3 Estate Planning Documents Everyone Should Have
1. Will (Last Will & Testament)
The first document that most people have heard of but may not be entirely familiar with is a Will. A Will is a legal document that outlines your final wishes upon your passing.
4 primary components of a will:
Specific instructions on how and when you want your assets distributed.
Executor - the person you designate to carry out the provisions of your will.
Beneficiaries - the people or organizations you assign to inherit your assets.
Guardians - the person you want to care for minor children. Psst… don’t forget to name a guardian for your fur babies (pets).
Without a written Will in place, and without written beneficiaries, you are deemed to have passed intestate. This doesn’t mean that your family or loved ones will lose your assets, it just means that the state you reside in will oversee your assets via a process called Probate. They will then distribute your assets based on state law/precedent, often being your closest living relatives to receive assets first. The order typically goes married spouses, children, parents, siblings, etc.
Every estate plan is different and will reflect you and your family’s financial situation. A couple of other items we often see included in a Will are:
Trust Creation - depending on the state you live in; you may be subject to estate taxes separate from federal limits. Creating a trust could help you avoid paying unnecessary taxes and help with how you want your assets distributed. Trusts can also help make sure that individuals, such as young children, don’t inherit large sums of money immediately, but rather at your pre-determined intervals (for example: age 25, 30, 35, etc).
Letter of Intent - this isn’t a document that the court will recognize, but it can help your executor understand your intent. This document can include funeral & burial arrangements, financial information, a sentimental message to loved ones, etc.
2. Power of Attorney
Both of the following examples outline how individuals that you assign can make decisions on your behalf when you are no longer able, after becoming incapacitated.
Financial Power of Attorney (FPOA):
This document is necessary in a situation where you don’t pass away but are found to be mentally incompetent. The FPOA allows someone to make financial decisions on your behalf. For example – pay bills, transfer funds, make investment transactions, etc. With no document in place, it will be up to the state to assign someone to make those decisions for you, which may not be in line with your wishes.
Healthcare Power of Attorney (HCPOA):
Much like the FPOA, this is the person you assign to make healthcare decisions on your behalf. In some cases, the person you want making financial decisions and the person you want making healthcare decisions, are not the same person(s).
3. A Living Will (aka Advance Directive for Healthcare)
The reason that I list this as number 3 isn’t because it’s any less important but instead to simply differentiate between a Last Will & Testament (No. 1 on this list) and a Living Will. The Last Will focuses on who inherits your assets after your pass away. The Living Will is about outlining your healthcare preferences before you pass away and before the decision is at hand. Your Healthcare power of attorney may be able to make decision on your behalf; however, do they have a complete understanding of the choices you’d make for yourself? These decisions are particularly difficult subjects to discuss and often involve life changing (or ending) choices that have to be made. For example, what happens if you are left in a vegetative state and the only way to survive is through life-sustaining machines, and artificial nutrition or hydration. In the later years of life when our bodies are frailer and more susceptible to injury, do you wish to be resuscitated if someone needs to make that decision? Most living wills are not strictly regarding physical ailments, they include mental health and cognitive decline as well.
A few of the specific areas covered in a living will include:
Organ donation
Mechanical ventilation
Dialysis
Tube feeding
Medications
The executor of your estate will need to be notified of where these documents are in the event of your passing. Documents include:
The 3 estate documents listed in this article.
Titles and Property Deeds – Homes, vehicles, etc.
Insurance Policies – Life insurance, disability insurance, and & group insurance if employed.
Account or custody locations – Checking/savings, retirement & Investment accounts.
Digital Logins & Passwords – social media, email, and streaming services.
Identification information – Birth certificates, social security, marriage certificates, divorce decrees
DISCLOSURES:
Consilio Wealth Advisors and its’ team members are not attorneys or legal professionals. We strongly recommend contacting your attorney to determine the best legal strategy for your situation.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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Consilio Wealth Advisors, LLC (“CWA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure.
