The 6 Key Elements Of A Strong Estate Plan

One of our favorite parts about the holidays is baking cookies with the family. We rummage through the highest cupboard in the kitchen and sift through the excess paper towel and napkins to find the seasonal cookie cutters. In preparation for Thanksgiving, we have leaves, a turkey, cornucopia, and various fruits and veggies. 

Cookie cutters are excellent tools to help get the shapes we need. But the shapes are just the first step. We then frost and decorate them however we want. While the cookie cutter gave us a baseline, the frosting and sprinkles let us make them our own. 

This concept got us thinking about the basics of estate planning. Estate planning is a complex process, one that is unique to each person and situation. But while each outcome will vary, estate plans start with the same basic structure. Today, we would like to walk you through the basic documents in an estate plan, keeping in mind that yours may look different based on your financial and personal goals. Let’s dive in!

1. Will

A will is both the most well known and the most overlooked component of an estate plan. There are so many misconceptions about wills, and the one that we hear about most is the feeling of not having enough assets to justify creating a will. This happens far too often which leads people to procrastinate or simply neglect to make one altogether.

But a will is an important document as it is the legal record of your wishes and designation of your assets. With a will, you are able to choose the people who will receive specific assets. As you outline those beneficiaries, be sure they are consistent with other documents outside of your will. Discrepancies can lead to costly errors and family tensions which are best to avoid if possible. 

When you create your will, be sure to include your family and friends in the discussion, especially if you plan on leaving a large asset to them, for example, the family business or a house. Having conversations beforehand can help you both plan and better prepare for the future. 

2. Trust

With the rise of estate taxes, many families turn to house some of their wealth in a trust in order to preserve more of it for their loved ones. A trust can be an excellent way to pass money to the next generation while mitigating the burden of some estate taxes. 

A trust is a legal entity that owns and manages your assets (either while you are living or after you pass) and is controlled based on the structure you establish. With a trust, you are able to control how and when your beneficiary will receive your assets. Establishing a trust is a complex process and one that should be discussed with your estate planning attorney. 

3. Financial Power of Attorney

A financial power of attorney (POA) is someone who you designate to make financial decisions on your behalf should you become incapacitated or unable to make the decisions yourself. Selecting a financial power of attorney is an important decision, and should be someone like-minded who could handle the responsibility with tact and care. 

Your financial POA will step in and handle bills, taxes, debts, investment choices, possibly a trust, or other financial/legal responsibilities. If you don’t elect someone to fill this role, the decision rests with the courts, which may not have the outcome you would have hoped for. Retaining control over your assets is important which is why you will need to select a financial POA. 

When you choose someone, take some time to talk to them about what you want and expect from them when the time comes to assume that role. Having a candid and open conversation about it will prepare them for the responsibility ahead but also will give you a chance to let them know how you would like your assets to be handled. 

4. Healthcare Power of Attorney

Just like you will need someone to preside over your financial and legal matters, you will also need someone who is able to make medical decisions on your behalf which is where a healthcare power of attorney comes in. A healthcare POA will make medical decisions on your behalf should you not be able to do so yourself. 

In addition to selecting a healthcare POA, it is also prudent to create a living will, which is a document that stipulates your medical wishes including critical care, life support, and other medical choices. Your healthcare POA should be someone like-minded who will support your wishes and carry them out as you would want. 

You can select the same person to be your financial POA and your healthcare POA, but both require different skill sets and can be overwhelming for one person to handle. If you do pick different people, be sure that they can work together and each knows their respective roles. 

5. Beneficiaries 

Who will get the house? Where does your insurance money go? Who assumes control of the checking/savings accounts? All of these questions and more are answered by your beneficiary. A beneficiary is a person you choose to receive a certain asset(s) when you pass away. You may be surprised to think about how many accounts have a beneficiary designation. 

• Insurance policies (health, life, auto)
• Checking account(s)
• Saving account(s)
• 401(k)
• IRA
• Investments (mutual funds, bond, stock, etc.)

Your beneficiaries are crucial to your estate plan as they are the ones who will be inheriting your assets, therefore it is important to choose the people who you really want. Be sure to update your beneficiaries in the event of any life-altering circumstances such as a divorce, re-marriage, new child, etc. to keep everything as up to date as possible. 

A beneficiary designation supersedes one that is in your will. So if your will stipulates your insurance policy should go to your ex-husband and your will says it should go to your oldest child, the beneficiary on the insurance policy is the one that will most likely hold up in court. Be sure your beneficiaries are updated to reflect your goals and wishes now. 

6. Guardianship

If you have children who are under 18, naming a guardian will be a necessary component of your estate plan. A guardian is someone who will have the legal responsibility to care for your children. This person will care for them personally and financially until they are old enough to do so themselves. 

Guardians will play a key role in your children’s development, therefore you should choose someone who will be able to assume this responsibility and do it the best that they are able. Remember to have a conversation with the person you select so that you are both on the same page and there are no additional surprises in case something should happen to you. 

Estate plans have many moving pieces. While each plan is different, many of them will include the elements above. As always, it is imperative to have your financial planner and estate planning attorney working in concert to help you create a plan that best reflects your wishes and hopes for the future. 

We love helping our clients build a steadfast legacy and one way to do that is with a strong estate plan. Is it time for you to update your documents or are you starting from scratch? Either way, we would love to get to know you and help you create a plan to establish your legacy. Schedule a 15 minute call with us—we can’t wait to hear from you. 

.Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.