Estate planning checklist: Essential documents and steps to get your affairs in order

One of the most important aspects of financial planning is estate planning. Unfortunately, it’s often left undone. When meeting with new clients, we frequently discover they have no estate plan or instructions in place for the disposition of their assets or guardianship of their minor children. That’s why we created this estate planning checklist to help you get organized for action.

An effective estate plan not only ensures that your assets, such as real estate and financial accounts, are distributed according to your wishes, but also addresses important matters like your healthcare decisions, considering trusts and addressing digital assets. By having the essential estate planning documents in place, you can provide clarity and peace of mind for your loved ones, help avoid unnecessary complications and facilitate a smoother estate administration process ... and in some cases, you may help reduce potential estate tax exposure.

1. Consult with a financial advisor and an estate planning attorney

A financial advisor helps you develop a comprehensive financial plan that can cover things such as college funding, life insurance, retirement savings, estate planning and more. He or she can tell you what estate planning tools you might need to consider – such as a will, durable power of attorney, advance directive or revocable living trust – and then an attorney can help you decide on those documents and create them.

An experienced estate planning attorney can guide you through the estate planning process, helping you understand complex issues like beneficiary designations, asset protection strategies and potential transfer tax implications. Together with a financial advisor, they can help you structure your retirement accounts, life insurance policies and other assets to optimize asset distribution and potentially minimize estate taxes.

It’s important to work together because just having, for example, a signed living trust from your attorney may not be enough. You also need to title the assets, such as brokerage accounts, homes, cars, etc., into the trust.

Additionally, reviewing your beneficiary designations on retirement accounts and insurance policies ensures that your named beneficiaries align with your overall estate plans.

2. At a minimum, get three estate planning basics in order

Having these three key elements in place can prevent some costly headaches later:

• A durable power of attorney authorizes someone you trust to manage financial matters (paying bills, managing accounts) if you’re unable to
• A healthcare power of attorney names someone to make medical decisions on your behalf if you can’t
• A last will and testament directs where your assets go and names guardians for minor children

A will is an essential part of any estate plan. It’s the primary legal document that allows your assets to be transferred upon death as you instructed. Your will outlines how your assets, such as property and valuable possessions, should be distributed. It also allows you to name an executor who will manage the estate administration process, ensuring your wishes are carried out efficiently.

If you don’t have a will, the state in which you live will determine how your assets are distributed. They call this “dying intestate,” which means you give up the opportunity to distribute your assets as you want; instead, the state decides for you. State laws vary, but your assets may not pass to your spouse and children the way you intend.

And without a thorough estate plan, including a will, your estate may be subject to higher estate taxes, potentially reducing the amount your beneficiaries receive.

If you already have a will, you should add reviewing and updating your will to your estate plan checklist. Regularly reviewing your will and other estate planning documents ensures they reflect any changes in your financial situation, such as acquiring new assets or changes in your family circumstances. These essential documents should be reviewed especially after major life events like marriage, divorce, death of a loved one, birth of a child, significant change in assets or relocation to a new state. And absent of any such life events, it's best to review estate plans every 3-5 years.

3. Review beneficiary designations and update as needed

Importantly, there are certain assets for which disposition isn’t governed by the terms of a last will and testament or a living trust. For any asset that has a beneficiary designation (such as retirement accounts and life insurance), a properly executed beneficiary designation supersedes any other estate planning documents. So, it’s important to regularly review your beneficiary designations to be sure they align with your overall estate plan.

4. Name a guardian for minor children

If you have minor children, discuss with your spouse who will raise them and manage your assets for their care, benefit and welfare if something were to happen to you both. This helps ensure someone you trust will make those decisions.

Ironically, being unable to choose a guardian is one of the most common reasons parents of young children give for putting off writing a will. There are several factors to consider when choosing a guardian for your kids, but don’t let that intimidate you from making this important decision.

We recommend having an honest conversation with the intended guardian before you formalize the paperwork so they agree to the responsibility in advance. Let this person know where they can find a copy of your current will and separate custodial documents when the time comes. Preparing your appointed guardian can help streamline the estate administration process if the need arises.

5. Durable power of attorney

Being suddenly incapacitated is an example that no one likes to think about, but a sudden accident or illness could prohibit your ability to perform basic financial tasks like paying your bills and filing taxes. Consider designating a third party to make all financial and non-health care decisions on your behalf in case you’re unable to do so on your own. This requires executing a durable power of attorney document and it involves careful thought. After all, you’re granting this third party, also known as an “attorney-in-fact,” a lot of power over your life, including all financial decisions. That said, you should know that your attorney-in-fact has a fiduciary duty to act in your best interests.

It stands to reason that your attorney-in-fact should be someone whose judgment you trust implicitly – perhaps your spouse, an adult child or a close friend.

Your attorney-in-fact would need to present the power of attorney document to financial institutions and others as proof of their decision-making authority.

6. Medical directive, healthcare power of attorney and HIPAA authorization

While most of the steps and documents we’ve discussed thus far address financial decisions, they won’t help with healthcare decisions. To prepare for those, you also need a medical directive and a healthcare power of attorney.

A medical directive – sometimes called an advanced directive or a living will – states your end-of-life care wishes. For example, if your condition is so severe that you can be kept alive only by artificial means, or if you need an operation but can’t make that decision because you’re incapacitated, your medical directive specifies your wishes.

A healthcare power of attorney allows you to appoint a person of your choice – often called your healthcare agent – to make medical decisions on your behalf if you wouldn’t be able to make these decisions for yourself, even if just temporarily.    

A HIPAA authorization entitles your healthcare agent and other named loved ones to your healthcare information, including whether you’re in an emergency room or other healthcare facility.

Without these essential documents, your loved ones may face difficult decisions with no guidance, which can add stress during an already challenging time.

7. Consider a revocable living trust

Without proper planning, your heirs may have to contend with probate court. And if you own real estate in more than one state, your heirs will have to deal with probate in each state. The process can potentially involve extensive time delays and legal fees. Fortunately, you can help mitigate this with a revocable living trust.

A revocable living trust is a legal document that allows you to transfer ownership of your assets into the trust during your lifetime. You maintain control and ownership over these assets, and upon your death, they are distributed to your beneficiaries without the need for probate, allowing for a smoother asset distribution. This can be particularly beneficial for complex estates or when aiming to maintain privacy.

Additionally, a revocable living trust can be updated as your circumstances change, providing flexibility in your estate plans. It can also assist in managing your assets if you become incapacitated, ensuring your financial decisions are handled according to your wishes.

8. Talk to your family

You’ll want to let your loved ones know where you keep all of your estate planning documents. And make sure everyone knows who you’ve named as your agents entrusted to make decisions for you.

You might consider providing your healthcare agent electronic copies of your healthcare power of attorney, HIPAA authorization and medical directives. In the event your agent needs to make healthcare decisions on your behalf, they’ll need to show proof of their authority to act.

You may also want to create an inventory of important digital assets, such as email accounts, cloud storage, cryptocurrency holdings, subscription services and social media accounts. Document how trusted individuals can address them if needed.

Sharing the location of important documents like your estate planning documents and life insurance policies helps your family locate them when needed. Clear communication can prevent confusion during the estate administration process and help ensure that your wishes are followed.

When is the best time to start estate planning?

There’s no better time than now. If you’re not sure where to start on your estate planning checklist, speak with a financial advisor. They can help you understand what may be needed for your individual situation and portfolio of assets.

For personalized guidance always consult an  experienced estate planning attorney who can then provide legal advice tailored to your unique circumstances, including potential tax implications, guiding you through the estate planning process and drafting essential documents. Collaborating closely with a financial advisor ensures that all aspects of your financial and estate planning are aligned, from managing your retirement accounts to setting up a revocable trust, if appropriate.

And remember, once you have an estate plan in place, be sure to review it every 3-5 years and whenever you experience a major life event. That way, your estate planning evolves with you and your overall financial plan.