Estate Planning Checklist: 6 Must-Have Documents

I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.

Estate planning is an essential piece of anyone’s later years, and it’s crucial to have all the details laid out neatly for your future beneficiaries. By creating a concrete estate plan, you can help your future heirs by limiting the time and money spent ironing out all the problems.

Estate Planning Guide
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According to a poll by Harris Interactive, 57% of American adults don’t have a will.  Not having a will can create problems for their future heirs, such as long court proceedings, court costs and high lawyers’ fees. 

By creating a comprehensive plan to deal with your retirement plan assets, you can avoid these pitfalls.

6 Essential Documents for Estate Planning

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What is Estate Planning?

Estate planning is the process where you can dictate how your estate's assets will be divided up and who will make decisions for you when you no longer can.

Estate planning can refer to plans you make for your financial affairs after death and other reasons, such as severe illness or incapacitation.

Estate planning involves wills and other legal documents, so finding a lawyer is usually needed. The process can be long and complicated, so having someone knowledgeable in all law avenues will help make the process smoother.

Importance of Estate Planning

Estate plans are essential for everyone, not just the super-wealthy. If you have any property, it can be passed along in a will, so planning for that inevitability is crucial.

When you’re nearing old age, this can be a pressing concern.  If you don’t do any estate planning, your heirs will be left with the consequences.

They will have to deal with the long probate process - including possible probate court appearances - and more lawyer fees.  They will also have to abide by a judge’s decision, rather than what your plan could have dictated. 

6 Estate Planning Must-Haves

Estate planning may look rigorous, but once you have a skeleton plan with estate planning basics accounted for, the process becomes much more manageable.

Follow this estate planning checklist to ensure you have all of the essential documents and legal forms in your estate plan.

1. Wills & Trusts

A will is a legal document that dictates how your estate will be handled and who will do that. The person named in your will to watch over this process is called the executor.

The executor’s job is to distribute your assets according to the plan set up in your will.  Trusts act in much the same way. The main difference is that an impartial third-party acts as the executor to distribute your estate among your beneficiaries in trusts.

The third-party handling your assets is compelled to act in a fiduciary manner, so you can feel comfortable leaving your assets in their charge.

A will or trust is an integral part of estate planning because it’s what lays out how you want to divide your assets. Your heirs will have to spend their time and money on courts and lawyers if you don’t produce a will or trust.

Having a will or trust makes this process much smoother.

2. Beneficiary Designations

Beneficiary designations are the part of the estate plan where you designate which of your heirs will inherit your property.

You can make a beneficiary designation with life insurance policies, unused individual retirement account assets, and others to a designated beneficiary. 

You can choose more than one designated beneficiary, but this needs to be spelled out in a will or trust. You can specify a primary beneficiary who can claim the asset as their own.

If they fail to claim your assets, a secondary beneficiary you have named can claim the asset.  It is essential to designate beneficiaries in your estate plan because if you don’t, arguments about your asset distribution may occur after your death.

Problems like these can easily be avoided by designating beneficiaries to your assets in your will. 

3. Durable Power of Attorney

A durable power of attorney (DPOA) is an integral part of estate planning because it designates who will make decisions on your behalf when you cannot.

If you have a severe illness or have been in an accident, you may not be able to tell people what you want, but your DPOA can.  Sometimes referred to as a 'durable financial power of attorney' - your designated DPOA can make decisions about your personal finance, property, and legal matters.

The DPOA is limited in making healthcare-related decisions, as that power is granted to the person with a healthcare power of attorney.

4. Letter of Intent

A letter of intent is a non-legally binding letter where you layout important information that you may not have needed in the will but is helpful to your family and executor.

Often, this letter gives instructions for what to do in case any problem arises.  The letter of intent should include personal details that your family may need in an emergency.

This includes passwords for bank and other financial institution accounts, as well as details of retirement plans, emails, contact information, details of savings accounts, location of assets or legal documents, and any other information that you may not have included in the will but your family may need.

Having a letter of intent ready for estate planning is helpful because it can lay out the information not explicitly noted in your will.

By laying this information out clearly, your family will be able to address your needs more carefully and precisely.

5. Healthcare Power of Attorney

Healthcare power of attorney, like the DPOA, allows you to give someone the right to make decisions on your behalf, but in this case, only in regards to medical care.

A healthcare power of attorney is important for anyone nearing old age, as the likelihood of incapacitation rises.  The healthcare power of attorney has to be someone you trust completely.

They will be responsible for your health and well-being, so choosing someone you can rely on is one of your most significant concerns. 

The importance of designating a healthcare power of attorney cannot be understated. For proper planning, it’s crucial for your end of life care, but also your family’s well-being.

Sometimes making these big decisions can feel like a burden, so choose someone you know can handle it.

6. Guardianship Designations

If you have young children or dependents, estate planning means a lot more. In the unlikely event your children lose both their parents, they will be unable to plan and care for themselves.

That’s why an estate plan that involves guardianship is so crucial.  In deciding who should have guardianship over your children, you should find someone who is financially stable and wants to raise your kids in the event of your death.

These are people you should trust, much like the person you choose for your healthcare power of attorney.  Designating a guardian in your estate plan will give you peace of mind to know someone responsible will care for your children.

Guardianship designation can be a very stressful part of estate planning, but getting a friend or relative designated as a guardian could make issues easier to resolve in the future.

7 Steps to Creating an Estate Plan

Estate planning should be comprehensive, including all of the information needed to find and claim assets. You can make this process easier for your family or beneficiaries by finding and organizing this information:

1. Inventory your stuff

This part of the estate planning process may be the most cumbersome, but it is also the most important. If you can organize all of your tangible and intangible assets, and their locations, into one document, your beneficiaries will benefit from your planning.

Tangible assets include things like property, cars, and possessions. Intangible assets include bank accounts, investments in stocks or bonds, insurance policies, or ownership in a business. 

An essential part of the inventory process is estimating the value of your assets. Inventorying your things means you will need to find recent appraisals and financial accounts statements, as well as receipts or invoices. 

2. Account for your families needs

This part of estate planning relies on your knowledge of the current financial situation of your beneficiaries. If you are married, you will pass most, if not all, of your assets to your surviving spouse.

But what if your life insurance policy is not enough for the mortgage or another unexpected cost arises? Blended families need to consider people who might not automatically be beneficiaries too.

This is where your estate planning, and knowledge of your family’s needs, are most important. Understanding your family members’ financial position allows you to plan for the distribution of your assets in a way that benefits everyone.

This point in time is also when you should designate guardians for your children. Not only will you be able to designate who watches them, but also how they are cared for.

Issues such as which school to attend and how much money is needed for college should be addressed here.

3. Establish your directives

The directives in your estate plan are the legal documents and directives outlined above.  Your will or trust, power of attorneys, and guardianship designations are all directives you give to your beneficiaries.

The directives dictate how you want certain aspects of your estate to be dealt with. By putting these directives in legally binding documentation, you can make sure your beneficiaries follow your directives.

4. Review your beneficiaries

Some parts of your estate plan will have their beneficiary designations aside from your will. Life insurance is the most important, so reviewing that all your assets are finding their way to the proper beneficiary is crucial. 

If you are updating your estate plan, it is a good idea to review your designated beneficiaries. If you have had a falling out or someone has passed away, it is essential to find a new beneficiary.

Always find a secondary beneficiary just in case something happens to your primary beneficiary.

5. Note your state's tax laws

Each state has its estate tax laws, so it’s recommended you understand your locality’s unique tax laws. Federally, only the largest estates are taxed.

On the state level, estate taxes can vary from none at all to 16%. Understanding and planning for your state’s taxes will leave your family with one less headache.

6. Weigh the value of professional help

Professional help can be a life-saver for some people who are planning their estate. If you feel like you are lost or if the process is too complicated, an estate attorney or tax professional can let you know if you’re on the right track.

7. Plan to reassess

Unforeseen issues can arise for anyone, so having the ability to reassess and change your estate plan is positive. Sometimes it can be as easy as designating a new beneficiary to your life insurance, but often it requires a new will or trust.

This process can be long and tiring, but making sure your beneficiaries (including minor children) get the most out of their inheritance is worth it, so don’t leave this for another day.

If you need to reassess your estate plan, do it!

Next Steps

Estate planning is a process that can take a long time, but getting it right will allow your family the space to grieve without having to worry about finances or other issues that arise around your estate.

If you haven’t started estate planning, start today! It’s never too late to think about what your estate consists of and begin planning.

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I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.

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