What Estate Planning Documents Do I Need?

Have you ever asked “what estate planning documents do I need?” Or, have you searched for this answer on the internet? If so, we encourage you to keep reading. This article explores five foundational estate planning documents and when you should consider using them.

The Big Five

We consider the five following estate planning documents to be the foundational elements of any estate plan. 

Financial Power of Attorney (“FPOA”)

The FPOA allows you to appoint someone else, an “agent”, to handle your financial affairs. There are different types of FPOA’s and they can be broad or limited in scope.  Many estate planning FPOAs are Springing FPOA. The term “springing” typically means your agent gains their power upon your incapacity.

Medical Power of Attorney (“MPOA”) and/or Healthcare Directive (“HCD”)

The MPOA allows you to appoint an agent to make medical decisions on your behalf if you are incapacitated. This power may be limited to routine healthcare, or it can include making end of life decisions on your behalf. The HCD, is a legal document that allows you to predetermine which medical treatments doctors will provide to you if you are persistently unconscious and there is no reasonable expectation of your recovery. Some people elect to create both documents in order to give their agent some guidance.

Nomination of a Guardian

Typically found in a Last Will and Testament, this provision allows a parent of a minor to nominate a guardian to care for the minor in the case of the parent’s death. Many people will also want to create a stand-alone nomination of guardian for situations dealing with incapacity. To learn more about Guardian nominations click here. 

Last Will and Testament

A legal document that tells a court how to distribute your stuff after you pass away. This estate planning document has significant value and is a great estate planning document for some people. However, it does have some fairly significant limitations that cause many clients to elect creating a Revocable Living Trust. You can learn more about Wills here. 

Revocable Living Trust (“RLT”)

A legal document that essentially creates a separate legal entity from yourself. (Note, this isn’t exactly legally true, but it is the easiest way to understand it.) The Revocable Living Trust is effective upon its creation. As such, you can immediately start putting assets into the trust and benefit from it. People create RLTs for many reasons, some of which are briefly described below.

Some of the benefits of planning with a Trust include the following. You may be able to reduce, or avoid, probate. A Trust may provide some asset protection during life, particularly if you are married. Additionally, a RLT will give you advance planning mechanisms to care for certain types of beneficiaries. We call this “controlling from the grave”. Typically, we think of minors, drug or alcohol abusers, financially irresponsible adults, or disabled beneficiaries. You can learn more about Trusts and their benefits here.

When designing a Trust, you should consider family values, family dynamics, financial circumstances, and more. These factors will help design the provisions you’ll need to create a Revocable Living Trust that meets your goals. We cannot over stress the importance of consulting your estate planning advisor when creating these estate planning documents.

The “When” to Estate Plan

Now.

If you are over the age of 18, you are a prime candidate for some level of estate planning. Statistically speaking, an 18 year old is highly unlikely to face an end of life situation for many years. However, young adults are commonly the subject of medical emergencies and serious accidents. Creating financial and medical powers of attorney in case of an emergency is the definition of #adulting. 

Parent(s) of Minors

One of the largest categories of adults without an estate plan are parents of minors. Adults between the ages of 18 and 50 are the least likely to have an estate plan. Yet, these same people are the most likely to have minor children and substantial financial liabilities. Utilizing the proper estate planning documents can limit asset liability, nominate guardians for minor children, and protect children from financial exploitations and their own financial immaturity. Revocable Living Trusts are a fantastic tool to help young parents secure assets and protect their children.

Pre-retirement and retirees

Studies suggest that about 60% of Americans over the age of 60 have some sort of estate planning documents in place. That means 40% of Americans in this age category are without a plan. More detailed analysis suggest that of the 60%, or so, with a plan, more than half have not revisited their plan for more than 5 years. We encourage our clients to review their documents every year and to have a full review with us every 3-5 years or as major life events occur. A well developed estate plan deals with more than just death, it also considers incapacity and injury. As we age, so does our likelihood of injury, incapacity, and eventually death. 

What estate planning documents do I need?

Life circumstances, your goals, and your assets play major roles in determining what estate planning documents you will need. As such, there is no ‘one size fits all’ estate plan. However, an estate planning attorney should be able to help you craft an individualized estate plan that accomplishes your goals and relieves you the stress of uncertainty. 

If you, or a loved one, wants to learn more about estate planning documents, tools, and resources, please give us a call at (636) 352-1222. Contact us here. You can also learn about our estate planning process here.