can always plan ahead, but you can’t plan behind. Having a well-defined estate plan will help give you and your family more peace of mind if a tragedy happens. Here are four documents to keep in mind.

1. A Last Will and Testament

When it comes to estate planning, having a last will and testament is likely the first thing that will come to mind. Most people think of this as just a Will. It may sound a little macabre to be thinking about your death, but if you approach it as a financial plan and nothing more, it can help make the whole process feel a little less uncomfortable.

Your Will identifies the executor, or personal representative, for your estate. This is the person who will oversee the distribution of your assets and follow your wishes. Your Will should also identify guardians who will care for your minor children and provide details regarding how and to whom you distribute your assets.

Note that your Last Will and Testament only becomes active after you pass away, and a probate court oversees its administration. If you pass without a Will, the state you reside in has a plan for you, but those plans may not be consistent with your intentions, which is just another reason why it’s so important to start planning early.

2. A Document Granting Power of Attorney

A full-fledged estate plan should contain not only a robust Will but also other vital documents, including a report which identifies who should make financial decisions for you in the event you are unable to do so. This document is called a Durable Power of Attorney. Unfortunately, this is one of the main estate documents many people either breeze over or neglect completely.

The agent named in this document will be in charge of managing your assets and making the financial decisions, such as filing tax returns or buying and selling real estate, needed to help see your wishes through. In many cases, this document may be “springing.” A springing power requires proof of your incapacity, which creates another roadblock to navigate during an already difficult time. A non-springing Durable Power of Attorney will manage your finances in the event you are unable to do so.

3. An Advance Medical Directive

It’s also important to consider your medical decisions. Setting up an Advance Medical Directive (including appointing your healthcare agent and creating a Living Will) helps guide doctors and caretakers to make the appropriate decisions if you become terminally ill and can’t act on your own.

By specifying how and when to proceed with specific treatment plans, you’ll take the possibility of uncertainty out of the equation and make it easier for people to follow your wishes. Be sure that the document also includes a HIPAA (Health Insurance Portability and Accountability Act) privacy waiver so that your medical agent has access to your medical information!

4. Revocable Living Trust

By creating a Revocable Living Trust, you can address the handling of Trust assets in the event of incapacity or death without having to spend time tied up in court. Depending on the size and scope of your assets, your state of residence, and your distribution wishes, a Will alone may be sufficient. That said, if you do decide to create a Trust, you’ll need to retitle your assets so that they fall under the Trust itself. You can name yourself trustee and appoint successors to step in and act if needed.

A Trust may not be right for everyone, which is why it’s worth taking the time to speak with a qualified financial advisor or estate attorney to discuss if/when a Trust would be necessary.  

Remember to tie up any loose ends

With your Wills, Powers of Attorney, and Trusts laid out; it’s important to make sure everything — and everyone — is covered. Be sure to evaluate how your assets are titled, and make sure that your beneficiary designations are consistent with the plans.

We also recommend that you gather your various financial accounts and insurance policies and store them in a safe place, such as a home fire safe or bank safe deposit box. These include mortgage deeds, car titles, estate documents, and anything else your agents may need. Keeping this information on hand helps your agents carry out your wishes the way you intended.

Finally, take the time to periodically update your beneficiary designations to help make sure everything is up to date. We recommend giving your documents a once-over every year and performing a comprehensive review of all assets, insurance, beneficiary, and estate planning with your financial advisor periodically.

Still have questions? Reach out to FJY Financial today so we can help you craft the right estate plan for your needs.


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