Secure Your Legacy with These 4 Essential Estate Documents

Estate planning isn’t just for the wealthy - it’s for anyone who wants to protect their loved ones and ensure their wishes are honored. Whether you're just starting out or revisiting your plan, understanding the core documents that make up a solid estate plan can save your family time, money, and stress. Let’s break down the essentials that every adult should have in place.

Everyone who owns assets has an estate

No matter where you are in life, you will need to plan for what happens to that estate when you’re no longer around to control and use it. Attorneys and financial advisors often recommend that clients protect their assets by establishing an estate plan. But what constitutes a complete estate plan? Why are these documents important?

Let’s look at four documents that should be a part of every estate plan: a will, a revocable trust, an advance health care directive and a power of attorney.

Will

A will is the document everyone thinks of first when they are contemplating estate planning. A will is a legal document that states your final wishes, and becomes effective at your death. Wills are used to leave detailed instructions about what should happen to your assets after your death and how your final wishes are carried out. This includes:

• Who will receive your assets (beneficiaries)
• How beneficiaries will receive them (outright or in trust)
• When they will receive them (either immediately or over time)
• Who will be executor of your estate, legally responsible to carry out the terms of your Will
• Who will be guardian (or guardians) to care for your children should both parents pass away before the children reach the age of majority.

Dying intestate, or without a will, results in your assets being divided based on predetermined rules set by your state of residency. This reduces the amount of control you have on the terms of distribution and may result in assets being inherited by parties other than those you would have wanted.

Ultimately, your will has to go through probate, a court-supervised legal process of validating your Will and transferring your assets to the beneficiaries of the Estate. Probate includes inventorying and and valuing  your assets and paying any debts or taxes for which you are responsible. Probate can be expensive and time-consuming, but you can reduce time and expense by establishing together a well-written will prior to your passing.

A well-written will minimizes the costs, time commitment and impact of the court-supervised probate process.

Revocable trust

A revocable trust (or “living trust”) is an alternative route to a will for distributing your assets following your death. Benefits of living trusts include avoiding the time, expense and public-nature of the probate process. Probate records are public and include information about you, the identification of your heirs, the composition and value of your assets, and any legal actions that occurred in connection with your estate. The terms and assets of a revocable trust, however, are confidential and only available to those parties with a legal interest in the trust.

Unlike wills, which take effect only on death, revocable trusts are effective immediately when signed and funded. Additionally, a revocable trust:

• Saves you the court fees and administrative burdens of the probate process, so long as the revocable trust is funded
• Allows you, the settlor, to control the property in the revocable trust, as well as the terms of the revocable trust
• Offers continuity of management if you become disabled, avoiding total reliance on durable powers of attorney
• Distributes property after your death, either outright or to be held in trust for a period of time
• Offers privacy for you and your loved ones
• Is reasonably easy to create, maintain and amend as circumstances dictate
• Has no adverse lifetime gift or income tax consequences

Setting up a revocable trust requires careful planning and specific legal documents

The trust agreement, sometimes referred to as a declaration of trust, outlines the terms of the trust, including the designation of the trustee, successor trustee, beneficiaries, and the provisions for managing and distributing assets. The trust agreement must be signed and in most states notarized to be legally binding. For the purposes of the revocable trust to be fulfilled, ownership of your assets must be transferred to the trust. Therefore, in addition to the trust agreement, you'll need  deeds or other transfer documents such as bank account change forms or brokerage transfer forms to move assets into the trust Consulting with an estate planning attorney or legal professional is advisable to ensure that all documents are properly drafted, conform to reflect your specific wishes and comply with your state's laws.

A revocable trust with a pour-over will

One additional planning option involves wills  established to work in coordination with a revocable trust established during your lifetime. This type of will is called a pour-over will.  A pour-over will directs that any of your property not in the name of the revocable trust be distributed to the trustee of the revocable trust.

Having a revocable trust does not render a will obsolete. Wills are necessary, even if only to serve as a backstop to assets held outside of your trust. Wills create an extra level of protection in the event you did not transfer all your assets to your revocable trust during your lifetime, and are necessary to name guardians for any minor children.

Advance health care directive

An advance health care directive is a legal document that outlines how you want your medical decision to be made, in the event you are not able to make or communicate your decisions yourself.

This scenario may be difficult to think about, but it’s an important protective measure. Your agent has the power to consent or refuse consent to medical procedures, consult with doctors regarding your health and make a broad range of health care decisions for you. In most cases, your health care agent is your spouse first, then a close family member or very trusted friend who is not afraid to make difficult, life-or-death decisions. Lastly, advance health care directives typically include a HIPAA form, which addresses the use and disclosure of your health information.

An advanced healthcare only applies to healthcare decisions and does not impact financial matters.

Power of attorney for finances

A durable power of attorney for finances is a legal document that grants a designated agent the authority to manage your financial affairs  and make financial decisions on your behalf, outside of your revocable trust. This includes responsibilities such as:

• Overseeing retirement account assets
• Signing checks
• Filing tax returns
• Making financial gifts
• Handling health insurance coverage

If certain real property or investments are not included in the revocable trust, the agent can also manage these assets, and may even transfer them to the trustee of the revocable trust, consolidating financial management.

This arrangement allows for seamless financial oversight, especially when the same individual serves as the successor trustee, executor and financial agent. By clearly defining these roles and responsibilities, a durable power of attorney for finances ensures that your financial matters are handled according to your wishes, even if you become incapacitated or are otherwise unable to manage them yourself.

Additional documents

Inventory of assets and professional contact list

Creating an accurate inventory of your assets is a crucial step in the estate planning process. This inventory should encompass a detailed list of all your personal assets, including bank accounts, stocks, life insurance, real estate, along with corresponding account numbers, passwords, and physical locations. By providing a clear road map of your financial landscape, this list aids your spouse, heirs, and personal representatives in the eventual administration of your estate. Additionally, it's advisable to include contact information for any professionals you collaborate with, such as your planning attorney, CPA, financial advisor, business partners, and lenders. This information ensures that these essential contacts are readily accessible in an emergency.

Together, an asset inventory and professional contact list form a comprehensive guide to your estate, simplifying management and providing peace of mind for both you and your loved ones. The inventory of assets, your contact list of professionals and your estate planning documents should be updated periodically and stored in a secure location. Keep a copy in a safe deposit box or an in-house storage system, as well as an electronic copy. Also provide a copy to the people named in the documents so they can act on your behalf, when or if required. While this process is time-consuming, it will make many aspects of your estate easier and more successful.

An accurate asset inventory list provides a clear road map for your spouse, heirs and personal representatives.

The importance of estate planning documents

Whether it's substantial wealth or modest assets, every individual holds an estate. Planning for the future of that estate is essential. Creating legal documents such as a pour-over will and a revocable trust can streamline the management of your estate and alleviate the stress of the probate process. These tools foster family harmony by minimizing conflicts and ensuring a swift and orderly transfer of assets. Without proper planning, including a power of attorney and an advance health care directive, decisions about your care and assets could fall to a court-appointed individual if you become incapacitated. This person may not align with your wishes, which could lead to undesirable outcomes. Establishing a revocable trust allows a trustee, whom you choose, to manage assets within the trust.

A power of attorney empowers an agent to act on your behalf for matters outside the trust, and a medical directive authorizes an agent to make health-related decisions if you are unable to do so. These documents collectively safeguard against the lengthy and expensive process of conservatorship and probate. Together, these planning tools offer a comprehensive approach to securing your legacy and ensuring that your wishes are carried out in a manner that reflects your values and goals.

Estate planning tools, such as a pour-over will, revocable trust, power of attorney, and advance health care directive, , organize and protect your assets.

Summary

Estate planning should be a top priority. With the right documents in place, you can protect everything from the distribution of assets upon your death to provisions for incapacity. Through the strategic use of tools like a pour-over will, revocable trust, power of attorney, and advance health care directive, you can ensure a streamlined and conflict-free management of your estate, protecting your wishes and providing assurance to you and your loved ones.

Estate planning should be a top priority.

Navigating the estate planning process?

Work with our team at Comerica. Our advisors have decades of experience helping clients from all income levels protect their family and their assets. Contact your Comerica Relationship Manager or request to speak with a Comerica Professional today.