Beyond your will: How to ensure your estate plan is complete

Your estate plan is a set of legal documents that set forth your wishes for when you die or if you lose capacity. These documents usually include a revocable or living trust, a will, powers of attorney for financial and health care purposes, and beneficiary designations for any retirement accounts or life insurance.

These documents are especially important when you have children or other dependents, who look to you for financial support. Regardless of your situation, these documents are how you protect yourself and your assets in the event of death or incapacity.

Why you need an estate plan

You are never too young to be in control of your decisions. If you have no estate plan, the courts take control, default intestacy laws direct who receives your assets, and the legal process can be costly and time-consuming for your beneficiaries.

In contrast, having an estate plan can provide peace of mind to you and your family on several fronts:

• Who receives your assets and how they are distributed after your death. The central function of an estate plan is to name who you want to receive your assets after your death. In your will or revocable trust, you can provide for gifts of specific property or dollar amounts. You can create trusts to protect assets you want to support your beneficiaries for the long term. You also can design your distributions to manage estate and income taxes.
• Who will make decisions on your behalf if you lose capacity. A comprehensive estate plan includes powers of attorney for financial and health care purposes. These documents appoint individuals to make financial and health care decisions on your behalf if you are unable to do so.
• Who will care for your minor children. An estate plan includes documents to name guardians for your minor children if you pass away.
• Privacy and efficiency of administration. An estate plan involving a revocable trust can allow you to avoid a probate court proceeding at your death. Instead, your successor trustees can manage your estate and transfer your assets without court involvement. This allows your family to keep your matters private and complete the various administrative steps as efficiently as possible.

Essential estate planning documents

1. Revocable trust

In most US states, a revocable or living trust is the central document of an estate plan. A trust can avoid the need for a probate court proceeding to transfer your assets after death. It can also facilitate the handling of your property during your lifetime in the event of incapacity.

You must retitle your assets to the name of your trust for the trust to function correctly. Only assets titled in the name of the trust will achieve the benefits of the trust. Generally, you will be your own trustee during your lifetime and can manage your assets in the same way as if there were no trust. You can revoke or amend the terms at any time during your lifetime.

If you become unable to serve as trustee, the successor trustee named in your trust document will take over and carry out the terms of the trust. This may include holding assets for your benefit during your lifetime.

2. Will

Although revocable trusts have taken over many of the functions of a will, a will remains an essential part of an estate plan. Your will is the legal document in which people typically name guardians for their minor children, so it is especially important for families with young children. If you have a revocable trust, you can include language in your will that directs any assets outside of your trust to be transferred into the trust upon your death.

In your will, you also name an executor who oversees administering any assets held in your individual name. This is typically the same person or organization named as the successor trustee in your revocable trust.

3. Financial power of attorney

A power of attorney for financial decisions is a document in which you name someone to act on your behalf for financial matters. This can be very helpful if you are severely ill, going through surgery or following an accident. It can also come into play if you are out of the country or otherwise unable to execute financial decisions on your own. The person you appoint is authorized to manage financial matters for you, such as paying bills, signing financial documents or applying for benefits on your behalf.

4. Health care power of attorney

A power of attorney for health care decisions allows someone to make health care decisions for you if you are not able to make them for yourself. In addition to talking with your doctors and other health care professionals, this may be the only person who is authorized to obtain information about your medical condition—information that privacy laws might otherwise prevent a doctor from sharing with your family members.

Lastly, another document called a health care directive (often known as a Living Will) may accompany your power of attorney document. It allows you to express your wishes regarding broader health care decisions, including life-sustaining treatment, pain management and organ donation. This document makes your wishes clear to loved ones and medical professionals as they manage your care and comfort.

Retirementa Accounts and life Insurance – keep beneficiaries up to date

Retirement accounts and life insurance are not controlled by your will or revocable trust. Instead, they are controlled by the beneficiary designations you have on file with the account administrator or life insurance company.

Therefore, it is important to make sure you have named beneficiaries for these accounts and that you keep them up to date. For example, if you fail to update your designations to include younger children, those children may not be entitled to a share of the account at your death. You can change your beneficiary designations at any time and should always make sure your designations are aligned with the other terms of your estate plan.

Don’t set it and forget it: Communicating and updating your plan

While you don’t want to share information about your estate plan with just anyone, you should have at least one trusted advisor, family member (other than your spouse) or other individual who is aware of your plans and knows where your important documents are located.

If your plans are complicated or are likely to be a surprise, you should think carefully about sharing those plans during your lifetime. At minimum, you should consider sharing the plans with your trustees, executors, guardians and agents, as appropriate, to make sure they are comfortable taking on their responsibilities.

Once you have your documents in place, your next step is to conduct a regular review, usually at least every three to five years. If your beneficiaries or other plans change, update your documents immediately. Reviewing your instructions regularly is the only way to ensure your assets transfer the way you intend.