Make Sure You Have Core Estate Planning Documents


Nearly every comprehensive financial plan includes estate planning. When you estate plan, you specify your wishes, both in the event you are unable to manage your own affairs, and at the time of your death.

Estate planning also makes it easier for your loved ones to administrate your affairs, and can save some significant legal fees. Everyone, regardless of age or wealth, should have some form of a basic estate plan.

This week’s MoneyDo: make sure you possess these critical Estate Planning documents:

  • Power of Attorney for Finances and Property, also known as a Durable Power of Attorney. The Durable Power of Attorney names an individual to act on your behalf and act for you during life, as it relates to your finances and assets, including filing tax returns or applying for Medicare, Medicaid, Social Security and other government benefits. If you were to become incompetent without a power of attorney in place, a court-supervised guardianship would be required for someone to be able to manage and take care of your finances.
  • Power of Attorney for Health Care names someone to make health care decisions if you’re unable to make decisions, and gives you the opportunity to give direction to that individual if various situations arise.
  • Last Will and Testament is the primary document that will provide how assets titled in your individual name without a joint owner or beneficiary will be distributed.

Your Will also appoints an executor (aka personal representative) responsible for managing your estate and following your final wishes. If you have minor children, your will can also nominate a guardian to care for them. Assets distributed under a Will go through the court supervised, probate process.

Once you have assembled those key pieces, estate planning can and often does include additional documents depending on the nature of your  assets and family situation.

  • Revocable Trust, also known as a Living Trust, can be used in conjunction with a Will and become the primary mechanism to distribute assets outside of the probate process. A trust allows for continuity of management during life and after death as the trust continues automatically without having to wait for the court to appoint an executor. An important decision to make in the planning process will be naming a successor trustee to provide for a smooth transition and continuity in management of the trust assets upon your death or incapacity.
  • Marital Property Agreement is an additional document that can be used in estate planning for couples in marital or community property states that classify property owned as either individual or marital property. Classification of property can have an impact on how an estate plan flows when individuals pass away. A primary advantage to using a marital property agreement is that it can also be used to help avoid probate.

All five of these documents are used regularly as part of a comprehensive estate plan. Even beyond these documents, there are optional documents that your attorney may use as part of your estate plan.

Living Will (aka Declaration to Physicians or Advanced Directive) outlines your wishes for health care treatment in certain situations, but it does not appoint an individual to make decisions on your behalf.

Memorandum of Personal Property is a separate document you can prepare that outlines who should receive your tangible personal property (jewelry, furniture, dishes, photos, etc…). Your personal representative or trustee will follow the list to the extent possible in distributing your personal property. The memorandum allows you to update the list without needing to re-execute a new Will each time you decide to make changes to the list.

Authorization for Final Disposition is a form of an advanced directive where you specify who is responsible for your funeral and burial arrangements. You can also express your wishes for certain arrangements, services, viewing, or music. The document is not required, and state statutes will specify who is responsible if you do not specify.

Beneficiary Designations, Transfer on Death Provisions and Asset Titling are also important components to ensure the estate plan you have designed will be effective and easy to administer when you pass away.  Beneficiary designations, transfer on death provisions and joint accounts will pass automatically according to the terms of the account rather than under the terms of your Will or Trust. When developing your comprehensive estate plan, it’s important to review and update all your accounts to fit.