Three Essential Estate Planning Documents [And Why You Need Them Now]

Written by Heather Locklar, JD on April 30, 2019

Warren Averett Estate Planning Image

If you knew you could protect your legacy and your family after you are gone, would you do it?

It’s a loaded question.

While most individuals wouldn’t hesitate to affirm that, yes, they would do it, 58% of American adults don’t actually have the appropriate estate planning documents in place.

It can be a difficult topic for many individuals to discuss or even think about—much less proactively pursue. Estate planning comes with emotional and relational aspects that are unlike any other area of financial planning, and the associated familial intricacies and legal complexities can be numerous. It can be hard to know where to start, who to listen to and what to do to accomplish your goals. The good news is that the peace of mind that follows completion is well worth the effort you’ll put forth in the beginning.

Learn more about what matters to you and your goals. Click here to receive the information from Warren Averett that’s most valuable to you.

Once you’ve found the right advisor, he or she will help you towards building an estate plan that works for you and your family.  For most, the first step is to execute the most basic documents that will accomplish your goals and drive the direction of your estate plan.  Below, I’ve outlined three essential estate planning documents everyone should have, why you need them and helpful questions you can ask yourself to help make decisions.

Essential Estate Planning Document #1 – Last Will and Testament

What it is: A Last Will and Testament is a written document that specifies the distribution of your assets upon your death.  Not only can you dictate who receives your assets, but you can also direct when they receive them. A Last Will and Testament covers a multitude of other important details as well. For instance: who will serve as Executor of your estate?  And what powers will he or she have? Who will you name as guardian of your minor children?

Why you need one: Without a Last Will and Testament to express your wishes as it relates to the above details, the laws of the state in which you reside at the time of your death will dictate what happens to your estate.  That includes everything from who receives your assets to who can administer your estate.  Many state laws are not necessarily intuitive, and it’s always better to direct where you want your assets to go rather than the law deciding for you. You have worked hard for the estate you have accumulated.  Why let the law determine what happens to it?

Helpful questions to ask yourself:

  • Do you have a list of your assets for those you leave behind to find?
  • How are your assets owned? Do you own anything jointly with your spouse or a child?
  • Do you have minor children? Who is named as their guardian?
  • Do you want children to receive assets outright? Or should they be held in trust?
  • Who would you name as Executor of your Last Will and Testament?
  • Do you have a family-owned business? What happens to the business once you’re deceased?
  • Do you have a retirement plan (profit sharing, 401(k), IRA, etc.)? Who is the primary beneficiary?  Who is the contingent beneficiary?
  • Do you have life insurance? Who is the primary beneficiary?  Who is the contingent beneficiary?
  • Do your beneficiary designations match your overall estate plan?

Essential Estate Planning Document #2 – Durable Power of Attorney

What it is: A Durable Power of Attorney is a document that allows you to designate someone to act as your attorney-in-fact. While the document itself will explicitly list the powers you have given your attorney-in-fact, the powers are typically pretty extensive.

Generally speaking, there are two types of powers of attorney: (i) a “sprung” power of attorney, whereby the appointment of your attorney-in-fact is effective the minute the document is signed, and (ii) a “springing” power of attorney, whereby the appointment is not effective until a certain event occurs (such as incapacity) or upon a certain date.

Why you need one: Because the power you are giving in this document is so extensive, it is important to appoint someone you trust implicitly.  Having someone who can act on your behalf is invaluable.  For example: if you are hospitalized and unable to see to your own affairs, who is paying your bills for you? Who is talking to your medical insurance provider?

It’s typically unwise to wait for an event to occur before executing one of these documents.  Because a person must be of sound and coherent mind to execute a Durable Power of Attorney, if you don’t have one in place before the event takes place, you will be too late.

Helpful questions to ask yourself:

  • Who do you trust to handle your affairs?
  • If you have elderly parents, do they have a power of attorney?

Essential Estate Planning Document #3 – Advance Directive for Health Care

What it is: An Advance Directive for Health Care is a document that (i) allows you to designate someone as your health care proxy and (ii) makes your wishes known to family members and health care providers regarding medical treatment or other medical care if you become unable to speak or act for yourself.  It is important to note that your proxy will only make decisions should you be unable to make them yourself. You are in charge of your own health care so long as you have the mental capacity to make such decisions.

Why you need one: Health care decisions are possibly the most personal of all.  Without a directive explaining to your friends and family your wishes, how are they supposed to know what decisions to make?  Counting on a spouse to remember a conversation you had on this topic five years prior is risky.  It’s best for all concerned if these wishes are memorialized in writing.

Something else to consider is the possible weight you could alleviate by expressing your wishes formally.  Making health care decisions for another can be one of the most difficult things a person can do.   Having formal instructions from you can help lift some of the weight that comes with such an appointment.

Helpful questions to ask yourself:

  • Who would you name as proxy to make health care decisions for you if you are unable to speak for yourself?
  • What are your thoughts on life-sustaining treatment if you are terminal?
  • What are your wishes concerning food and water through tube or IV if you are unable to swallow?

Estate planning is a difficult topic, not only in complexity, but also emotionally. Having the right documents in place is an effective step toward overcoming both challenges. Putting these documents in place now can help secure your vision for the future.

Having an advisor who can help you make the right decisions for you and your loved ones can help you accomplish your goals. Don’t navigate estate planning alone. Click here to connect with one of Warren Averett’s estate planners and advisors.

New call-to-action

Back to Resources
Top