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Estate Planning Documents: How to Get Started With Estate Planning

April 19th, 2021 | Written by

Proper estate planning helps ensure your assets’ efficient transfer to individuals and causes you care about most. There are various estate planning documents you can draft to ensure that your wishes are met and your loved ones are taken care of in the event of your passing. Here are the primary estate planning documents you should discuss with your financial advisor to get started with estate planning.

Wills and Trusts

Wills and trusts are a primary component of estate planning. They are often the first thing that comes to mind when planning a transfer of assets.

Wills

A will is a legal document stating how you’d like your assets distributed once you pass away – whether to family, friends, or charity.  A will can also name guardians of minor children.

After death, wills go through the probate process where a court will examine the will. Depending on the state of residency, and the size and composition of the estate, the probate process may be lengthy.

Trusts

A trust is a legal document where you can authorize another party (trustee) to handle your assets. There are two main types of trusts – living (revocable) and testamentary.

A living, or revocable, trust is created while the trustor (owner of the assets) is alive. It is revocable, meaning it can be changed as long as the trustor is alive. One main benefit of a living trust is that it avoids the probate process.

A testamentary trust is created through a will. It names a trustee responsible for managing and distributing the trustor’s assets to the beneficiaries. The person may change their will while they’re alive, however once they pass away the testamentary trust becomes irrevocable.

Titling of Assets and Beneficiary Designations

Beneficiary designations are typically made when establishing financial accounts such as retirement, life insurance, etc. These beneficiary designations should reflect who you’d like to receive the assets of that account upon your passing. Beneficiary designations are legally binding and will typically trump what is in your will.

Asset titles are the people who are listed as the owners of assets such as real estate, cars, boats, non-retirement accounts, etc.

Typically, the titling of your assets will trump what is written in your will. For example, if you have a boat titled to you and your spouse, but you left it to your brother in your will, it will still go to your spouse because it is titled to them. Therefore, it is vital to periodically review your trusts, wills, and titling of your assets to ensure that they reflect your wishes.

Power of Attorney

The person you authorize to act as a Power of Attorney (POA) must be someone you trust completely. There are two main types to consider as part of  your estate plan.

A Financial Power of Attorney is a legal document authorizing another person to make financial decisions as if he/she were you.

There is also a Medical Power of Attorney or Health Care Directive. This legal document authorizes another person to make medical decisions on your behalf if you become mentally or physically incapacitated.

What happens if you become incapacitated and do not have a Power of Attorney?

If you become mentally incapacitated and do not have a Power of Attorney, it may become the court’s decision to decide what happens next. They may name someone to make financial and medical decisions for you. While this is typically the next of kin, it may not be the person you would choose for yourself.

Guardianship Designations

Guardianship designations are typically included in wills if you have minor children or other dependents. It is a crucial decision as this person will be left responsible for your children if you pass. Without a guardianship designation, a court may decide who will look after your children should you pass away. This may be a family member, or they may become wards of the state in rare cases.

Letters of Intent

A letter of intent is a simple document you can leave to your beneficiary or executor. Typically, letters of intent inform your executor of any specific wishes you may have. While these documents may not be legal in the eyes of the court, they can include information on what you’d like to be done with personal effects or even funeral details.

Are You Ready for Retirement?

At The Prosperity Consulting Group, we work with clients to help them ensure that their wishes are honored in their estate plan. Along with retirement planning, estate planning is a vital part of your financial plan. Are you ready for retirement? Take our retirement readiness quiz to find out!

 

This information is for educational purposes only. It is not intended to provide, and should not be relied on for, any tax or legal advice. You should consult your tax or legal adviser prior to making any decision based on any specific information contained herein. This information is not intended to be used as the only bases for investment decisions, nor should it be constructed as advice designed to meet your particular needs. You are advised to seek the advice of your financial advisor prior to making any decision based on any specific information contained herein.

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    This information is not intended to be used as the only bases for investment decisions, nor should it be constructed as advice designed to meet your particular needs. You are advised to seek the advice of your financial advisor prior to making any decision based on any specific information contained herein.
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    The Prosperity Consulting Group registered as a Registered Investment Advisor (RIA) in 2005. We have with a passion for providing clients with objective investment advice and wealth management solutions. Our purpose, coupled with our fiduciary commitment, is essential in helping clients achieve their financial goals. Our firm is dedicated to providing unparalleled financial planning and investment advice to individuals, families, businesses and institutions. We have identified key areas that are critical and integral to a client’s financial success. These planning areas encompass: Investment Planning & Management Retirement Planning Estate Planning Tax Planning Business Planning Insurance Planning Income Protection & Asset Preservation Education Planning 401(k) Planning
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