Real Estate Law

The Ultimate Guide to Preparing Important Estate Planning Documents

3 years ago
Read Time: 8 minutes
by Eamon
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Have you ever lost a loved one and got saddled with a nightmare? You tried to figure out how to find and then distribute the person’s wealth.

If you have, you know the massive amount of time and headaches that go with those activities.

You also know struggles of that nature cause you to never wish such a nightmare on anyone else. You may have even felt a compulsion to keep your life in order for the sake of those you’d leave behind at your passing.

It’s time to create an estate plan, no matter what your age. The below guide will help you prepare important estate planning documents so your loved ones don’t ever have to worry.

Estate Plan

The estate plan passes your information and property to beneficiaries upon your death. For the plan to succeed, you’ll gather many documents and store them in a safe and accessible place.

The estate plan holds your wishes to transfer information and wealth to loved ones.

Estate Planning Documents

Project managers create a book that includes everything needed to meet their objectives. It becomes their management bible.

Estate planning requires similar instructions for the executor to manage your wealth.

You too can have your objectives met when you die. Create a reference book of documents, instructions, and estate planning checklists.

Estate Status Check

You’ll need to update your estate planning information anytime there is a significant change in status. Here is a list of items that should trigger updates in your estate plan when they change:

Your marital status or that of a family member
The addition of a child or grandchild
A serious illness or disability of you or a loved one
Support provided by family members
New financial problems
Significant gifts to family members not in your estate plan
Given or forgiven loans to family members
The amount of life insurance or beneficiaries
Business ownership, valuation, and succession plan
Value of your estate
Alterations in your will (executor, guardian, beneficiaries, property, charitable gifts, trust arrangements)
Moving or spending more time at another location

Letter of Intent

A letter of intent covers all items that don’t belong in a will. The letter specifies your clear intent and hopes. While this item doesn’t have any legal clout, it provides the executor or family members with the information necessary to carry out your wishes.

Your wishes might include inviting a specific person to your funeral or asking your family to eat your favorite breakfast and think about you next Christmas.

You can also include contact information for all the professionals you work with. This might include your attorney, accountant, broker, and financial planner.

List of Important Documents

Maintaining a list of important documents and their location will help your family find answers at the moment. You can also maintain a folder with a copy of each document for easy access. Documents might include:

Life insurance policies
Insurance policies
Pension, 401K, IRAs, and annuities
Bank accounts
Birth and adoption papers
Real estate titles and deeds
Vehicle loans and titles
Stocks, bonds, and mutual funds
Bills and direct withdrawals
Tax returns
Any payment plans

The Will

Your will is your last form of decision-making of what is best for your kids and pets. A well-prepared will helps you distribute your financial and sentimental property, assign an executor, and make funeral provisions. If you have anyone under your care like kids or elderly parents, you can also name guardians.

A will is a powerful tool. Without one, a probate court assigns an executor and your information becomes public record.

To avoid this, consider everything necessary to prepare a will. You may want to read what Freedom Law has to say about the 10 things to consider when preparing your will.

Power of Attorney for Finances and Legal

This document allows you to name a trusted person to make financial and legal decisions on your behalf. Without the power of attorney, your spouse or adult child will have limited authority over your joint property. It’s common for spouses to have reciprocal power of attorney documents.

If no power of attorney exists, a family member would go to court for a judge to assign a financial manager over your estate. The person may or may not be a family member.

A Living Trust

A living trust allows you to name a person you trust as the trustee. You can use the trust to transfer property, which is solely in your name, to family members without using the probate process.

For a trust to work, you’ll have to file a significant amount of paperwork to actually transfer your property to the trust. You’ll want to look into the time and tax savings a trust can provide.

Medical Plan

Since the medical profession is often involved in our end-of-life moments, your medical plan will provide medical personnel your desired instructions. This can be done using power of attorney for healthcare and a living will.

Power of Attorney for Healthcare

A power of attorney for healthcare is also known as a durable attorney. This allows you to name someone to oversee medical decisions on your behalf. Each state has different parameters used in naming a person.

When giving this consideration, you’ll want to evaluate ways to fund whatever decision might be made. As an example, you might outlive your pension fund while living in an assisted care facility or nursing home.

A Living Will

This document outlines your medical care, should you be unable to make your own healthcare decisions. As an example, an emergency places you in the emergency room and your document specifies if you’ll be kept alive on life support and for how long. You’ll want to check with an attorney to determine if this document can be combined with your power of attorney for healthcare.

Relationship Plan

This document is ideal to mention your loved ones and your parting thoughts for them. You can also list your beneficiaries, but be cautious to leave the actual property transfer information in your will, as you wouldn’t want to create any conflicts between documents that a court must sort out.

You can also include your final wishes for a memorial, funeral, and burial. This will include any deeds to a burial plot or if you desire to be cremated. Some individuals include their choice of hymns for services and other related desires.

Business Ownership Plan

If you are the sole owner of a business, then providing the necessary documentation to your family is critical. They’ll need to know about your bank accounts, credit cards, subscription purchases, assets and liabilities, property, and owner’s equity.

If you have multiple business owners, you’ll have to decide how much of the information you pass on is relevant to the family. You’d want to pass on any shares of stock or LLC memberships and their associated bylaws. This will help your family decide on how to make financial decisions based on all that are involved.

Regardless of the type of business you have in place, it is prudent to set up a succession plan that automatically passes information to your executor at your passing. This should protect your heirs from any legal and financial surprises.

Digital Plan

This is one of the newest considerations in estate planning. Many people leave behind social media pages and websites. If you own digital property, you need to consider what happens to your digital life when you pass.

Passive Income

Sites established to produce passive income need to be treated as an asset. Each site is tied to services or products that may automatically ship and deposit funds into an account. This requires you to log the site location, password, related bank account, and any drop shipment information.

Also, you’ll want to document who is to take over the site or how it is to be taken down. If you desire a family member to take over the site, the information must be made available in your plan.

If you want a business partner to take over the site, you’ll need a succession plan created. This will need to be separate from your digital plan.

If you prefer selling the site to a digital broker and pass the liquidated assets to your beneficiaries, you’ll need to include that information in your digital plan.

Non-Monetary sites

Your non-monetary sites and social media accounts also need some level of documentation for your executor or family members. This will include a list of all website names, site URLs, usernames, passwords, cloud-based storage accounts, digital movie and book accounts, shopping accounts, etc.

You might need to document additional information for more secure sites. This might include security questions and answers, PIN numbers, security codes, and account numbers. Also, note any accounts that have two-factor authentication using a phone number, text device, or email address.

To simplify the listing of sites and passwords, some people make use of single-site password storage apps or an online password manager. Many of these sites can generate a document to be included in your digital plan. Or, you can document the password site so a family member can find all of your consolidated passwords.

Here are some other types of important information that needs to be in your digital documentation:

Computer passwords/PIN
Smartphone passwords/PIN
Tablet passwords/PIN
Bank account numbers, sites, passwords, etc.
Voicemail PIN
Loyalty cards, membership numbers, and gift cards (and associated PINs)
Medical IDs and insurance numbers
WiFi passcodes
Recurring subscriptions (and credit cards or direct withdrawal information)
Streaming subscriptions, usernames, passwords, associated credit cards

Using Digital Heirs

Another consideration is to establish digital heirs where you can. Some sites have processes to facilitate heirs taking over a site.

For instance, Google has an Inactive Account Manager that gets notified if your account is inactive. This is a list of up to ten people you select that receive access once your specified inactivity criteria are met. You can access this information from within your profile.

Facebook allows you to designate a legacy contact to memorialize your page. Your legacy contact will have access to make decisions about your account once it is memorialized. Your legacy contact cannot log into your account, read your messages, delete any of your friends, or add new friends.

Instagram also has steps to memorialize an account. The memorialization process is very similar to Facebook’s methods. There are a few changes as to where the account can show up.

When you think about how many online accounts you have, the task of preparing the documentation seems overwhelming. To simplify the process, determine what way you want to manage the digital data and take a half-hour every week to transition to your chosen method. Your heirs will be very thankful that you did.

Legacy Plan

A legacy plan allows you to give some of your property to non-profit or charitable organizations. It also allows you to ascribe abstract ideas and ideals to your family. Sometimes it is used to craft a family narrative that encompasses beliefs and spiritual milestones.

While some use the term legacy planning interchangeably with estate planning, others use it to pass on abstract heart-based inheritances of the heart. For instance, if a grandchild attends a religious institution, within a given time frame, the estate will pay the tuition. But if the grandchild passes on the opportunity, the executor establishes a scholarship program for the institution.

There are no hard and fast rules for how a legacy plan works. To be prudent, it’s advisable to discuss all ideas with an attorney. they will inform you of what is legally permissible in your area.