How to Build a Complete Estate Plan

Most people get estate planning wrong.

We all know about the importance of having a will, yet a surprising amount of Americans either don't have one, have an out-of-date one, or don't understand how their will really works.

This article will clear up what an estate plan looks like, and how to implement one.

A will is a document containing your wishes for when you die. It's mainly used to pass assets to beneficiaries. They're an essential document for any estate plan. Even if you have a trust, you'll still need a pour-over will.

Wills go through probate. Probate is the process by which the court validates a will, and oversees the administration of the estate. Yes, your will goes through what can be a slow and costly court process. The process is also public, meaning your will is available to view by anyone, and can be contested by anyone.

Luckily, there are ways to avoid probate if you'd like to.

A trust is like a box that you can transfer assets to. The assets are managed according to a set of instructions that you create. Trusts are active while you're alive, and can remain active after you've passed.

Trusts are more expensive and complex than wills, but are worth considering for a number of benefits, avoiding probate chief among them. Assets in a trust can pass directly to your beneficiaries upon your death.

Trusts offer much greater control over distributions than wills. With a will, distributions only occur once. But with a trust, your assets can last longer. For example, "distribute $20,000 to each grandchild on their 18th birthday". If you're worried about family members blowing through your savings, this can be a great tool.

Pop quiz: If George is the beneficiary on my IRA, but my will states that Jane inherits my IRA, who does the IRA go to?

Answer: George. Beneficiaries at the account level supersede what's written in your will. Passing retirement, bank accounts, and life insurance policies this way allows assets to pass directly, avoiding probate.

Making sure your beneficiaries are in order for your accounts is a crucial piece of estate planning. Make sure they're updated and going to who you want them to.

Estate planning isn't just about what happens to your assets when you die. It's also about planning for the possibility of incapacitation.

What if you develop demensia, or get in an accident, or have a stroke that impedes your ability to communicate? Without a Durable Financial Power of Attorney, not even your family can manage your money in emergency situations where you're incapacitated.

A Durable Financial POA is someone you appoint to make financial decisions for you if you become incapacitated. They can withdraw emergency funds, pay your taxes, even manage your business.

A Healthcare Directive allows you to state your wishes for medical treatment, and ensure they'll be honored if you're incapacitated (often called a Living Will). A Durable Healthcare Power of Attorney is someone who you can appoint to make healthcare decisions on your behalf.

There are low-cost ways to create wills, healthcare directives, and power of attorney documents online. However, you'll have less input from a professional to make sure the job is done right. Trusts are almost never a good idea to do through these platforms, as they're just too delicate.

Going through an attorney is a great way to make sure your plan is sound and comprehensive, but this is typically the most costly option. The added costs for updating plans years down the line might disincentivize you from seeking out those necessary updates.

The service we recommend for our clients is Wealth.com, a leading digital estate planning platform available exclusively through licensed advisors. This is typically a more affordable solution than going through an attorney, and will get you a complete estate plan, all with professional guidance. Your documents are created and stored online, and updates are included in the service.