2020 Estate Planning Documents Checklist

As we deal with this crisis, it is as good a moment as ever to take stock of your current estate planning documents. If you do not have an estate plan, then this is the time for you to set one up. Despite the term, estate plans are not just all about your estate.

More than anything, estate plans are like an insurance policy that lets you plan not just for your death, but for disability, incapacity, and grave illness. In a way, an estate plan is about making sure everything is set up to make things as easy as possible for your loved ones.

Additionally, with new tax changes upon us, it’s also important to review any and all estate planning documents and measures that you may currently have in place and ensure that all newly-acquired assets or account changes are taken into consideration. Estate plans are not just for the wealthy, or for retirees.

Young families, freshly married couples, and even individuals with modest savings can benefit from setting up either a comprehensive estate plan or just a couple basic estate planning documents, to save themselves and their family a big headache in the future. Regardless of where you are in life, we are going to walk you through some of the basics of setting up an estate plan in 2020, and what you will want to know.

Do You Need an Estate Plan?

In most cases, the answer is going to be yes. But in every case, an estate plan needs to be meticulously tailored to suit the person in question. Some estates are far more complex than others and require a wider assortment of tools to fulfill a person’s needs. In general, all estate plans are designed to check a few simple boxes:

      • An estate plan must prepare and account for the worst.
      • An estate plan must maximize how much of the estate can be safely, swiftly, and conveniently transferred to the appropriate next of kin.
      • An estate plan must wholly reflect the estate’s wishes.

Yet how these boxes are checked will differ from estate to estate and will require different documents. In most cases, it’s better to start with a lawyer to begin with, and have things drafted up from scratch. It is usually still a quick and easy process, as most people will not require complex plans.

But sometimes, complexity is unavoidable – either now, through a large estate plan, or later, when your family must sort through a mountain of paperwork and deal with a variety of potential issues. To save yourself the trouble, it’s always a good idea to schedule a simple free consultation.

Wills or Trusts?

When it comes to determining who gets what, the two types of estate planning documents that usually spring to mind are the last will and testament, and the living trust. The last will and testament (or just the will) is the subject or plot point in many movies and stories, but contrary to popular belief, it’s rarely read out loud dramatically or declared by a lawyer.

Instead, it’s usually a close relative who is tasked with bringing a will to the courts alongside a death certificate after a loved one’s passing, in order to kick-start the probate process. Wills have limitations, the greatest of which is they do not help to avoid probate court.

Within probate, a court probates a will (declaring it legitimate), and appoints someone (usually the relative) as the executor in order to be able to deal with the assets in the estate and, ultimately, distribute them according to the will. Trusts are different, and generally more popular than wills now in California, as they help to avoid probate court.

A revocable living trust is usually recommended for anyone who owns a home, or anyone with minor children. Trusts can be either living or testamentary, and revocable or irrevocable, but unless you have a very specific situation. Most people will set up a revocable trust. Revocable simply means you are able to change it and update it during your lifetime.

Beyond this, even with setting up a revocable living trust, we will usually also do a simple will at the same time, called a pourover will, which identifies that you have set up a trust and that you intend to put your assets into that trust. The will also allows you to nominate a guardian over any minor children.

Powers of Attorney and Advance Directives

A power of attorney is a document with many variants, each of which give another person some degree of power to act as the principal’s proxy (or agent). A durable power of attorney is often the type most recommended as an estate planning tool, because it gives the proxy the ability to make decisions in the name of the principal should the principal be incapacitated.

Powers of attorney are usually created either to grant power over healthcare decisions, or financial decisions. One person can be given both. A principal can also have several agents (usually family members) acting jointly together. Powers of attorney can also be specifically written to limit or adjust this power – for example, one can create a document assigning power of attorney to multiple individuals, but only if they act jointly, and not individually.

A power of attorney can be very useful should you be incapacitated, as it ensures that someone can answer critical medical questions for you and manage your finances in your absence (from making crucial payments to managing investments). It is also vitally important to create an advance healthcare directive. This is a document that essentially details who you want to designate to speak to your doctors, get healthcare/medical information, and make healthcare decisions.

Additionally, it can:

      • Can be set up so that your designated agent can only act upon your incapacity (if you are unable to make decisions for yourself), or alternatively, you can make it effective immediately.
      • Can specify what life-saving measures and procedures you would like them to take, including a DNR provision.
      • Is especially important these days to make sure that your family members would be able to deal with hospitals, doctors, and get healthcare information without running into red tape with medical privacy laws.

Account and Asset Beneficiary Designations

Certain assets and accounts can avoid the probate process simply by having a beneficiary or beneficiaries listed on the accounts. These are assets and accounts with a designated beneficiary (or multiple designated beneficiaries), such as:

      • Retirement accounts
        • 401(k) plans
        • IRAs
      • Life insurance policies
      • Bank accounts

This designation overrides a will and can be used to further reduce how much of your estate must pass through probate.

Review Your Estate Planning Documents Regularly

Estate planning documents are often contingent on your current relationships, your current assets, and current tax law. All of these things are subject to frequent change. It is advised to review your estate plan whenever you experience a life-changing event, whenever appropriate tax laws change, or every 3-5 years – whichever comes first.

If you have any questions about what you should set up, contact us to schedule a free initial telephone appointment and we can help you start taking care of this for you and your family.

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