Estate Planning: The Basics

  • Everyone needs an estate plan – not just the wealthy.
  • There are five essential estate planning documents.
  • An estate planning attorney can help draw up the necessary documents.

Estate planning is about control

An infographic that asks Why have an estate plan? Control over decisions.

When estate planning makes the news, it’s often because someone famous has passed away. Stories then crop up about what a good, bad, or unusual job of estate planning he or she did.

Unfortunately, associating estate planning with famous people tends to feed the myth it’s just for the wealthy. In fact, estate planning is really for everyone.

Even if you’re not well-to-do, consider all the assets you own: bank accounts, investment accounts, 401(k) or 403(b) plan accounts, your house, cars, jewelry, family heirlooms, etc. Your estate includes all this and more. Your estate plan can determine what happens to all these assets when you die.

A good estate plan will also focus on taking care of you as you age or if you become ill or incapacitated. Whether you’re wealthy or not has little to do with it.

“Developing an estate plan is about taking control. You are controlling how assets are managed and distributed, along with who will handle these tasks when you are unable to do so,” says Deborah Lauer, Vice President and Wealth Planning Strategist for Wells Fargo Advisors in St. Louis.

More than just assets

Five estate planning documents

Asset management is only part of the picture. For parents, having a will is the only way to name a guardian to raise your minor children if both parents die.

A well-designed plan will also include documents designating who can communicate with health care professionals and make decisions about what type of care you should receive if something happens and you can’t make those decisions yourself.

Ultimately, if you don’t make your own plan, your family may be left scrambling at an already difficult time. Someone will have to ask a court to decide who will act as guardian for your minor children (or maybe even for you), and state law will determine what becomes of your assets. Bottom line: If you don’t decide, someone will decide for you.

Remember, establishing a plan is only the beginning. Significant life events are likely to call for changes to your plan. Lauer explains, “It’s important to regularly review your plan to ensure it continues to meet your needs. You need to consider whether your plan documents, asset titling, and beneficiary designations allow your assets to be distributed according to your wishes.”

It’s important to regularly review your plan to ensure it continues to meet your needs.

Five essential documents

Your situation’s complexity will determine which documents your plan requires; however, these five are often essential:

A will provides instructions for distributing your assets to your beneficiaries when you die. In it, you name a personal representative (executor) to pay final expenses and taxes and distribute your remaining assets.

A durable power of attorney lets you give a trusted individual management power over your assets if you can’t manage them yourself. This document is effective only while you’re alive.

A health care power of attorney lets you choose someone to make medical decisions for you if something happens and you can’t make them yourself.

A living will expresses your intentions regarding the use of life-sustaining measures if you are terminally ill. It doesn’t give anyone the authority to speak for you.

By transferring assets to a revocable living trust, you can provide for continued management of your financial affairs during your lifetime, after your death, and even for generations to come.

An infographic that says Get help with putting estate planning pieces together

Turn to a team of professionals

The notion of making the decisions involved with estate planning may seem intimidating at first, but it doesn’t have to be.

The key is to rely on a team of trusted professionals, including a financial advisor, estate planning attorney, and accountant. They know the questions to ask and can help you avoid potential pitfalls.

If you currently don’t have relationships with these individuals, a financial advisor is a good place to start. He or she can discuss his or her role in the planning process and can refer you to an estate planning attorney who can work with you to draw up the necessary documents.

Next steps

  • Talk with a Financial Advisor about your estate planning goals.
  • He or she can provide referrals to local estate planning attorneys.

Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors.

Wells Fargo Advisors and its affiliate do not provide tax or legal advice. Please consult with your tax and/or legal advisors before taking any action that may have tax and/or legal consequences.

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