Do you need estate planning? The answer is yes, but what exactly does that mean? The key is to make sure your affairs are handled smoothly both while you’re alive AND after you pass away. Here’s the estate planning everyone needs.
Regardless of your net worth, most people need Foundational Estate Planning, which helps you define your inheritance plan, avoid probate, and choose trusted people to care for you if you’re incapacitated and carry out the inheritance plan after you pass away.
4 key foundational estate planning documents that you need.
- “Revocable Trust” (sometimes called a living trust because you created it while you were living) – A revocable trust is the key to a smooth, flexible, estate plan without requiring probate. You transfer your primary assets into the trust. You are the trustee of the trust and control the trust and can modify it anytime. If your incapacitated, your chosen successor trustee steps in to continue to take care of you with your assets. Upon your death, the successor trustee follows the terms you outlined in the trust to distribute assets to whom you want, how you want, and when you want. And all of this without the cost and publicity of court probate proceedings.
- Pour-over Will – We commonly think of a will as the tool to divide assets upon death which is correct because it certainly can serve that function. However, because your revocable trust handles division of assets, your pour-over will functions as a safety net “pouring” any assets into your trust which were not already there (such as a property or an account which hadn’t yet been titled in the trust). The pour-over will ensures that everything ultimately ends up in the trust to follow your pre-designed inheritance plan. Your will can also designate guardians for minor children.
- Durable Power of Attorney – This allows you to appoint an “agent” to sign documents on your behalf. This is an excellent tool because if you are ever incapacitated and unable to sign documents for yourself, you’re covered because you have already given this authority to someone you trust.
- Advance Health Care Directive – This has two parts. First, is the medical power of attorney where you appoint someone to make medical decisions for you if you cannot for yourself, and second, you outline your “living will,” which is how you want to be cared for (for example: you want the best care possible, but if you are on life support with no reasonable hope of recovery you want them to withdraw life support, or keep you on life support as long as possible, it’s up to you).
These four documents are the foundational estate planning documents that just about everyone needs. They’re sophisticated, but not complicated and deliver peace of mind knowing that you are covered during lifetime and after death.