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The 5 Estate Planning Documents You Should Have

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Estate planning isn’t just for wealthy families. Read on to find out the benefits of estate planning, including the 5 estate planning documents you should have.

Chances are, if you’ve heard of estate planning, it has probably been in the context of wealthy families on TV or in a movie. In reality, estate planning is for many of us—that’s because estate planning is really just about organizing your personal and financial affairs in the event that you cannot. And there are a few estate planning documents you should know about.

In the words of one of our podcast guests, Attorney Genoveva Meza-Talbott, estate planning is a way of communicating love. It is about preparing our own things so that our family does not have to carry the stress or weight of handling things we may have left unfinished, unclear, or even a little messy. You can build your estate plan through an attorney like Genoveva, or through an affordable, reputable service like Gentreo, which helps you set up your legal documents and store them in a digital vault.

Read on for the five essential estate planning documents you can build your plan out of.

1. Last Will & Testament

When it comes to estate planning, having a last will and testament is likely the first thing that will come to mind. Most people think of this as just a Will. It may sound a little morbid to be thinking about your death, but if you approach it as a financial plan and nothing more, it can help make the whole process feel a little less uncomfortable.

Your Will identifies the executor, or personal representative, for your estate. This is the person who will oversee the distribution of your assets and follow your wishes. Your will should also identify guardians who will care for your minor children and provide details regarding how and to whom you distribute your assets.

Note that your Last Will and Testament only becomes active after you pass away, and a probate court oversees its administration. If you pass without a Will, the state you reside in has a plan for you, but those plans may not be consistent with your intentions, which is just another reason why it’s so important to start planning early.

2. Revocable Living Trust

By creating a Revocable Living Trust, you can address the handling of Trust assets in the event of incapacity or death without having to spend time tied up in court. Depending on the size and scope of your assets, your state of residence, and your distribution wishes, a Will alone may be sufficient. That said, if you do decide to create a Trust, you’ll need to retitle your assets so that they fall under the Trust itself. You can name yourself trustee and appoint successors to step in and act if needed.

The basic parts of a revocable living trust include:

  • Trustmaker, Grantor, or Settlor. This is the person that establishes the trust and designs the provisions of the living trust agreement.
  • Trustee. The trustee takes legal title to the trust assets and ensures that the trust directions are carried out. A trustee has a fiduciary duty to the grantor and the beneficiaries to carry out the grantor’s intentions in a fair and reasonable manner. The grantor usually serves as the initial trustee of a living trust.
  • Lifetime Beneficiary. The lifetime beneficiary is usually the grantor. The lifetime beneficiary has full access to income and principal of the living trust during their lifetime.
  • Death Beneficiary. The trust establishes who will benefit from the remaining income and principal of the trust upon the grantor’s death.

A typical living trust created for estate planning is revocable in full or in part. The trustmaker can amend any part of the trust while the trustmaker is alive and mentally competent. When the trustmaker dies, the living trust becomes irrevocable, and the trust beneficiaries and successor trustees may not alter any of the trust provisions.

A trust agreement is not recorded in the public records and is not filed with any government agency. Instead, a living trust is a private document among the parties. A Trust may not be right for everyone, which is why it’s worth taking the time to speak with a qualified financial advisor or estate attorney to discuss if/when a Trust would be necessary.

3. Financial (Durable) Power of Attorney

An estate plan is not just in preparation for death. It is also in the case of incapacitation. That’s where a Power of Attorney becomes particularly important.

A Financial or Durable Power of Attorney lays out who will be reponsible to manage your finances if you become incapacitated or pass away. This document specifies the instructions for managing your real estate portfolio, conducting financial transactions, and making other financial decisions under your name. Important to note: this document is not active upon death. It is only active during your lifetime. An example of when it would be active: you suffer an accident and enter a coma. Your Durable Power of Attorney would became effective due to your incapacitation.

4. Healthcare Power of Attorney

The Healthcare Power of Attorney is similar to the Durable Power of Attorney, only it’s strictly for medical decisions, rather than financial ones. Who you designate will be responsible for any decisions around your health, in the event that you cannot make them yourself. This includes decisions around surgery, life-support, etc.

Who you choose as this individual should be someone you trust. The creation of this document should come alongside conversations with this person around your wishes in these scenarios.

5. Advanced Medical Directive AKA Living Well

If the Healthcare Power of Attorney is the designation of an individual to make decisions, the Advance Medical Directive (also referred to as a living will) is the actual decision around your care. Sometimes the two documents can be combined into one document. This depends on the state. In the case that there are two separate documents, this Directive spells out exactly what your wishes are for end-of-life care, or in terminal situations.

The Bottom Line

Creating your estate planning documents can be stressful for a host of reasons. Not only can it be tedious, but it can also bring up tough conversations between you and your family. In any case, the stress you will save your family from will far exceed the work it will take to make your estate plan. Consider your options, assess where you are at, and decide if working with an attorney or using an affordable service like Gentreo can serve your needs.

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Meet Jannese

Jannese Torres-Rodriguez is a award-winning Latina Money Expert, Educator, Speaker, Writer and Business Coach. She became an accidental entrepreneur after a job loss led her to create a successful Latin food blog, Delish D’Lites. Now, she helps her clients and listeners build successful online businesses that allow them to pursue financial independence and freedom.

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