If you want loved ones to remember you fondly, tackle your estate-planning tasks. Your heirs will thank you for not leaving a legal mess to sort out.
Many of us want to get going on this planning, but don’t know where to start. Here’s what you should know about eight documents that can help you get your affairs in order.
If that sounds like a lot of paperwork, don’t worry: You probably won’t need every document. And if you’re wondering where to find the documents you need, not to worry: Just head to our partner, Rocket Lawyer, where you’ll find everything you need cheap.
1. Last will and testament
A will gives you the power to decide what is in the best interests of your children and pets after you’re gone. It also can help you determine what will happen to possessions with financial or sentimental value. It typically names an executor — someone who will be in charge of following your directions. Finally, you can include any funeral provisions.
Use your will to name guardians for those under your care, including minor children and pets. Designate any assets you are leaving for their care.
If you’re married, your spouse needs a separate will, AARP says.
In the absence of a will, a probate court will name an executor for your estate, typically a spouse or grown child. Probate proceedings are a matter of public record. So keep private information — passwords, for example — out of your will, as that information could become part of a public document.
Update your will as big changes occur — marriage, divorce, inheritance, the purchase of real estate or the birth of a child. If you move to a new state, have your will reviewed by an attorney in the new state.
You can change or add to a will by making a new will or adding a supplement, called a “codicil.” Get an attorney’s help if you have substantial assets or a legally complex personal or financial situation.
2. Revocable living trust
A living trust is another tool for passing assets to heirs while avoiding potentially expensive and time-consuming probate court proceedings.
You name a trustee — perhaps a spouse, family member or attorney — to manage your property. Unlike a will, a trust can be used to distribute property now or after your death.
You can change a revocable living trust as long as you’re mentally competent.
If you have substantial property or wealth, a trust can provide tax savings.
ElderLawAnswers further explains differences between trusts and wills. Creating a trust is not a do-it-yourself project. Get an attorney’s help.
3. Beneficiary designations
When you purchase life insurance or open a retirement plan or bank account, you’re often asked to name a beneficiary, which is the person you want to inherit the proceeds when you die. These designations are powerful, and they take precedence over instructions in a will.
Keep beneficiary designation papers with your estate-planning documents. Review and update them as your life changes.
4. Durable power of attorney
Choose someone to act on your behalf, financially and legally, in the event that you can’t make decisions.
Don’t put off this chore. You must be legally competent to assign power of attorney. Older people worried about relinquishing control sometimes put off the task until they are no longer legally competent to do it.
If you do not designate a power of attorney, your family’s hands could be tied should you become incapacitated, which can happen to young people as well as the elderly.
“For most people, the durable power of attorney is the most important estate-planning instrument available — even more useful than a will,” says ElderLawAnswers.
Some financial institutions won’t accept a general power of attorney document. Ask your financial institutions if they have a separate power of attorney form that you must use.
If you don’t have someone you trust to designate as your power of attorney, ElderLawAnswers has some advice:
“… it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney simply nominating the person you want to serve as your conservator or guardian.”
5. Health care power of attorney and living will
To ensure that someone can make medical decisions for you in the event you become incapacitated, establish a health care power of attorney — also called a durable health care power of attorney. This is different from the durable power of attorney for financial and legal affairs.
A living will lets you explain in advance of your death what types of care you do and do not want, in case you can’t communicate that in the future.
“You can use your living will to say as much or as little as you wish about the kind of health care you want to receive,” says legal site Nolo in a detailed article.
In some states, the living will and health care power of attorney forms are combined in one “advance directive” form.
These decisions require discussion and weighing of values and wishes. The American Bar Association has a free toolkit for health care advance planning.
States differ in their requirements. Obtain forms and instructions that are valid in your state.
6. Provision for digital assets
Decide what to do with your digital assets, including your computer hard drive, digital photos, information stored in the cloud, and online accounts such as Facebook, Yahoo, Google and Twitter. Be sure to include a list of your passwords.
“What Happens to Your Email and Social Media After You Die?” explains how to make these decisions.
7. Letter of intent
For instructions, requests and important personal or financial information that don’t belong in your will, write a letter. Use it to convey your wishes for things you hope will be done. For example, you may have detailed instructions about how you want your funeral or memorial service to be performed.
No attorney is needed. The letter won’t carry the legal weight of a will.
8. List of important documents
Make certain your family knows where to find everything you’ve prepared. Make a list of documents, including where each is stored. Include papers for:
- Life insurance policies
- Pension or retirement accounts
- Bank accounts
- Divorce records
- Birth and adoption certificates
- Real estate deeds
- Stocks, bonds and mutual funds
Another item helpful for your heirs is a list of bills and accounts, including contact information and account numbers for each, so your representative can settle and close these accounts.
AARP suggests using a safe for storage. Your lawyer’s office could be another possibility. AARP adds:
“Before you decide to store the will in a bank safe deposit box, consider state and local probate law. Many laws require that a bank safe deposit box be automatically sealed upon your death. This can result in messy complications.”
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