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As we grow older, estate planning becomes more and more important each year. Failure to properly organize your personal and financial affairs has the potential to leave your heirs in a messy situation. By taking the time to plan your estate properly, you will leave your family in a better position to get through the probate process more efficiently and properly distribute your assets without complication - or to avoid probate altogether! Read on to learn more about the estate planning process and the essential documents you will need to gather.
What Are Estate Planning Documents?
To properly plan your estate, you need to understand more about the estate planning process and the essential estate planning documents. Essentially, estate planning documents are the foundation for creating a systematic approach for organizing your personal and financial affairs. There are a variety of estate planning documents that you will need to acquire throughout your overall estate planning process.
Along with knowing about estate planning documents, it is essential to understand the different types of estate planning there are to choose from. The two main types of estate planning are will-based estate plans and trust-based estate plans. The two types of plans are detailed below.
- Will-Based Estate Planning
A will-based estate plan is the most basic type of estate plan. The basic legal documents included in a will-based estate plan are a last will and testament, an advance medical directive, a living will, and a financial power of attorney.
- Trust-Based Estate Planning
A trust-based estate plan is a more detailed type of estate plan. Along with an advance medical directive, a living will, and a financial power of attorney, this type of estate plan also includes a pour-over will and a revocable living trust. Essentially, a revocable living trust provides detailed sets of instructions for three important periods of your life. The three detailed periods are what happens while you are alive and well, what happens if you become mentally incapacitated, and what happens after your death.
What Are the Most Important Estate Planning Documents?
There are a variety of documents that can be included in your estate plan. Which documents you choose will primarily be based on your individual situation and the law firm you work with. However, there are certain documents that will be found in almost every type of estate plan. The following are the six most important estate planning documents to include in your estate plan.
1. Will or Trust
In this document, you will provide a detailed list of instructions on how your property and or assets will be distributed after your death. In your living will, you will also detail a written set of instructions on if you want to receive life-sustaining procedures should you ever be diagnosed with a terminal condition or are in a long-term vegetative state
2. Durable Power of Attorney
This document allows you to designate an individual to make financial and legal decisions as if they were you, should you ever be in the position to not be able to make these decisions for yourself.
3. Beneficiary Designations
In this document, you can detail how your assets will be divided up among your beneficiaries and who will receive what.
4. Letter of Intent
A letter of intent is simply a document that provides further details or instructions to your executor or beneficiaries. Some letters of intent are simply funeral details or requests.
5. Healthcare Power of Attorney
This legal document is also known as an advance medical directive. In this document, you can designate a specific individual to make medical decisions for you, should you, for any reason, ever be unable to make them for yourself.
6. Guardianship Designations
If you have minor children, you need to include a guardianship designation in your estate plan. Choosing a guardian for your children should not be overlooked. In extreme situations, your children could become wards of the state after your passing. Failure to designate a guardian could also leave your children in the care of a family member that you would not have personally selected.
When Should I Start Compiling Estate Planning Documents?
You know estate planning is important, but when should you actually start? Well, the best time to start estate planning was yesterday, and the second-best time is today. You never know when an accident may strike that will leave you needing a trusted individual to make crucial decisions regarding your medical state, finances, or assets. It's always best to start estate planning as soon as possible. Estate planning is even more important if you have minor children or a substantial amount of assets. It is in everyone's best interest to have your estate squared away before your passing to avoid a messy situation for those you leave behind.
Consultant with an Experienced Estate Planning Attorney Today
Estate planning can be a complicated process to navigate alone. Working with an experienced estate planning attorney is a worthwhile decision that will also reduce the chance of error in any of your essential estate planning documents. For further guidance in your estate planning process, consult with an experienced estate planning attorney today.