Assembling the documents you need to guide your loved ones as to your wishes gives them an estate plan they can use in life’s difficult moments.
How well do your loved ones know you?
Sure, they can probably tick off your favorite meal and have you pegged as a morning person (or not). But do they know the answers to those harder questions, like what you hope happens if you face health challenges or who you’d like to benefit from your hard work and savings?
Not knowing those answers is understandable. The conversations are hard, and life is busy.
But there’s a process you can use to help you figure out the “what-ifs” you may encounter. It can help you get organized and give your loved ones the details they need to guide them, if needed. It’s called an estate plan. Use these helpful explainers to figure out what an estate plan is and how you can put yours together.
Unlike a will, an estate plan isn’t a single document. Instead, an estate plan is a collection of legal, contract, and miscellaneous documents you complete and assemble to provide holistic direction about your wishes and plans for what you own, care about, and have an interest in, such as a business. It may include two documents or ten, but typically always includes a will.
Why then, isn’t a will enough? For starters, a will can’t tell others what kinds of health care decisions you might want, or who should make those decisions for you. Other documents do that. Taken together, all the documents in an estate plan offer thoughtful planning and directives.
The reasons are varied, but many are practical. The documents that comprise an estate plan help establish control and clarify planning. They serve as a guide for both assets and intentions: how you want children taken care of and how you’ll provide for them; what you want done with items that have meaning to you or to others.
A holistic estate plan may also help to minimize estate taxes and fees, or designate ownership of a business or property. In contrast to a will, which goes through probate and must be made public, not all of the documents in an estate plan must go through probate or be made public.
When it comes to your assets, as long as you have a will, courts will still recognize your wishes for the parts of your estate that are governed by a will. But a will on its own cannot tell your loved ones what you wish should you be incapacitated.
You may need some legal documents that are typically part of an estate plan—but you might not need all of them. Financial, legal, and tax professionals can help you determine which legal documents you might want. They include:
- A last will and testament, which outlines beneficiaries, an executor, guardians for minor children, and your wishes for property distribution.
- A trust transfers control of your property while you’re living and offers direction after you die.
- A health care power of attorney appoints someone to make decisions if you’re unable to. It’s best if the person understands your values and wishes.
- A living will/advanced directive is used by health care professionals as a guide to your wishes for end-of-life medical care.
- A financial power of attorney names someone to make financial and legal decisions if you are unable to. This should be someone you fully trust.
Unlike legal documents—which you choose to create and which may have specific requirements based on the state you live in—contracts are agreements you’ve made. Some may have financial value or beneficiaries. Contracts in an estate plan may include:
- Life insurance policies
- Other insurance plans such as health, dental, homeowners or renters, and auto
- Investments including retirement accounts, bonds, mutual funds, a pension plan, and annuities
- Deeds or loans to large assets such as cars, homes, or boats
- Business details—a buy-sell agreement, transition plans, key roles, or other information
Finally, some information in an estate plan may simply be helpful to those who are charged with ensuring all those documents and wishes are carried out. They might be:
- A copy of your net worth and budget, with assets, liabilities, income, and expenses
- Your Social Security number
- Bank accounts and safe deposit box information
- Credit card accounts, with your latest credit report
- Key professional contact information including a financial professional, insurance agent, estate attorney, accountant, executor, beneficiaries, trustee, and others
- User IDs and passwords to all devices and social media
- Professional or personal memberships, with member numbers, websites, and mailing addresses
- Final arrangement wishes
If beneficiary rules govern the transfer of assets in an account, they are not included in an estate plan. That’s the case of a 401(k); the beneficiary is, by federal law, a surviving spouse. A financial professional can help with any questions.
Financial, tax, and legal professionals can all help with creating an estate plan that best suits your needs and wishes. Check with your state on specific laws that affect estate planning. But you can get started on your own, too. Our estate planning workbook (PDF) can help.
Some people keep a binder with all the documents and contracts in their estate plan in a safe spot, such as a locked file cabinet. Others prefer a digital copy. Your executor, spouse, partner, or other designated, trusted individual should have access to these documents.
That depends on your comfort level. Once a year is good to review key details, account transfer specifics, ownership designations, and beneficiaries. It’s also helpful to re-evaluate an estate plan when you experience a big life event.
Find free estate planning forms through ARAG for Principal customers for creating a will, power of attorney for health care, durable power of attorney, living will, medical records release HIPAA, and authorization for minor’s treatment. You’ll need to ensure you have online access at Principal.com or through the Principal® app, and set up an account with ARAG, too.
