Four Estate Planning Must-Haves

If you are one of the millions of American’s who has put off creating an estate plan because they didn’t think they needed one, didn’t know where to start, were too busy, or simply procrastinated, don’t panic! This post will outline four very easy steps you can take to put your plans back in order…

Estate planning is very often looked at as a requirement for only the extremely wealthy; rich, presidential candidates with blind trusts and $300 million estates, for example. While those of extreme wealth certainly have concerns the average individual does not, that does not mean you should ignore estate planning. Estate planning is not just about reducing federal estate taxes, which most American’s do not pay, but much more about ensuring that when our time comes, the transition of our estate is carried out the way we want, in a timely manner with little or no hiccups along the way.

NOTE: While estate planning is a critical planning tool for all individuals and families, same-sex couples face a very unique set of challenges that traditional families do not. If you would like to learn about those challenges and how to overcome them, read “Estate Planning Challenges for Same-Sex Relationships.”

Below are four estate planning tools that if you do not already have, you should strongly consider implementing.

1. Living Will

   A will is basically a road map you lay out (preferably with the help of an attorney) that designates where certain assets will go up on your death. While this sounds basic enough, not creating a will, or creating inconsistencies in your will, can lead to lengthy legal battles, battered emotions, and financial distress for those who may need access to financial resources that will be tied up in probate.

   Having a will allows you to bequeath real estate, collectibles, dependents (to be discussed later in this article), and financial assets, among other things. Not having a will leaves these decisions to the court. Besides having no idea what your true wishes are, not leaving a will leaves the door open for lengthy legal battles among family members and beneficiaries who may feel they are entitled to something they were not intended to have.

2. Power of Attorney

   A power of attorney is a document that gives an individual of your choosing certain rights in the event of your incapacitation. There are two main types of power of attorney’s:

   1. Durable Power of Attorney

      A durable power of attorney gives another individual the right to act on your behalf when you are unable to do so. This allows your chosen designee to do everything from conduct financial (both investment and banking) and real estate transactions, to signing a road-trip approval form for your students school trip. It is important when making the decision who to appoint as your designee that they not only be a trusted partner, but intelligent enough to make sound decisions in the event you are unable to.

   2. Healthcare Power of Attorney

      While not required by all jurisdictions, it is often recommended to create a health care power of attorney (often called a health care proxy), separate from your durable power of attorney, granting an individual of your choosing to make decisions related to the medical services you receive if you are unable to do so. This will give the designated individual the ability to accept/decline certain medications or procedures on your behalf. In addition, you may add/remove the right of the appointed designee to make decisions with respect to maintaining or removing life-supporting medical care.

3. Beneficiary Information

   Specifying beneficiary information on your investment, retirement and insurance accounts is critical to ensuring that your assets pass as desired. For accounts that allow you to designate a beneficiary, the decisions you make will often supersede your will (although you should still try and make sure they do coincide to avoid any legal battles, unwarranted as they may be).

   In addition to creating primary beneficiaries, you should also consider naming contingent beneficiaries in the event your primary is no longer living or unable to receive the assets.

   And while it is important to ensure that you designate a beneficiary when you create such an account, is it equally important to ensure that your beneficiaries are up to date on a regular (annual) basis. Many times the birth of a child, or in less fortunate circumstances a divorce, can make previous decisions less desirable.

4. Guardianship Designation

   Specifying an individual or a family who will take care of your children in the event of your untimely death or incapacitation is one of the most crucial, yet overlooked estate planning tool. Without a proper guardianship designation, the fate of your children may be left up to the courts to determine, and besides being a potentially long, drawn out process, may lead to a child being placed in foster care (at least temporarily).

   Additionally, while the courts will ultimately look to place your child in the care of a family member, without proper guardianship guidelines, which family member they choose is out of your hands. It is important to have not only primary, but also contingent beneficiary information listed to ensure that your wishes are granted in a timely manner.