The estate planning process can seem daunting, but it’s a necessary step to ensure that your wishes are met. Estate planning protects your plans for your assets and your future.

From wills to power of attorney, there’s a lot that goes into estate planning. Luckily, we’ve outlined the basics of the estate planning process. Read on for a breakdown of what estate planning is and how you can get started.

What is Estate Planning?

Estate planning is the process of setting up a plan for how your affairs and assets will be handled. Professional advisors and lawyers are involved when planning for your estate to ensure your plans will be followed.

A core element of estate planning is the will. The will is a document outlining who will be in charge of distributing your assets and who stands to inherit them. Estate planning can also include trusts, insurance policies, and other documents.

Who Needs an Estate Plan?

Everyone needs some form of estate planning. Without a certified document establishing how you want your assets handled, you cannot be sure that your estate will be handled how you intended. To know what your estate plan should involve, consult a legal expert.

Estates that are larger or have complicating factors become more difficult to manage. An estate lawyer will likely be needed in the following situations:

  • If you have a large estate
  • If you have unusual assets or assets that are difficult to manage
  • If you have assets that are difficult to liquefy (such as real estate or artwork)
  • If you have disabled children or dependents that require lifelong care
  • If you own a business
  • If you have nonfamiliar heirs
  • If you have other complicating factors

The Estate Planning Process

1. Create an Inventory

The first step in estate planning is to make a list of your assets. Take inventory of everything you own. Keep in mind that your assets are more than money. Your inventory can include: 

  • Checking and savings accounts 
  • Real estate
  • Artwork 
  • Collectibles 
  • Cars, motorcycles, or boats 
  • Stocks, bonds, or mutual funds
  • Life insurance policies
  • Businesses 
  • Health savings accounts 
  • Retirement accounts  

2. Account for Your Family’s Needs

Think about what your family would need to maintain their current lifestyle. Ensure that you have an appropriate life insurance plan to cover these costs. If you have children, consider naming a guardian and a backup guardian.  

3. Establish Your Directives

Make a plan for what you want to happen to your assets. Consider what you want your estate plan to look like. You may need one of the following legal documents: 

  • A Will
  • A Trust 
  • Medical Power of Attorney or an Advance Healthcare Directive 
  • Financial or Durable Power of Attorney 
  • HIPPA Authorization 
  • Or Other Legal Documents 

4. Review Your Beneficiaries

Review who you want to inherit your assets. If you have children, pets, or loved ones who cannot care for themselves, consider how you can plan for them. You might need to designate a guardian or prepare a financial plan to care for them. 

Know who you would want to leave in charge of your medical decisions, financial assets, and assets distribution. Keep in mind that this does not have to be the same person. 

5. Note Your State’s Estate Tax Laws

Taxes are a huge consideration to remember when making an estate plan. Taxes will still need to be paid on all of your relevant assets if you become incapacitated. They will also need to be factored into any inheritance. 

Estate taxes depend on the state, so find out how much you’ll have to pay for federal and state estate and inheritance taxes. 

6. Weigh the Value of Professional Help

Attorneys are not always needed for creating an estate plan. However, they can be extremely valuable when looking for legal advice on the best way to get your goals accomplished. Legal experts will also help you properly create legal documentation and directives. 

If you need legal documents for your estate planning, consider hiring professional help. A legal firm could be invaluable in helping you identify what documents you’ll need to create.

Most Common Estate Planning Documents

Financial Power of Attorney (POA)

A Financial Power of Attorney, or POA, is a legal document that designates who will have the authority to handle your finances

Durable Power of Attorney (POA)

A Durable Power of Attorney, also called a POA, is a type of financial power of attorney. It continues to give the designated party authority to make decisions if you become incapacitated. Durable Power of Attorney documents gives decision-making power for all decisions besides medical care decisions.

Advance Healthcare Directive (AHCD)

For health-related decisions, you’ll need an Advance Healthcare Directive, also called an AHCD. This legal document gives someone the authority to make medical decisions on your behalf if you become incapacitated.

AHCDs are often referred to as Medical Power of Attorney, however, there are legal differences between the two. Medical Power of Attorney gives someone the authority to make medical decisions for you.

A Living Will is a similar document, but one that allows you to specify your medical preferences. For example, your willingness to be on life support long-term. An AHCD combines these two documents, designating a power of attorney and allowing you to give health care directives.

HIPAA Authorization

HIPAA regulations prohibit medical personnel from sharing any medical information. If you are willing to allow someone access to your medical information you can give them HIPAA Authorization. This will allow medical staff to share your medical records and information.

Common Estate Planning Mistakes to Avoid

Not Having a Plan

The most common mistake in estate planning is assuming that everyone will know and follow your wishes. On the contrary, having a documented plan that outlines your wishes is the best way to ensure they are met.

Having a plan also eases the burden for your loved ones. It is easier to make decisions and take action when there is a legal document. The document offers legal permissions and guidance regarding your preferences.

Not Updating Your Plan

Over time, your needs and wants will change. As your children grow older, for example, you might not need to specify plans to care for them. If you remarry, you might want to update your financial or legal power of attorney.

To ensure that your plan is right for you, you’ll need to continue updating it over time.

Not Considering Taxes

It is a common mistake to underestimate or forget to account for taxes. Take a while to fully plan out exactly how much taxes you’ll need to account for in your estate plan.

Do You Need Help with Your Estate Planning Process?

Do you need help with your estate planning? Talk with an attorney that can walk you through the estate planning process. Call us at 800-874-3528 for a free consultation.