Updated: May 21
A lot of times, folks get intimated by the world "estate plan", but an estate plan is really simple to understand. It can get a little complicated if you own a lot of property, but for most folks, an estate plan is pretty simple.
What Is An Estate Plan?
An estate plan is simply the thoughtful transfer of the "stuff" you own to where you want it to go when you pass away. Notice the word "thoughtful"; you are thinking ahead of time about how you want your property divided before you pass away.
What documents do I need for estate planning?
To make it really simple, there are only three documents you need for estate planning.
1- Last Will And Testament
Your Will directs where you'd like your property to go when you pass away. It is the most important document you need for your estate plan. Your Will becomes effective when you pass away. If you don't prepare your Will, the State where you reside when you pass away will direct how your property will be divided, and who it will be distributed to.
Your Will only distributes the property you own under your name. This typically includes your house, your car, your bank accounts and everything inside your house.
Your Will also names who you trust to be the legal guardian for your minor children if you pass away before they turn 19.
Power of attorneys are also important documents you need for estate planning. They are only valid while you're alive and are unable to make decisions for yourself.
2- Durable Power Of Attorney
The Durable Power of Attorney is the document in which you name someone you trust to make financial decisions for you if you are unable to. You can choose to allow them to make any and all financial decisions on your behalf, or you can choose to only allow them to make financial decisions for you for certain things such as stocks and bonds, or taxes.
3- Health Care Power Of Attorney
The Health Care Power of Attorney names someone who you trust to make medical decisions on your behalf if you are unable to do so.
For both Power Of Attorneys, you can make them effective as soon as you sign them, or you can make them effective only when you become disabled and your disability is verified by a physician.
The most important documents you need for estate planning are your Will and Last Testament, your Durable Power of Attorney and your Health Care Power of Attorney. This keeps your estate plan simple and easy to do.