Home » Insight » Investor Education » Essentials of Estate Planning
Essentials of Estate Planning

While at college three hours away, I received a packet of papers delivered to me on my 18th birthday. Inside that packet was a power of attorney, living will, and a will for me to sign. The instructions told me to go to my bank branch, sign the documents, have a notary witness and notarize them, and mail them back with the paid envelope.  Sounds like a weird birthday gift. Well, when your father is an estate planning lawyer, you know it comes from the heart. He knew, with me turning 18 and living three hours away, that these essentials of estate planning were necessary if the worst happened. 

 What happens if you don’t have these documents in place? You could be like one of the Secret Dividend Millionaires, whose estates were tied up in court since they did not take the time or effort to plan. In any case let’s now take a look at some of the essentials of estate planning.

 *Please note that there is never a “one size fits all” plan for estate planning. Laws and taxes vary by state; please involve your team of advisors (estate planners, tax advisors, financial advisors, and insurance providers) for information specific to your situation. 

Essentials of Estate Planning
Essentials of Estate Planning

Affiliate

First National Bank is an over 150-year-old award winning bank. The bank has convenient branches in Ohio, Pennsylvania, Maryland, West Virginia, North Carolina, South Carolina, Virginia and Washington, D.C with 100s of ATMs. First National offers multiple types of checking accounts suitable for almost all consumers.

  • Online and mobile banking with Zelle®
  • Free debit card with Card Guard
  • eStyle Checking with no check writing and cannot be overdrawn
  • Some accounts have no minimum balance
  • Some accounts earn interest above a certain dollar value

For convenient checking accounts, I recommend First National Bank.


 Last Will and Testament 

 A last will and testament, simply put, is a planning document that explains what you want to happen with your property at the time of your death. It will also name your choice of executor (or personal representative) who will be in charge of getting your estate through probate and distributed. 

 Your last will and testament is usually broken down into four parts. The first part deals with how you would like your final bills to be paid; the second deals with settling the estate and how any estate or inheritance taxes will be paid. The third part involves naming the executor and detailing what powers they have. If you have minor children, this part will also describe who will be responsible for raising them (the guardian/conservator). And the last part will cover who gets the balance of your estate, how they will receive it, and when. 

 What Happens if You Die Without a Will? 

While it is a common rumor that if you die without a will, your assets go to the state or a charity. This is just not the case. Each state has intestacy laws to handle the situation if someone were to die without a will. While the laws are different for each state, they all tend to follow the same pattern. Your possessions will go to the closest living relative, starting with a spouse and children, then parents, brothers or sisters, and then nieces and nephews. 

 What Will You Avoid by Having a Will?

 If you have a will set up, you get to decide who will receive what from your estate, when they receive it and how (outright or in trust) and possibly minimize your estate taxes. You will be able to make gifts and donations and allow your legacy to live on through your personal values and interests. You can avoid more significant legal challenges like having all or part of your estate go to someone you did not intend to receive assets or money from your estate.

 Power of Attorney and Living Will

 The second set of essential documents for estate planning are a power of attorney and living will. A power of attorney is a document that allows you to name a person or organization (your agent) to manage your property and financial affairs if you are incapacitated and can no longer make decisions for yourself. Similarly, a living will allows you to appoint someone to make healthcare decisions for you when you cannot make decisions. You can name one person to handle all affairs or split up the responsibility among multiple people. A power of attorney or living will ends for any of the following reasons: you pass away, you revoke the power of attorney or living will, a court determines it is not valid, or if the named agent can no longer carry out the outlined responsibilities. Additionally, suppose you make your spouse your agent, and you legally divorce. In that case, they will no longer be allowed to act on your behalf. 

 What Happens if You Don’t Have Power of Attorney or Living Will?

 If you become incapacitated without a power of attorney or living will in place, the court will handle it similarly to if you pass without a will. The court will step in and determine the case and appoint someone to act as your agent. This person will be called a conservator in some states or a guardian in other states. This can be a lengthy, tiresome, and sometimes costly process. It is likely much simpler to have a power of attorney or living will in place.

 What Do You Avoid by Having a Power of Attorney and Living Will?

 If you have a power of attorney and living will in place, the most significant thing will be that you have a say over who can make medical and financial decisions for you in case you are incapacitated. You can name someone you trust completely. It also prevents any questions or doubts about what you would want in case of incapacitation. Would you like your business to be run by someone or sold off? Would you want to be kept alive as long as possible, or would you like to be taken off life support? Having all of these directives written down will help your family and friends avoid undue stress if you become incapacitated. 

 Living Trust

 The final document for estate planning essential is a living trust. A living trust, like a will, handles the transfer of property after your death. A trust differs from a will because a living trust passes property outside of probate court. Your property, upon your death, will be transferred directly to your named beneficiaries, provided your property has been transferred into the living trust during your lifetime. While trusts tend to be more expensive to set up and maintain, they are an effective way to control the passing of your estate after your death. In addition to a living trust, you will likely sign a “pour-over will,” which says that any assets that were not transferred into the living trust during your lifetime will be transferred into the living trust when you die. This way, all your assets will be distributed in accordance with the living trust. 

 What Happens if You Don’t Have a Living Trust?

 Without a living trust, your estate would go into probate, just like if you didn’t have a will. Any asset that you owned would not be available until it went through the court system. If your assets do go through probate, you are not afforded any privacy. The distribution of your assets would be a matter of public records so someone can go and look at how things were distributed.

 What Do You Avoid by Having a Living Trust?

 As mentioned above, having a living trust, while more work and possibly money to set up and maintain, is going to save your family and beneficiaries down the road. A trust will avoid probate court, therefore keeping distribution confidential. A living trust will also help you in the event you become incapacitated. The person you name as successor trustee can step in and manage your financial affairs without the court’s intervention. 

Final Thoughts on Essentials of Estate Planning

Are these essential documents for estate planning required? Absolutely not! But looking at the reasons above, it is better to have something in place than leave it up to the courts and fate if you become incapacitated or pass without them. Furthermore, the closer you are to retirement you may be thinking about moving into safer investments. This is certainly a good time to think about the essential of estate planning. Take time to speak with your family and discuss what is best for all of you and consult legal representation to avoid mistakes and make sure everything is set up correctly.

Thanks for reading the Essentials of Estate Planning!

If you would like to read a related article by the same author, please read Estate Planning Deep Dive: Power of Attorney!

Author Bio: Jessica Strull, a freelance writer who works with leaders looking to drive employee engagement and increase customer satisfaction. She is passionate about bringing awareness to the working female perspective. Jessica holds a bachelor’s degree in Human Resource Management. When she’s not writing you can find her binging bad movies, reading great books, or hanging out at Walt Disney World. Find Jessica on jessicastrullwrites.com or LinkedIn.

Related Article on Dividend Power


Here are my recommendations:

If you are unsure on how to invest in dividend stocks or are just getting started with dividend investing. Take a look at my Review of the Simply Investing Report. I also provide a Review of the Simply Investing Course. Note that I am an affiliate of Simply Investing.

If you are interested in an excellent resource for DIY dividend growth investors. I suggest reading my Review of The Sure Dividend NewsletterNote that I am an affiliate of Sure Dividend.

If you want a leading investment research and portfolio management platform with all the fundamental metrics, screens, and analysis tools you need. Read my Review of Stock RoverNote that I am an affiliate of Stock Rover.

If you would like notifications as to when my new articles are published, please sign up for my free weekly e-mail. You will receive a free spreadsheet of the Dividend Kings! You will also join thousands of other readers each month!


*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.

Related Posts

6 thoughts on “Essentials of Estate Planning

  1. I have got a lot of new Information from your Page And really I like the style you wrote the article. Thank you very much for sharing a lot of new things on this page.

    Thank You So Much

  2. I found it especially interesting that you mentioned a living trust as a critical document for estate planning. My mother is getting older and we are trying to work out the best situation for her so she doesn’t have to worry about her will or her estate. We are hoping to find a reputable company that will be honest with us about the necessary documents for estate planning.

Leave a Reply