Three Steps to Creating an Estate Plan

Last Updated: November 27, 2012

Many people have preconceived notions about their needs for an estate plan. This one question quiz will help provide guidance: Select the correct answer to the following statement. I don’t need an estate plan because: a) Estate Plans are only for the very wealthy. b) I plan to live forever. c) My kids already know what I want to happen. d) All of the above. Regardless of how you answered, everybody needs an estate plan. While it is true that estate planning can be a complex topic, there are a few basic measures that everyone can, and should, take.
  An estate plan will help ensure that your financial and family goals are, in fact met, once you’re gone. Your estate plan starts with several documents, which we’ve highlighted below, and includes a will, a power of attorney for financial affairs and a healthcare directive (power of attorney for healthcare matters). Additionally, you might also benefit from the use of a trust. Finally, it’s important that you stay abreast of changing state and federal laws—many people elect to have an attorney help them with these legislative changes. Types of Estate Planning Documents Will – A will outlines exactly how you want your assets distributed when you die.  It is also generally the document in which you will name a guardian for your minor children.  Dying without a will could be extremely costly for your heirs, and would mean that the state would determine who gets your assets.  Even if you have a trust, you still need a will because everything will not be titled in the name of the trust, such as your antique china cabinet or your matchbook or stamp collection. Power of Attorney – This document gives authorization for someone else to handle your financial affairs for you.  Needless to say, this should be a person that you trust implicitly to do what you would want. A power of attorney will authorize the named individual to pay your bills, sell your assets, enter into contracts, and anything else that you can do personally.  Power of attorney is usually set up in one of two ways: immediate or springing.  An immediate power of attorney goes into effect (you guessed it) immediately.  A springing power of attorney only goes into effect following a triggering event such as medical incapacitation. Healthcare Directive – A third document that you need to have in place is called a healthcare directive, also known as a living will or power of attorney for healthcare.  In this document you will name someone that you would like to authorize to make medical decisions for you if you should become unable to make them yourself.  This person could be the same as your power of attorney for financial matters, but it doesn’t have to be.  In addition to naming someone to fulfill this responsibility, you may also explicitly state your wishes under certain scenarios.  For example, would you want to be kept alive via life support if two or three medical doctors state that you have no chance of recovery? Trust –If you have a more complex financial situation or if you want to exercise more control over your assets after your death, then a trust might be beneficial.  A trust allows you to place conditions on the distribution of assets.  For example, you might include an age restriction (i.e. my son receives $10,000 after he turns 23 years old).  You can designate specific uses for your money (i.e. money can be withdrawn for college, but not for a new car). A trust can also help keep your estate private and avoid probate court.  There are dozens of different types of trusts that can be used to meet an infinite number of goals. How to Create an Estate Plan 1.) The first step in the estate planning process is to list all your assets.  This would include not only your home, autos and personal property, but your retirement accounts, insurance policies and other real estate or business interests. 2.) Second, list all potential beneficiaries including your spouse, children, other family members and favorite charities.  Once your list is complete, you are ready to begin creating documents to specify your desires.  These documents can be created using computer software or internet-based resources, or you may consider consulting an estate planning attorney who will work with you to clarify your personal goals and ensure the documents they create for you will meet those goals. 3.)  The final step in the estate planning process never ends—continually monitoring your plan and making changes as needed.  Any time a major event happens in your life, it is a good time to review your estate plan.  Some common events might be getting married or divorced, having children or grandchildren, the death of a family member, relocating and buying or selling a significant asset.  It is also a good idea to review your documents every few years even if you have not had a major life event because estate planning laws and legislative updates and litigation outcomes are continual. Seek Guidance Estate planning can be a complex topic; therefore, we recommend seeking a firm like Pension Consultants that has Certified Financial PlannerTM professionals on staff that can assist you with your specific questions. PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.


Pension Consultants, Inc.



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