10 Keys to Proper Estate Planning

Estate Planning, Investing
Open source business

By Michael Chamberlain

Learn more about Michael on NerdWallet’s Ask an Advisor

Estate planning is the process of determining what happens to you and your property when you can no longer make decisions because of incapacity or death.

Without a plan, an already difficult situation for your loved ones can be even worse. Not having a plan can delay your medical care if you become incapacitated and make it harder to pass your wealth to your heirs if you pass away.

To avoid these issues and protect yourself and your family, here are 10 keys to developing a sound estate plan.

Key documents

First, make sure to record your wishes with the proper estate-planning documents. To complete these, consult with an estate-planning attorney. Keep the originals in a safe deposit box and copies at home, or keep copies on your computer. Some people have their attorney keep the originals.

Following are the four key legal documents you should have in place, plus one you might want to add:

  1. An advance health-care directive indicates your health-care preferences and is to be used only when you can’t communicate your wishes. You’ll need to complete the one specific to your state.
  2. A power of attorney for asset management appoints someone you trust to manage your financial affairs on your behalf. The form also indicates in which areas he or she may assist you. If you don’t have this form completed and you become incapacitated, a court may appoint someone for you.
  3. A HIPAA release form will allow the people named in your advance health-care directive and your power of attorney to access your health-care information to deal with insurance matters on your behalf when you can’t do so.
  4. A will is used to transfer your assets upon your death. However, even with a will, in most cases your estate will still have to go through the time-consuming and expensive legal process called probate, in which the courts distribute your property. Wills are relatively inexpensive to acquire, but there may be better ways to make your property wishes known.
  5. A living trust offers another way to transfer property upon your death. This method can be more confidential, faster and more flexible in regard to distribution than probate, and your wishes may be less likely to be contested than with a probated will. Not everyone needs a trust; it depends on what you own and how much it’s worth, as well as the state in which you live. If you have a trust, you should also have a will.

Key steps

These five steps are essential to helping your family during the difficult time following your passing.

  1. Make your final arrangements before they’re needed. Making the myriad decisions associated with your final arrangements may be difficult, but it’s better to make these choices during a time of relative calm. Selecting the services and arrangements that you think are most appropriate takes the burden off your family when you are no longer here. Paying for them ahead of time can be worthwhile as well.
  2. Update beneficiary forms. If you have life insurance, annuities or retirement plans — like an IRA, 401(k), 403(b) or others — there should be a primary beneficiary, often your spouse, as well as contingent beneficiaries, which could be your children, a charity or good friends. It’s particularly important to make sure your designations are current if you’ve remarried or had other family changes. These accounts will automatically pass based on beneficiary designations and do not go into probate.
  3. Make a list of your assets. It’s helpful for your power of attorney or trustee to know where all of your assets are held so they can use them for your benefit if you are incapacitated and distribute them as you wish when you are gone.
  4. Make records of your digital assets. This helps those who will manage your accounts upon your incapacity or death. Keep records of both online login information and offline documentation for all bank, brokerage and credit card accounts, bill pay sites and other accounts you access online. Store this information in a secure and known location, preferably with your other estate-planning documents. This allows the trustee, designated power of attorney or executor to access your accounts as needed. Sample forms are available for download.
  5. Make a list of friends, family and advisors. When you pass away, there are people to notify. It is much easier for you to put together an up-to-date list when you have the time than it will be for your family to figure out whom to contact during those hectic and emotional hours after your passing.

Make sure your wishes are met

Without a plan, a challenging time for your loved ones can be even more complicated and difficult. Not having a plan is also time-consuming and costly for your heirs if your estate must go through the probate process or outdated documents are contested. It could also mean that your property won’t be distributed as you had intended.

Taking these steps today to create a carefully considered estate plan can help make sure your wishes are met while making it easier on your loved ones.

Michael Chamberlain, CFP, is the owner of Chamberlain Financial Planning and Wealth Management, a fee-only firm with offices in Santa Cruz, Sacramento and Campbell, California.


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