Estate Planning: What You Need to Know

Published: August 16, 2018
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1. Introduction 

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Creating an estate plan may be a lot easier than you expect.

We're not all planners. Some of us prefer to pack an hour before a transatlantic flight, and fly by the seat of our pants.

But estate planning is not a situation where it's best to wing it. Setting out your wishes for things like end of life care and guardianship of your children or pets is something you should seriously consider. Even if you don't have a huge estate or children (fur babies included), establishing an estate plan is the responsible and considerate thing to do. And it's actually a lot simpler than you may realize to set out your wishes so they're recognized by the law. That way, should you find yourself in a situation where you're unable to share your wishes or manage your financial and legal life, you'll have taken the right steps to protect yourself and those who love you.

We know you don't want to think about it. Heck, we don't want to think about it. But it's important, just like brushing your teeth or buying a minivan. Don't do it for you, do it for them.

2. Understanding the Basics of Estate Planning

Creating an estate plan is no longer just for rich older people who keep an attorney on retainer. Let's start with the core documents that typically make up an estate plan. You've probably heard of a last will, but there's also a living trust, the tried and true power of attorney, and, for your health, the living will. These are relatively standard documents that require a bit of thinking and digging through old paperwork on your end.

Here's a primer to get you started:

Estate plan components, diagram.
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  • Will (aka last will). You can set out who you want to leave your property to, name a guardian for your children and determine who should carry out the will itself once you are gone. Wills often have to go through probate, a public court proceeding that determines the validity of the will and authorizes the distribution of the person's property. The process can sometimes be lengthy and expensive, however, without a will, state laws determine who will get your property.
  • Trust (aka living trust). This is an alternative to a last will. A living trust allows you to establish a plan to manage your assets while you are alive, and if you are no longer able to manage them. Property in a trust is managed by the person you choose if you are unable to manage that property. You can also set out instructions for when your beneficiaries get their inheritance after you pass away. A trust only becomes valid once you transfer property into it, and you have to manage the assets while you are alive. Having a trust also allows you to avoid probate.
  • Power of attorney (POA). You can choose someone to make legal or financial decisions on your behalf if you are unable to. You determine when they should step in and what duties they can perform, and they can be used now or in the future.
  • Living will (aka advanced directive). You can decide what you want to happen in the event you can't make your own medical decisions. This sets out guidance for your family and doctors regarding the medical treatment you want to receive in an emergency situation, along with authorization to receive your medical records.

3. Getting Started 

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The complexity of estate plans vary, based on assets and family needs.

First off, you'll want to decide how you prefer to create your documents - whether that'son your own, using an online tool, or with an attorney. You don't have to get attorney advice, though it might be wise if you want to draw up the documents completely on your own. An online document service may provide access to an attorney, or you can have an attorney prepare all of the documents for you.

Next, you'll need to consider if you want a will or trust. Here are the main things to consider:

  • Your location. State law regarding probate and trusts varies greatly, so what may be advantageous in one state may not be in another.
  • Your current financial situation. Setting up a living trust may be more expensive upfront than writing a will, but this must also be weighed against all other considerations.
  • Your asset value. Generally, states establish an asset value below which even wills can bypass probate, but that doesn't mean lower valued estates couldn't benefit from the other advantages of a living trust. Also, if you have assets that could be harmed by prolonged probate, such as a business, a living trust might be the better choice.
  • Your property. If you have property in more than one state, a living trust may be for you. It can avoid the need for probate proceedings in each state in which you own property.
  • Your tolerance for paperwork. If you choose a will, there is no need to transfer assets during your lifetime. They are transferred upon your death, often through probate. With a living trust, you have to change the title of your property, which could involve creating new deeds, closing and opening bank and brokerage accounts, and other complex paperwork.
  • Your faith in a potential trustee. With a living trust, you must be able to trust your named successor trustee to act according to your wishes if you are unable to manage your assets and after you are gone, without court intervention or monitoring.

People often set up both a living trust to create what is referred to as a "pour-over will." Typically, as many assets as possible are transferred into the trust. The pour-over will transfers the rest into the trust after death, so all the loose ends are tied up. However, pour over wills are subject to probate

Once you make the choice about how you'll draft the documents, you'll want to organize your personal information. List out what you own and where you want each piece of property to go after you die.

List your assets and debts, including bank, credit and retirement accounts, investments and personal property, along with all of the documentation to go along with each item. It might be helpful to use a worksheet or spreadsheet to keep everything tidy.

You'll also need to think about who you want to handle your affairs, care for your young children and who will be the beneficiaries of your estate.

Once you've thought about all of this, you're ready to complete your documents.

4. Tips and Tricks for Completing Your Documents  

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With LifePlan, you can complete estate plan documents online and talk with an attorney.

If you're relying on an attorney to create your documents, you'll likely have several meeting

s with them to provide the necessary information and sign the documents. They'll create the documents, you'll review them together, and then you'll sign/witness them.

When drafting the documents on your own, there are plenty of online resources or you may just want to have an attorney review them once you are done. Make sure to sign them once they're done to ensure they are completely legal.

Online document services are a great middle of the road option. They are usually inexpensive and have attorney advice included with the package you buy. You can fill out an online questionnaire with the information you've collected, and they'll review the document for errors and then send it back to you. It's still wise to have an attorney review it prior to signing the documents.

With LifePlan, you can complete all the documents on your own and talk with an attorney, who will help you prepare by discussing your situation, letting you know what decisions you need to make and what information you will need to complete your documents. After you have completed your documents, you can also speak with an attorney and have them review everything before you sign and anytime you are considering making a change.

Make sure to keep your documents somewhere safe, both hard and soft copies.Review your beneficiaries frequently. If you don't, your things may not go to the right people. And talk to your loved ones about what's in your plan, so they aren't surprised.

5. Updating Your Documents for Life's Changes

Congratulations, you're an extremely responsible and on-top of it adult. You've already created your estate plan and you can pat yourself on the back.

However, if any of the following has happened to you since you created your documents, you may want to consider updating them. Here are some situations that may change how you'd like your estate handled:

A couple getting married.

  • Marriage. If you, your child or anyone else named in your plan got married.
  • Divorce. If you, your child, or anyone else named in your plan got a divorce.
  • Birth or adoption of a child or grandchild. If you, your child, or someone else gave birth to or adopted a child that you would like to include. Also, if you want to name a guardian for that child.
  • A child has reached the age of maturity. If a child named in your plan turned 18 or reached a milestone set in your plan.
  • Death or serious illness. If someone named in your plan died or has fallen seriously ill. This is especially important if it's someone who has been named as your executor, financial or health care power of attorney, or trustee.
  • Changes in relationships with people, pets or organizations. If you've started a new relationship with someone or an organization you would like to include. Alternately, if you've severed or changed any relationships, it may be time to make updates.
  • Acquisition or sale of any major assets. If you've bought or sold a house, opened or closed a business, inherited property, etc.
  • New insurance policies or pension plans. If you've acquired new insurance policies or pension plans that cause you to reconsider adjustment of beneficiaries in your estate plan or reached the age at which you are required to take distributions from a pension plan.
  • Change of your state of residence. If you've moved to a new state, the laws governing how your estate plan is administered have changed.
  • Tax law changes. If there are new or different provisions in the tax law that affect your estate plan.
  • Estate planning may not be the most exciting thing you ever do, but it may be the most rewarding. There's great comfort in knowing that your affairs are in order and your family won't have to make difficult decisions should you pass away or be incapacitated.