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Estate Planning Essentials For Everyone

Updated: Jan 20

Estate planning is one of the most overlooked financial planning topics. Understandable as it's a bit morbid and arguably not as exciting as planning for exciting goals like early retirement, but it is still incredibly vital, especially for those with spouses/partners, children, or other dependents. For younger folks or those with small or simple assets, estate planning can actually be fairly easy and straightforward. Account updates and two vital documents may be all that you need. Let's take a look at the estate planning essentials.

Direct Transfers

Before we talk about estate documents, there is one action you can take today to better set up your estate for your heirs.

It is best practice to set up direct transfers upon death for easiest transfer of assets- this looks like updating/adding beneficiaries for bank and retirement accounts, life insurance and annuities. This is also called creating Payable on Death “POD” (for bank) accounts or Transfer on Death “TOD” (for investment) accounts. Naming beneficiaries will avoid probate and supersedes wishes documented in a will- hugely advantageous for protection of assets and avoiding contest! This is also to say, always make sure to keep your beneficiaries (and your will) updated over time as your desired beneficiaries may change.

1. Will

Beyond direct transfers, creating a will is vital to ensuring that your remaining assets are efficiently and effectively transferred per your wishes. If you don't have a will, your assets are distributed according to state intestacy law, which may go against your wishes and can cost more in time and money in the end. Essentially, if you do not have a will, the state has a blueprint one for you that they will apply to your estate to distribute your assets after death.

If you have minor children, a will is critical for naming your legal guardian of choice. Similarly, you can list in your will who you would like to care for your pets. I hope it goes without saying, but please make sure to talk with the guardian/s you choose before naming them in your will.

Your will is also a good place to specify how you would like your digital assets (email accounts, social media, devices) handled, as these may contain valuable or private information.

2. Living Will

A living will, also known as an Advance Directive, is used to communicate your wishes regarding certain end-of-life medical care. Essentially, a living will is used to direct loved ones or your medical provider on how you would like to proceed in case of incapacity. Clearly stating your wishes can save your loved ones a ton of headaches, arguments, and guilt for making the "wrong" choice down the line.

These end of life choices are never easy, and this one form can take a huge amount of pressure off of them in that moment.

3. Power of Attorney (POA)

Typically accompanying the Living Will is a health care power of attorney, also called a health care proxy. A health care POA allows a person of your choice to become your "agent" and make your health care decisions for you in case of your incapacity.

Often, the agent is your spouse, child or sibling, but you can name any qualified adult of your choosing. Your agent will have all the power to make decisions as if they were in fact you, so take extreme care when choosing an agent who truly understands your wishes.

When paired with your living will, these two separate documents come together to be called a combined advance directive. While drafting this document is a great time to have in-depth conversations with your agent about what your wishes actually are in various scenarios. These wishes should be documented in your living will and shared transparently with your agent. You may also want to speak with your other close family members and heirs to promote a shared understanding and prevent conflict down the road.

Note that your POA agents' rights do not supersede a living will unless otherwise specified, but your POA will be able to step in for you to make choices such as what healthcare provider to use, and other details above and beyond what are usually captured in a living will.

Have questions? Drop a comment on this post.

Need help putting together your estate plan? Get in touch.

📌 Sage Financial Planning LLC helps young and mid-career professionals know and do better with their finances and work towards financial freedom. For more information on our holistic financial planning offerings, please visit our Services page.

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