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We all want to build a secure financial legacy for the future. We spend time budgeting, saving, and investing to create security for ourselves and our loved ones in the years ahead. Have you ever considered what your legacy will look like after your lifetime?
While many of us think about the future five, ten, or even twenty years from now, we do not often consider what will happen to our finances and assets after we’re gone. It may not be the most enjoyable aspect of financial planning, but an estate plan ensures your legacy asset distribution wishes are carried out.
Who Needs an Estate Plan?
It’s commonly assumed that estate plans are only for the wealthy or the elderly. In reality, almost everyone has an estate, and every estate requires proper planning. Estate planning is for everyone. Your estate consists of everything you own, including your home, vehicle, bank accounts and investments, and even your personal possessions.
Planning for the unexpected allows you to decide what happens to these things if you die or become incapacitated. Without a will, the state will decide what happens to your assets. This is referred to as intestate succession and distribution can vary by state laws. If you want to make sure your estate goes to your loved ones, charitable organizations, or any other recipients of your choice, you will need a will which is part of your estate plan.
Will Vs. Estate Plan: What’s the Difference?
A will is an important part of every estate plan, but an estate plan comprises more than just a will. An estate plan is a group of documents that explains how certain events and assets will be addressed.
In addition to addressing how you would like your assets distributed, an estate plan can also include directives for medical decisions and guardianship of your children. An estate plan has many benefits for you and your loved ones. It can include documents like:
- A will and testament
- A living will
- Beneficiary designations
- Guardianship designations
- Power(s) of attorney
- Advance healthcare directive
- Letter of intent
- Establishment of a trust
7 Steps to Creating Your Estate Plan
There are many options in estate planning, and no two estate plans are exactly alike. If one of these steps doesn’t apply to your personal financial situation, you can skip it. If you’re unsure of what to include in your estate plan or need help crafting legal documents properly, consult a trusted estate planning professional or an estate planning attorney.
1. Create a last will and testament.
A will is a legal document that expresses your wishes for your possessions, finances, assets, and dependents in the event of your death. A will is the foundation for building a comprehensive estate plan, but it may not cover all of your wishes.
2. Create a revocable living trust.
A will helps you create a plan for your assets should the unexpected occur. A living trust helps you manage those assets while they’re still in your possession.
While a will is a legal document, a trust is a financial agreement between you (the grantor), a trustee, and your beneficiaries. Trusts and wills also differ in that wills do not take effect until death, while trusts can take effect as soon as they’re established.
You can act as your own trustee in many living trusts. You can also decide which of your assets to put into the trust, retaining autonomous access to those assets while you’re alive. In the event of your death, the trust will be distributed according to your directions.
3. Create an advance healthcare directive.
Your loved ones may face difficult decisions about your health and care. To alleviate this burden, many people choose to include an advance healthcare directive in their estate plan. This document details your wishes and preferences for your own care if you are rendered incapacitated, face a terminal illness, or suffer a debilitating accident.
4. Draw up any necessary beneficiary designations.
If you already have a will in place from long ago, you may want to update a specific aspect of it with a beneficiary designation. You may also have beneficiary designations related to retirement, insurance, or other financial accounts that have become outdated. These documents avoid probate and override designations in your will.
For example, if you created an education savings account for your child when they were young, you may have listed your spouse as the beneficiary. If your child is now an adult who is paying for their own education, you can create a beneficiary designation that leaves control of that account to them instead.
5. Designate power(s) of attorney.
A power of attorney document gives power over all situations, referred to as “full” or specific areas, referred to as “limited” to a designated individual. There are several types of powers of attorney, and you can choose to execute any number of them in your estate planning.
Medical power of attorney designates a person to make health decisions on your behalf, while a financial power of attorney gives someone the power to manage your assets. A general power of attorney gives the designated person power to act on your behalf in all situations.
Powers of attorney can be limited in scope and duration, which are designated in the document itself. An estate planning attorney can help you determine which powers of attorney to draw up for your estate plan based on your objectives.
6. Gather important documents.
When someone passes away, loved ones are often faced with emotional hardship and practical tasks all at once. To assist your family with the practical tasks, it’s helpful to gather all of your important documents in one place. This includes:
- Insurance policies — typically include health, life, car, and home policies, along with any other policies you may hold
- Financial information — account information for banks, credit cards, loans, mortgages, and investments
- Proof of identity – personal documents like your Social Security card, birth certificate, and marriage and divorce certificates if applicable
- Titles and property deeds — typically include your personal home and vehicles, along with other real estate holdings.
- Digital logins and passwords — in the internet age, it’s helpful to store digital logins for any site your loved ones may need to access
7. Create funeral instructions.
Funeral instructions can save loved ones from needing to make difficult choices in an already difficult time. Note whether you’d like to be donated to science, buried or cremated, what type of service you prefer and what you want to include in that service, and your preferred charity or nonprofit organization if people want to donate in your honor.
Your Partner in Leaving a Legacy
At Marietta Wealth, we want to help our clients leave a legacy that lasts more than a lifetime. Through comprehensive financial planning and tailored investment strategies, we can help you create financial security for yourself and your loved ones.
As a fee-only financial advisory firm, our fiduciary duty is to you first. When you choose Marietta Wealth as your financial partner, you’ll work with trusted experts who want to build a relationship with you as you work toward your financial goals.
While we are not estate planning attorneys, we have an extensive network of trusted professionals, and we’d be happy to refer you to someone who will handle your estate planning with care.
If you’re ready to find a path to financial confidence and freedom, talk to our advisors today.
Marietta Wealth is a registered investment adviser. Registration of an investment adviser does not imply any level of skill or training. For additional information about Marietta Wealth’s financial planning and advisory services, please see the Marietta Wealth Disclosure Brochure or ADV Part 2A for full details, which is available upon request or by visiting our website.
This article is not intended to be used, and should not be used, as the sole basis for legal advice. The reader should seek and rely upon the guidance and advice of legal counsel before making decisions regarding any estate planning tools or documents.