5 Key Documents for an Estate Plan

Photograph of a keyhole in a red painted door

Clients often ask what documents make up an estate plan, and what each document addresses. Listed below are some of the most common documents that help make up an estate plan.

1. Beneficiary Forms, TOD and POD Designation Forms
Beneficiary forms dictate who receives the assets in your 401(k)s, IRAs  and life insurance policies upon your death. Similar to a beneficiary designation, a payable on death (POD) form designates who should receive the money in your checking account upon your death, and a transfer on death (TOD) form indicates who should receive the holdings in your brokerage account. If used correctly, these designations can be used to avoid probate.

It’s important to keep these designations up to date, and not list a minor outright as a beneficiary of any of these assets. Additionally, you should keep in mind that beneficiary designations/POD/TOD trump any directives stated in your will. So, for example, if you forget that you’ve named your eldest child as the sole beneficiary on a life insurance policy and state in your will that you want the proceeds divided equally between your children, your eldest child will still receive all the insurance proceeds.

2. Durable Power of Attorney
A durable power of attorney names an agent to make financial decisions for you in the event that you become incapacitated, which may include paying bills and writing checks on your behalf. Durable power of attorneys may be made effective immediately or upon incapacity.

3. Health Care Power of Attorney (Living Will)
This document appoints an agent who may make medical decisions on your behalf in the event that you become incapacitated. The document also contains an advanced directive which details your decisions on life prolonging treatment.

4. Last Will and Testament

A will outlines how you want your assets distributed upon your death and who is named as guardian of your children who are minors. A will also appoints an executor who is responsible for paying all of your final bills from the estate funds and distributing all of your assets. Assets that pass according to a will must go through probate—which means your estate will have to report all assets, income and expenses to the court. Probate is public record and anyone can request a copy of your estate file from the court.

5. A Revocable Trust 
Similar to a will, a revocable trust details how you want your assets distributed upon your death and appoints a trustee who is responsible for distributing all trust assets. The biggest differences in the two documents are that trust assets do not have to go through probate and that a trust goes into effect immediately when you sign it. (Most clients serve as their own trustee during their lifetime and then appoint someone else to take over after at death.) For a trust to govern a specific asset, the account or property must be re-titled into the name of the trust.

All of these documents work together to provide a plan for you to manage your health care decisions, distribute your assets at death and make life’s transitions easier for you and your loved ones. If you would like to put an estate plan in place, please contact the Wills, Estates and Trusts team at Bell, Davis & Pitt for assistance.   

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