Starting an Estate Plan

Contrary to what Drake says, it’s actually not a good idea to keep your money in the grave to use in your next life. When you pass, assets need to be transferred to somewhere. Quite simply, estate planning is formalizing a plan for your affairs (assets and responsibilities) and selecting specific individual(s) to execute it when you pass. An estate plan sounds like it’s something that only wealthy people need. That’s wrong: it’s for everyone and especially for those that have a family.

Take a hands-on approach to estate planning to minimize the government’s role and decision making on your behalf with regard to your affairs at the end of life. The government does this through the probate process (tldr: you have to pay legal fees, it can take a long time, and your case becomes public information).

Here are the five considerations you need to get started. These are called the Core Documents. For most of us, this covers 99% of estate planning.

  • Durable Power of Attorney – This document lets you select an individual to make decisions on your behalf in the event you cannot yourself (i.e. you’re in a coma). The powers under this document are commonly financial and legal decisions. You can make changes to this document whenever you want and is not permanently binding.

  • Medical Power of Attorney – This document is very similar to the Durable Power of Attorney, but it is for medical decisions. It’s important to note that this person must be a trusted individual—not your doctor. The kind of medical powers you’ll allow to be made on your behalf include the following:
    • Doctors to work with
    • Treatments to utilize
    • Elective surgeries
    • End of life decisions

  • Wills and/or Trusts – This is meat of your estate plan. These documents will dictate the flow of most of your assets and you will be able to assign a person responsible for carrying out your wishes. Wills and trusts accomplish much of the same; the major difference being that wills go through the probate court (as mentioned above). Because trusts avoid the probate process, your beneficiaries will most often be able to use the assets passed onto them a bit quicker through a trust.

    It’s important to work closely with an estate planning attorney on drafting these documents as the wording must be perfectly tailored to your wishes. If you end up pursuing the Trust route (keep in mind, this is not just a tool for the wealthy), you’ll see there are numerous options and different trusts may make sense for different assets and situations. Your estate planning attorney will be able to properly guide you through this as well.

  • Beneficiary Designations – Some assets can be passed on immediately at your death outside of a will or trust. These are accounts like your IRA and/or 401(k), or even a life insurance policy. If you’re like me, you just wanted to set these accounts up and you paid very little attention to assigning beneficiaries because you’re young and you figured you’ll think about it later. Double check who you’ve assigned as the beneficiary, and ask yourself if they still make sense.

  • Guardianship Designations – For those of you with kids, this one is crucial. In the unfortunate event you and your spouse pass, this document lets you assign a guardian for your children. Without this document, the courts will decide your children’s guardian. Your sister or uncle may look great on paper to the courts, but the courts may not realize how often they’re still doing keg stands during the weekends. Note: This is for an example, no disrespect intended.

These are the first steps toward your estate plan. It’s simple enough, but incredibly important to get done as soon as possible and then review once a year. Proper estate planning is all about providing for and continuing to help those you care about even when you can no longer physically. Get started by speaking with a financial advisor or an estate planning attorney.

Compliance stuffs
Just remember, I’m not your financial advisor so the information may or may not best apply to your situation and you should get formal advice prior to doing anything. The information/data that is shared should be double checked by you and any conclusion that is driven based on past data is not to be interpreted as my advice for your future. I will do my best to only write what I think is true and right, but mistakes happen and we’re all learning together – this is meant to be a conversation. My employer has nothing to do with this blog – in fact, they’re probably upset I’m writing here instead of working.

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