When I meet with a new client, one of the first things we discuss is if the client already has an estate plan. Sometimes I get a blank stare because the client simply doesn't understand what I mean by this question. This doesn't necessarily mean that the client lacks a will or even a revocable living trust, but what it does indicate is that if the client already has an "estate plan," they have either forgotten what they have and why they have it because the plan was done many years ago, or they were simply not educated about what documents they have and why they need them. Aside from this, estate planning is certainly not "one size fits all," so while you may need a will and a trust, your neighbor may only need a will.
Below is a list of the common documents included in a basic estate plan. Which ones you will need will depend on your own personal and financial situations:
- Last Will and Testament - This estate planning document dictates who gets what after you die and who will be in charge of settling your final affairs. If you're single or married, have children, or own any property, you should have a will.
- Revocable Living Trust - This estate planning document covers three phases of your life with regard to property that you transfer into the trust: What happens to the trust property (1) while you're alive and well, (2) while you're alive but not so well, and (3) after you die. Revocable living trusts are used to put a plan in place in case you become mentally incapacitated, keep your final wishes private, and avoid probate. Whether or not you need a revocable living trust as part of your estate plan will depend on many factors.
- Advance Medical Directive - This estate planning document allows you to name someone to make health care decisions for you if for any reason you are not able to do so for yourself. Remember Terri Schiavo, who was only 26 years old when she slipped into a coma? Everyone of legal age should have an advance medical directive.
- Living Will - This estate planning document allows you to indicate what type of medical treatment you want, or do not want, to receive if you are in a terminal condition and not expected to recover. Again, remember Terri Schiavo, who was only 26 years old when she slipped into a coma? Everyone of legal age should have a living will.
- Power of Attorney - This document allows you to name someone to take care of your finances and certain personal matters. In most states you can choose if you want your power of attorney to go into effect immediately or only after you have been declared incapacitated. Everyone of legal age who has a bank account should have a power of attorney.
- What Are the Essential Estate Planning Documents?
- Do You Need a Will or a Trust?
- What Are the Benefits of a Revocable Living Trust vs. a Will?
- What's the Difference Between a Living Will and a Living Trust?
- Is Your Advance Medical Directive Valid?
- Will Your Power of Attorney Work For Your Retirement Plans?
- A Crash Course in Estate Planning