Estate planning can seem like a daunting task, but it can also be one of the more important steps to secure your future and protect your loved ones. Whether you’re just starting to think about it, or you’ve been putting it off for a while; understanding the basics of estate planning is crucial. In this beginner’s guide, we’ll break down the essentials – like what documents are important, how to designate beneficiaries, and planning for the unexpected. By taking these steps now, you can ensure that your wishes are honored and your family is cared for, no matter what the future holds. After all, it’s your legacy.

What is Estate Planning?

Estate planning is simply the process of making it clear how you want your estate to be handled after you pass or if you’re incapacitated and unable to handle things on your own. There are many parts of Estate Planning, but the first thing you must do is conduct a comprehensive review of your estate assets. Your estate is made up of all the property you own, including:

• Cash
• Cars
• Clothes
• Jewelry
• Houses
• Investments
• Savings
• Retirement accounts
• Land
• And more

After you have a clear idea of what your estate consists of, you can then begin planning.

Most Common Estate Planning Documents

Several documents will make up your Estate Plan. Each is important in its own way, and together they form a powerful representation of your final wishes. For your sake, we’ll only cover a few of the most important ones.

• Guardianship – states what you want to have happen and who you want to care for your children or any other dependent you’re responsible for after your death or in the event you’re no longer able to care for them. Most often, instructions for guardianship will be included in a section of your Will.
• Will – a legal document that expresses your last wishes for distribution of your property or other assets. This document, in the state of Alabama, does need to be signed by a testator and two witnesses. Although they don’t need a notary, a notary is highly recommended.
• A Living Will – lets you specify your medical preferences (typically for end of life decisions, like life support). Similar to a Will, it does not have to be notarized, however it does require the signature of two witnesses that meet certain requirements.
• Trust – a legal three-party fiduciary agreement that allows the first party (the Settlor, also may be referenced as Trustor or Grantor) to give the second party (the Trustee) rights to hold assets and property on behalf of and for the benefit of the third party (the Beneficiary). In the state of Alabama, a Trust does need to be notarized to be legally valid; however like a Will, having it notarized helps its authenticity and filing it with the county probate office with your real property adds public notice of trust’s existence.
• Financial Power of Attorney (POA) – a legal document that gives someone the power to handle your financial affairs. Signing it and having it notarized makes it more ironclad. Additionally, most financial institutions require a POA be notarized before they accept it.
• Medical Power of Attorney – lets you designate someone else to make healthcare decisions for you if you are unable to do so. Signing it and having it notarized makes it more ironclad.

Designating Beneficiaries

Many documents and accounts will have Beneficiaries already designated. These could include retirement plans and life insurance policies, to name a few. However, there are other assets you should note in your Will or Trust if you’d like to leave them to a specific person. If there is an opportunity, you should name contingent Beneficiaries. Keep in mind that Beneficiary designations will only go into effect after you pass. So, if you become incapacitated and unable to make decisions, you need to be prepared for more than simply naming Beneficiaries.

Planning for the Unexpected

Take caution when developing your Estate Plan. There are many mistakes that could result in delays, inaccuracies, or other misunderstandings. By having an comprehensive plan, you can avoid these common mistakes:

• Not having an official plan.
• Not updating a plan over time (at major lifetime events)
• Not making arrangements for if you become incapacitated (disability or long-term care)
• Improper ownership of assets (how easy will it be to pass assets on)
• Not including charitable gifts
• Not appointing a guardian for children or others who would need care
• Underestimating the implication of taxes
• Not having liquidity of assets
• Not making gifts during your lifetime to reduce the value of the estate after passing (tax advantages)
• Putting child’s name on the deed to property (potentially huge tax implications)

What Are My Next Steps?

For people who haven’t started estate planning, you may be asking “where do I go from here?” or “do I need an attorney to create an estate plan?” We want to answer some of those questions.

Most people have simple, straight-forward needs and do not need an attorney to create an Estate Plan. However, if you have a very complicated estate, you may opt to meet with a professional to guide you through the process. If you choose to go the traditional route and work with an attorney, there may be a financial cost that comes with creating an Estate Plan. Newer methods of Estate Planning include innovative and creative platforms like Trust & Will, Good Trust, and Legal Zoom where you can get a legal Estate Plan at a fraction of the cost.

Later this month, our Certified Credit Union Financial Counselor will host our Life Lessons Webinar. This month’s topic is “Crafting Your Legacy – Ways to Protect Your Family’s Finances.” Join us on Tuesday, November 19th from 12-1pm to learn more on financial planning, investments, and estate planning.

Estate planning is more than just preparing for the future – it’s about ensuring peace of mind for you and your loved ones. Now that you have a clear understanding of the basics, the next step is to take action. Whether that means meeting with a professional or starting with a simple will, beginning the process today will help protect what matters most tomorrow.