4 Estate Planning Documents Everyone Should Have

By Timothy Brown, MBA, CFA®, CFP®, RICP®, AIF®

Estate planning is like going to the doctor—you know you should do it, but you keep finding a reason to put it off. You don’t have enough time, you’re still so young, or it’s just downright inconvenient. We get it. But just like going to the doctor, estate planning is necessary. And it’s significantly easier when you start early.

If current events have shown us anything, it’s that having a plan is crucial for those times when life gets messy and unpredictable. Not only will a solid estate plan protect you, but it’s also one of the most loving things you can do for your family. By putting off your plan, you risk leaving your loved ones with the hardest decisions they will ever have to make: how to handle end-of-life care, how to divide assets, and how to navigate probate and estate taxes. It’s daunting to think about for yourself, while you’re still healthy and clear-headed, let alone making that decision for a spouse or parent. 

Daunting though it may be, it doesn’t have to be complicated or stressful. Here are four critical documents you can start thinking about today to ensure you are better prepared for tomorrow.

1. WILLS

A will is the most familiar of the estate planning documents. It spells out your final wishes and names a person or entity to handle your financial affairs upon death. Each person’s will is unique, but there are a few standard provisions that should always be included:

• Guardianship. This is where you can name a legal guardian for your minor children should you pass away before they become legal adults. If you don’t specifically name a guardian, the choice will be made by the court with no input or consideration for your preferences.
• Assets. This is where you can detail which heir receives what, including savings, investment and retirement accounts, cars, valuables, and other sentimental items. Again, if you do not expressly define these provisions in your will, your assets will be divided per the laws of the state, which often results in different heirs than you intended and increased probate costs. 
• Real property. Beyond assets, you may also have homes and buildings that you want to leave to certain people. This section is where you can outline the specifics of any real property you may own.

Once your will is drafted, be sure to keep it up to date. Review it at least every two to three years and whenever there is a major life event, such as a marriage, divorce, birth, or death.

2. MEDICAL DIRECTIVES AND HEALTHCARE PROXIES

There are several types of medical documents that you should consider including in your estate plan. The last thing you want is to leave your family in the dark regarding important medical information and how you want to be treated in the event of a medical emergency. If there are no documents in place, conflict can arise between who should make the decisions and what course of action should be taken. Consider the following:

• Advanced healthcare directive. This document describes what type of life-saving intervention you would like and in what situations it should be used. 
• Healthcare proxy. Also known as a healthcare power of attorney, this document identifies a specific person who is authorized to make medical decisions on your behalf. It can be used in conjunction with an advanced directive, or it can be used on its own. 
• HIPAA authorization. The Health Insurance Portability and Accountability Act (HIPAA) is a law that protects your medical privacy, meaning no one is allowed access to your medical information without prior consent. In the event of an emergency, you’ll want to have this on file so that an authorized individual is able to receive your medical information and make decisions if necessary.

3. POWERS OF ATTORNEY

A power of attorney (POA) covers everything else outside of medical rights. It allows an authorized individual to make decisions on your behalf, including financial and business decisions. There are two main types to consider:

• Durable power of attorney. Your designated agent can make decisions on your behalf immediately upon signing the document. They also have the authority to make decisions if you become incapacitated. 
• Springing power of attorney. Your designated agent only has authority to make decisions when a certain condition is met, like if you become incapacitated and can no longer make decisions for yourself.

The choice of which POA to use is highly personal and should be thoroughly reviewed. Make sure to involve whomever you choose to act as your designated agent. They should be well aware of the responsibility and willing to take on the role.

4. REVOCABLE TRUSTS

Though wills are the most well-known estate planning vehicle, revocable trusts are the true linchpin. This is because they save both time and money by removing assets from your estate and avoiding probate.

Probate is the legal process of settling a person’s estate after death. It involves filing documents with the court and it can be both expensive and time-consuming. When an estate goes through probate, it can cause major delays in the transfer of assets to your heirs.

This is where a revocable trust comes in. It operates as a separate entity that holds all of your assets while you’re alive, thereby removing them from your personal estate. You will act as trustee over these assets and upon death or incapacitation, a named successor trustee will take over. The trustee can be a family member, friend, or a professional fiduciary. They will distribute the trust’s assets in accordance with your will, avoiding the hassle and expense of probate.

GET STARTED TODAY

Planning an estate involves many intricate details and time-consuming tasks, but don’t let that prevent you from getting your affairs in order. At Brown Wealth Management, we can walk you through the estate planning process and help you coordinate with a qualified estate attorney. Schedule a free introductory call today by reaching out to us at (952) 303-6715 or https://www.brownwealth.com/getting-started.

About Tim

Timothy Brown is founder and president of Brown Wealth Management, an independent, full-service wealth management company that helps individuals and families prepare for all of life’s milestones and events. With more than 20 years of experience in the financial industry, Tim strives to help his clients live happier, more fulfilling lives with the confidence that they have been good stewards of their finances. Tim has a bachelor’s degree in finance and accounting from the University of Colorado and an MBA from the University of Minnesota’s Carlson School of Management. In addition, he holds a rare combination of credentials: Certified Financial Planner™(CFP®), Chartered Financial Analyst™ (CFA®), AIF® - Accredited Investment Fiduciary™ (AIF®), and Retirement Income Certified Professional® (RIPC®). Tim has been recognized for his hard work by receiving the Five Star Wealth Manager award in both the Mpls.St.Paul Magazine and Twin Cities business magazine since 2013.  

When he’s not working, Tim enjoys spending time in Eden Prairie with his wife, Stacey, and their four children. You can often find him keeping busy by staying fit, pursuing a black belt in Tae Kwon Do with his three boys, assisting kids with Boy Scouts, and attempting to read two books per month. To learn more about Tim, connect with him on LinkedIn.