Deep Dives

Essential Estate Planning Documents

Estate Planning is not just for the wealthy. A properly executed estate plan can greatly reduce stress and administrative hurdles for your grieving survivors should something happen to you. Planning your estate in advance will help make sure your savings and other assets are distributed as you intend.

July 11, 2022

Estate Planning is not just for the wealthy. A properly executed estate plan can greatly reduce stress and administrative hurdles for your grieving survivors should something happen to you. Planning your estate in advance will help make sure your savings and other assets are distributed as you intend. 

There are a few documents that every estate plan should include. They are: 

  • Will and Trust
  • Durable Power of Attorney
  • Medical Power of Attorney
  • Healthcare Directive

Will and Trust

A will and trust is the backbone of the estate plan. A will is defined as “a legal declaration of a person's wishes regarding the disposal of his or her property or estate after death.” Every individual should have a basic will in place that will instruct the court how to distribute your assets in the event you pass away, and who you designate as key players to administer your estate. Key players include your Executor, Trustee, Guardian and Beneficiaries

Your Executor works with your advisors (tax preparer, financial advisor, estate attorney etc.) to settle your estate if you pass away. This includes preparing your final tax return, paying bills, and making sure your things go to those you intended. This is typically someone you trust, and who physically lives near you so they can easily execute their tasks. 

A Trustee takes care of assets placed in trust. Again this is someone trustworthy (no pun intended), and should be someone who is financially responsible. You’re entrusting them to accurately interpret the intentions of your distribution instructions and treat your beneficiaries fairly and equitably. This may be the same as your executor, however it can also be someone different. 

A Guardian raises your kids in the event you pass before they are 18. You should find someone who shares similar parenting and moral values as you, and selecting someone who lives nearby physically means the kids won’t have to change schools or move to an unfamiliar place. 

Beneficiaries are who you will give your belongings and assets to when you pass. These can be family members, friends or entities (such as charitable organizations). 

In some cases your will may also include instructions to set up various trusts for purposes of limiting estate taxes, legal challenges, or control distributions to beneficiaries. A trust is “a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers a property upon the second party for the benefit of the third party, the beneficiary.” Not everyone needs a trust, they are only applicable in certain circumstances and we recommend consulting with an estate attorney to figure out what is an appropriate plan for you. 

Durable Power of Attorney

A Durable Power of Attorney is a document designating an agent to step in and act on your behalf if you are physically or mentally incapable of doing so. This person has the power to enter into financial transactions and make legal decisions as if they were you. Often spouses will initiate reciprocal Durable Power of Attorney designations to be able to step in for each other, however sometimes it makes sense for a trusted non-spouse advisor to be designated instead. 

Also, in some cases you may wish to designate a “springing” power of attorney which means they will become eligible to act on your behalf when a certain event “springs” them into action. For example, you may wish to have a springing power of attorney that is triggered in an event you are deemed incapacitated. However, in some cases proving that the springing event has happened can be difficult. Third party must know the springing power of attorney exists and medical professionals may need to come in to deem you are in fact incapacitated, which can take time.

Medical Power of Attorney

A Medical Power of Attorney (sometimes also called a Healthcare Power of Attorney) allows you to designate someone to make medical decisions for you if you are incapacitated. This can be a spouse or a trusted family member or friend. 

Healthcare Directive or Living Will

This document allows you to tell your doctors what course of action they should take if you are dying or become permanently unconscious. Some decisions you may make include use of CPR, ventilators, artificial nutrition or comfort care.  

Ok, so you’re ready to create an estate plan, where do you start? You have a few options for getting your documents drawn up.

Option 1:

There are pre-built templates for estate documents available online. However, in many cases you get what you pay for. We do not recommend using this approach as these are typically not custom enough to properly execute your wishes. 

Option 2:

Tech companies have created flows that you can use to create customized estate planning documents without requiring you to physically meet with an attorney. For simple estates, this can be a relatively inexpensive option. Some companies are better than others, so be sure to research the product and make sure it is custom enough to meet your needs. If the company provides access to attorneys to answer questions while you’re preparing your documents, this is highly preferred. 

Option 3:

Some more complex estates will require meeting with an estate attorney to create custom documents to execute your estate plan. Families with special needs, high net worth, blended families, or legal challenges may wish to meet with an estate attorney.   

Unlike a fine wine, estate documents don’t improve with age. You should update your documents when you have a change in life situation (marriage, divorce, birth of a child) or at least every ten years to reflect changes to estate law and changes in your personal life. Relationships change so periodically check your estate documents and update the key players when needed.

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