Starting your Estate Plan in Three Steps

Estate planning may intimidate many of you because it causes you to face your mortality. The vast array of documents and legal advice may also contribute to some of your confusion and procrastination. That procrastination stops today. Below are three essential steps that you should take in order to create your estate plan.

Remember why you are estate planning

You should first focus on why you are taking these initial steps to estate plan. You develop a plan so your loved ones – spouse, children, parents, friends, etc. – won’t have to worry about your estate, while mourning your death.  Knowing that your plan will make it easier for those you care about, should keep your eyes on the prize and make sure you complete your tasks at hand.

Take an inventory of your life

The next action you should take involves getting organized. You need to know what to plan around in order to make sure you have the proper estate planning tools. This means that you need to take an inventory of your estate.

Everything, big or small, should go on your list. Using a prearranged list will help ensure that you hit the major items. But don’t forget those items unique to you. You want to make sure your amazing set of Magic, the Gathering cards go to the right person.

 Some other things to consider in the organizational stage:

  • Do you have a place someone can find your passwords and log ins in case of your death?
  • Do you have people that depend on your for care?
  • Do you a special charity or cause that you want to make sure to support?
  • Are all of your beneficiary designations on your intangible assets (401k, life insurance, etc) up to date? (These assets pass directly upon death without regard to your other estate planning documents, so make sure the proceeds go to the right person.)

 Get Started

You need three essential documents in your estate plan:

  • A will: A will is a legal document that states how you want your property distributed upon your death. You can also use the document to appoint a guardian for your children and/or manager their assets while they are minors.
  • A trust: In its simplest form, a trust is a legal entity by which you (as trustor or settlor) gives another party (the trustee) the right to hold property for the benefit of a third party (the beneficiary).
  • Durable Power of Attorney: A power of attorney gives a person (an agent) broad or limited authority on your behalf in the event of your incapacity.  You should have a durable power of attorney for health care and a power of attorney for finances.  

You can go online to obtain these forms, or have a professional create them of you. Remember: these are legal documents, so you need to follow proper procedures to make them enforceable.  I will go in much more detail about the different flavors of these documents in future posts.

Don’t put it off

Hopefully these steps start you on the path to creating an estate plan.  Don’t put it off any longer. Getting started today is the most important thing you can do for yourself and your loved ones.