Many of my clients know this, but I came back to the US after being away for a few months tending to my father. He was in an out of the hospital these last few months, and he finally passed away at the end of October 2023. In his 90's, it was not unexpected that he went to be with the Lord. Even though I was mentally prepared, you're never really prepared when the inevitable actually happens.
Thank goodness we had taken care of his estate plans a decade and a half before. And in a way, one can say his longevity gave us enough time to prepare. However, we all know people who pass way too soon. The luxury of time is never guaranteed, and other than yesterday, the second best time to complete an estate plan is today.
This brings me to my point of this article - why didn't anyone tell me the importance of having an estate plan? You don't need to be rich to have an estate plan. As soon as you start growing your family, an estate plan is needed. Over time, as your family grows, your estate plan needs to grow also. The point is, similar to a financial plan, as your family, work, and financial health evolve, the needs of your estate plan need to evolve simultaneously. Why didn't anyone tell me about this before?
While I'm not an attorney and thus cannot give legal advice, I can certainly share information about some common basic estate planning documents that are often included in a first-time estate plan. It's important to remember that everyone's situation is unique and you may need additional documents depending on your specific circumstances. Working with your REAL financial planner (not a 🦴 Bone Collector) and consulting with an estate planning attorney are always recommended to ensure your plan meets your individual needs.
(At this point, I want to highlight that a financial planner with a CFP® designation is trained and somewhat knowledgable in this area. But there are CERTIFIED FINANCIAL PLANNER™ professionals who are Bone Collectors and are not motivated to be familiar with this topic. Make sure you interview your planner or advisor to ensure he/she is familiar with the basic strategies of estate planning.)
Here are some basic documents to consider.
Last Will and Testament: This document outlines your wishes for distributing your assets after you die. It names an executor to carry out your wishes and can appoint guardians for minor children.
Durable Power of Attorney: This document allows someone you trust to make financial decisions on your behalf if you become incapacitated.
Healthcare Power of Attorney (Living Will): This document allows someone you trust to make healthcare decisions on your behalf if you are unable to do so yourself. It can also express your wishes for end-of-life care.
Additional documents to consider:
Revocable Living Trust: This can help avoid probate and manage assets during your lifetime.
Guardianship Designation for Minor Children: This document names someone to care for your children if you die while they are still minors.
Letter of Intent: This is not a legal document, but it can be a helpful way to communicate your wishes and values to your loved ones.
Remember, these are just some basic documents for estate plans. Your individual and family needs may vary. The goals of your estate planning may also evolve over time, often going from guardianship of minors to asset protection, from reducing your overall tax liability at the end of your estate to minimizing estate taxes through charitable trusts and other irrevocable trusts, from business inheritance to setting up dynasty trusts for the benefit of future generations. Estate plans can get very complex very quickly.
As I also referenced earlier, it's important to have your documents reviewed and updated regularly, especially after major life changes. If you're working with a real financial planner, someone who's business it is to get to know you and your family's situation and help you to cover all of your basis, then he/she will be able to help you identify specific tools in the estate planning toolbox that could be applicable and quite useful in your situation. Of course, he/she will pull in an actual estate planning attorney when the time is right as they are the only ones who can create legally binding estate documents that meet your specific goals.