Estate planning is an important process that should be part of any senior’s life – no matter how little or how much money you have.
“Many people feel like estate planning isn’t for them because they don’t have large sums of money or assets to pass on, but estate planning isn’t simply about your stuff,” says Erica Labb, Executive Director of Bridges® by EPOCH at Westford. “Estate planning enables you to determine who will handle your responsibilities if you become incapacitated or pass away, and also allows you to pass along your assets – whatever they may be – in a cost-effective, streamlined and conflict-free way.”
Estate planning, just like financial planning, is a process that should be revisited on a regular basis to make sure your plans still work for your current situation. The most important question to ask is: how do you want your assets and decisions to be handled if you’re unable to make them yourself?
What Documents Do I Need?
An “estate plan” isn’t a single piece of paper. It’s actually a collection of documents that lay out your thoughts and desires in a clear manner. The types of documents you need will depend on your individual situation. However, there are certain documents that should be a part of anyone’s estate plan.
Last Will and Testament (Will)
Many of us know about wills – they are legal documents that specify your final wishes. Wills designate beneficiaries for your assets, like your property and financial accounts, but also allow you to specify guardians for pets and any dependent children.
Advance Health Care Directive (AHCD)
Also known as a healthcare power of attorney or a medical directive, this document allows you to designate a representative to make healthcare decisions in your place if you are unable to do it yourself. An AHCD also allows you to lay out your wishes for treatment and other healthcare-related options – for example, if you want a DNR order or would prefer to not have life-sustaining measures, this is where you should list your wishes.
Financial Power of Attorney
This document allows you to designate a representative to handle financial-related matters if you (again) are unable to make decisions for yourself. You can designate the person to have specific or unlimited control (or anywhere in-between) of your finances – it’s your choice.
Funeral Instructions
While it’s not always a comfortable topic to discuss, putting together your wishes and instructions for a funeral will help your loved ones navigate the bereavement process much more easily than if they have to make all the decisions following your passing. Think of it as a final gift to them and one less obligation they will have to shoulder.
Asset Documentation
Be sure to have information on all your assets, financial and non-financial. This includes 401(k)s, titles to cars and homes, life insurance policies and anything else that is related to the things you own (and that will need to be dispersed). Be sure to also include all relevant personal documents including Social Security card, any certificates for birth/marriage/death/divorce and any other legal documents that will be needed.
Estate Planning: Steps to Take
Overwhelmed by the thought of putting together an estate plan? Don’t be. Here are some simple steps you can take to make the process smoother, easier and more efficient.
1. Make an inventory of your personal assets.
Sure, you may think you don’t own enough to justify an estate plan. But when you start looking at everything you own, you may be surprised by all the assets – tangible and intangible – that you have. Go through your financial documents and your personal assets so you have the most comprehensive list possible.
2. Plan ahead for your family.
If you were to pass away or to become incapacitated tomorrow, what responsibilities would you leave behind? Do you have a spouse who would need your life insurance money to continue to live a good quality of life? What about dependent children? What sort of legacy do you want to leave behind for your grandchildren and other family members?
3. Update (or determine) your beneficiaries.
Insurance and retirement accounts generally have beneficiary designations so that, upon your passing, they can be transferred to that individual without having to go through probate court. It’s always good to review the beneficiaries listed on your policies, because oftentimes people “set and forget” them when they first open a policy. This can be problematic if, for example, your ex-spouse is still listed on your life insurance policy instead of your current spouse.
4. Find a financial planner who specializes in estate planning.
Since you don’t do estate planning every day, it may be beneficial to find someone who does do it every day. A good financial planner can help you navigate the paperwork and find the best way to protect your assets. He or she will also be up-to-date on things like your state’s estate tax laws and other legal aspects that could affect you, your heirs and your estate.
5. Revisit your plan regularly.
Changes happen in life, and when they do, your estate plan should change with it. Be sure to revisit your estate plan on a regular basis – once a year – just to make sure everything is up-to-date and current information is listed.
“Having a comprehensive estate plan will ensure that your wishes – for your assets, for your medical care and for yourself – are honored,” says Erica. “At the end of the day, that’s what’s most important.”
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