What's In an Estate Plan?

Estate planning can feel intimidating to many people. The idea of organizing all of your finances and assets and deciding how you want to distribute it may seem time-consuming. In addition to the difficulty of the work involved, there are also uncomfortable emotions associated with estate planning. 

Thinking about passing away, or becoming incapacitated and unable to make decisions about our lives and our wealth, isn’t fun. This is the number one reason so many people avoid estate planning in the first place!

However, it’s key to change your mindset about building an estate plan. Instead of looking at the process as something you do when you’re in late retirement, start viewing your estate plan as the way you can make an impact on the world around you. Your estate plan extends your wealth beyond just taking care of you and your goals during your lifetime. It allows you to continue to make use of the hard work you’ve put in to build your nest egg for generations to come. 

So, what exactly is an estate plan? And what documents do you need to get started?

What Is an Estate Plan?

An estate plan is a collection of legal documents that ensure your health and your money are taken care of according to your wishes. These documents can go into effect either when you pass away, or if you become physically or mentally incapable of communicating your wishes. 

Many people think estate planning is only for the elderly, or for the mass affluent. This couldn’t be further from the truth! Estate planning is something that can benefit every legal adult. 

Five Foundational Elements of Your Estate Plan

You may be wondering what legal documents go into your estate plan. Every individual’s needs are different, but generally, there are five key elements to create a solid foundation for your plan:

  1. Will/Trust. These documents ensure the appropriate distribution of your assets - even if you don’t feel you have much to distribute yet! A will or trust is the first and possibly most important element of your estate plan. 
  2. Beneficiary Forms. Even if you don’t have a will, many of your assets can automatically be passed to your beneficiary (or contingent beneficiary) in the event that you pass away. Make sure you have beneficiaries designated for all of your financial accounts (such as a 401k, or IRA).  A TOD (Transfer on Death) form is used for taxable accounts such as bank and investment accounts.
  3. Durable Power of Attorney. In the event that you can’t make decisions about your assets or your wealth on your own, like in the midst of a medical emergency, a Durable POA designates one person to act on your behalf. This person can sign documents, and help to execute your estate plan.
  4. Healthcare Power of Attorney. Your wishes about your health and medical treatment can also be outlined in your estate plan. Your Healthcare POA is a designated individual who is responsible for making medical decisions on your behalf.
  5. Guardianship Designations. If you have children, you must have guardianship designations in place. This is especially true if you don’t want guardianship of your children to go directly to the closest living relative (like a parent or sibling), but instead want another family member or friend to take on guardianship responsibilities should you and your spouse or partner pass away. 

Need Help?

Part of creating an exceptional financial plan is ensuring that the plan doesn’t only benefit you during your lifetime. If you need help creating a comprehensive strategy that includes working with an estate planning attorney, please reach out. We’d love to speak with you about your goals. 

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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