There are different times in your life, however, when you should prioritize it more than other times. If you own property, have minor children, are going through a big life change such as a marriage, divorce, or illness, your children have become adults, you are planning for retirement, or you may be reaching the end of your life, you definitely need estate planning more than someone who does not fit in one of those categories.
An estate plan not only helps you lay out your desires for your estate, or property, when you are no longer on the earth, but it also ensures that everything is in place to help your transition from earth go as smoothly as possible. A complete estate plan should include more than just a will and financial planning. In fact, the best estate plans involve a team of professionals to help you create your plan. Depending on the potential size of your estate, the team may include a financial planner, a tax professional, and an estate planning attorney all working together.
A complete estate plan should include more than just a will and is not just for the wealthy. A complete estate plan should include, at the bare minimum, the following items:
Your last will and testament, including a guardian nomination if you have minor children
Powers of attorney
Advanced healthcare directive/living will
Last Will and Testament
The last will and testament allows you to give detailed instructions for what you would like to happen to your assets upon your death. Additionally, if you have minor children, you can name who you would like to raise your children and manage any property for them. In most states, if you die without a will, the state determines how your assets are distributed according to state "intestacy" laws. Texas's intestacy law, for example, gives your property to your closest relatives, beginning with your spouse and children. If you don’t have a spouse or children, your grandchildren or your parents will get your property. The list goes on with increasingly distant relatives, including siblings, grandparents, aunts and uncles, cousins, nieces, and nephews. If the court exhausts the list to find that you have no living relatives by blood or marriage, the state will take your property.
Some assets can skip probate (the court-supervised legal process of distributing your assets) and transfer directly to a beneficiary after you die. These types of assets are called non-probate assets and include 401(k) accounts, pensions, and life insurance policies.
For these assets to skip probate, you have to contact each institution where you have a non-probate asset (for example, your bank or life insurance provider) and name a beneficiary for it.
Because non-probate assets skip probate, they do not get listed in the will as the will has no impact on them. Beneficiary designations override what’s written in your will, so it’s important you keep them updated to match your wishes.
Powers of Attorney
A financial power of attorney allows someone to act in your place financially with your permission. This would include paying bills, making bank deposits, and managing your real estate property. Appointing a power of attorney while you are of sound mind allows you to ensure that your affairs will be managed in your best interests and the way that you would manage them. If you do not set these powers up while you are of sound mind and then become incapacitated and need someone to manage your affairs, it is too late to put one in place and a guardianship will have to be appointed by the court.
A medical power of attorney designates who you would like to make medical decisions on your behalf if you are not able to make them yourself. If you do not have this power in place, medical personnel rely on next of kin to make this decision, but not everyone’s next of kin agrees with their decisions on medical care. Therefore, having the conversation about medical care desires and putting the proper paperwork in place cuts down on family conflict and ensures one’s desires are made known legally.
Advanced healthcare directive/living will
When it comes to end of life planning, one of the most important documents is the advanced directive, which is often known as the living will. This document is where you can make known your wishes regarding terminal conditions you may be facing while incapacitated. This allows you to communicate whether you want to be kept alive as long as possible or made comfortable and allowed to die. Many families have fought expensive legal battles over this, so putting the proper documents in place long before they are needed prevents your family from unnecessary bad feelings and wasted money.
This is where you let your loved ones know if you would like to be buried or cremated, what you would like done with your remains, and if you have already made specific plans. You can also appoint someone to be your representative to make sure these wishes are carried out.
Revocable living trust
If you would like to go above the bare minimum, you should consider a revocable living trust, accompanied by a pour-over-will. Similar to a will, a revocable living trust is a legal instrument that allows you to distribute your assets after you die. A revocable living trust is a legal entity that “owns” the property you put into it while still allowing you to use and control that property while you’re alive, and as a result, avoids probate upon your death. After you pass away, assets in a revocable living trust can be distributed to your heirs quickly and privately.
This is just the beginning of the conversation towards getting your complete Estate Plan in place. Schedule a free consultation with an estate planning attorney to discuss what should be included in your personal complete estate plan.