Get your estate plan in order with these seven steps.
You can protect your wealth and loved ones by creating an estate plan
Without a will, the probate court will determine your heirs
Don’t forget to establish a health care proxy and financial power of attorney
Take extra planning measures if you have an especially large or complex estate
Estate planning covers two main issues: what happens to your things after your death, and what kind of care you want to receive should you become unable to take care of yourself or manage your own affairs.
The way you address these issues is with an estate plan. Your estate plan is a collection of documents with your wishes and instructions for the management of your estate before and after your death. Your estate is simply everything you own at the time of your death. You can get started on your estate plan by downloading the Policygenius app and creating a will, a trust, or both.
It can be daunting to plan for your own death and it's easy to ignore when you're young. However, having a strong plan in place will make things a lot easier down the line for your future heirs by ensuring they receive the assets you intended for them. An estate plan can also prevent loved ones from having to make difficult decisions while they're grieving and an elongated probate process.
The best way to start estate planning is with an inventory of all the assets you need to pass to your heirs. As you make this list of assets, also mention if anything is jointly owned or jointly titled (which may be the case if you live in a community property state). Make sure you consider all of the following assets if you have them:
You should make note of things like all the credit cards you have and where you receive your paychecks. After your death, someone will need to make sure your bills get paid. Having a list of all your accounts can make this process much easier. Someone will also need to file an income tax return for you, so try to keep information on your previous tax returns in one place.
Think you’re forgetting something? See what types of assets you might have.
As you go through the estate planning process, you should make sure that you answer the following questions:
If your estate plan doesn't provide an answer for each of these questions, you should revisit it. Instead of creating completely new documents, you may be able to revise the estate planning documents you already have.
Your last will and testament, or simply your will, covers who gets what assets and how much they should each receive. At the very least, you should have this important document, which can also name a guardian for your minor children and nominate an executor to manage your affairs once you’re gone. It's possible that you don't have many assets or don't care who gets them, but you can make things a lot simpler for your loved ones by planning what happens to your things. Creating a will is straightforward — you can even make a will online. Dying without a will means the probate court will determine who becomes your beneficiaries.
The Policygenius app contains attorney-approved tools that will help guide you through the process of creating a will, a revocable trust, or both. Our app can assist you with listing your estate assets, determining who you want to give things to, and assigning key people to your estate plan.
In the event that you become incapacitated and unable to take care of yourself, your loved ones can know the health care treatment you wanted to receive via your living will. (Be careful not to confuse this with your regular will.)
A living will, also called an advance directive, should cover all your preferences around end-of-life medical care. You can also establish a _ healthcare power of attorney_ also known as a health care proxy that allows you to designate a person to make medical decisions for you if you are unable to.
You should also name someone to manage your legal and financial affairs if you become incapacitated by establishing a durable power of attorney (DPOA). This legal document names who can legally act on your behalf, including if you become mentally incapacitated.
Be sure to complete a beneficiary designation for all your financial accounts, which can become payable or transferable upon your death. These assets, known as payable-on-death (POD) accounts, can pass outside of probate, and are an essential part of your estate plan. Forgetting to designate a beneficiary will tie things up in court. Payable-on-death accounts are one of the few assets you can pass without a will. (In fact, they’re one of the few things you should not put in your will.)
If you have a large estate, you may need to take a few extra steps to make sure your beneficiaries get the most of your hard-earned wealth. As part of your estate plan you may want to consider asset protection or minimizing taxes (through an irrevocable trust. Only the wealthiest of estates have to worry about federal estate tax, but you may have other concerns, like capital gains tax, or inheritance tax faced by your heirs.
A financial advisor and estate planning attorney will have the knowledge and experience to provide legal advice for these specific situations. As you're considering attorneys, check this guide to finding an estate planning attorney.
There’s nothing stopping you from letting your beneficiaries or family know the details of your estate plan. You can even give them copies of your will or any other estate planning documents as you see fit. Just be sure to store the originals in a safe place and let your executor know where to find your documents; if no one can find your will, it will delay probate, and if it’s never found it’ll be like you never wrote in the first place.
More ideas on how to keep your will safe.
Recession-proof your money. Get the free ebook.
Get the all-new ebook from Easy Money by Policygenius: 50 money moves to make in a recession.
Derek is a tax expert at Policygenius in New York City. He has written about multiple personal finance topics in the past, and his work has been covered by Yahoo Finance, MSN, Business Insider and CNBC.
Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
Was this article helpful?