Estate Planning in 2023: Do You Have These Documents Prepared?

Estate planning is an often complex financial process that nearly all investors should consider. It includes reviewing legal and tax implications, investment strategies and personal questions to ensure your estate is set up efficiently. 

As we ring in 2023, let’s look at some of the most important estate planning documents you should have prepared. 

Wills & Trusts

When you think about considering estate planning in 2023, one of the most important documents to consider is your will or trust. A will is a document that spells out your wishes regarding the distribution of your assets and care of any dependents if needed. A trust is a tax-advantaged way to arrange ownership of your assets and allows a third party to hold these assets on behalf of a beneficiary.

Both of these documents are usually part of a well-crafted estate plan because they have different focuses. By preparing these important documents, you can help protect your legacy and make the transition of assets easier when you are gone.

There are also two subsets to these documents: living trusts and living wills. 

What is a Living Trust?

A living trust is a legal document that places your assets in a trust while you are alive and also designates where these assets will go upon your death. Some investors choose to also implement a living trust into their estate planning strategy because it is revocable (meaning that it can be changed), and it may allow your estate to bypass probate, which can be a long and costly process. 

What is a Living Will?

You can also set up a living will, which is a directive to physicians that explains your end-of-life medical care preferences. If you are unable to communicate, a living will helps doctors and family members make decisions about your care based on what you would prefer (e.g., CPR, mechanical ventilation, tube feeding, organ donation).

In your living will, you may also specify a healthcare power of attorney, which is an agent who can make important healthcare decisions on your behalf.

Beneficiary Designations

A will or trust explains how you would like your assets distributed among beneficiaries, so it’s also important to update your beneficiaries as you build your estate plan. You should have a contingent beneficiary stated on all insurance and retirement accounts, as well as contingent beneficiaries stated in your will or trust. The new year is a great time to review your beneficiaries as things can change (e.g. marriage or divorce, kids and grandkids, new in-laws, etc.) and having an outdated estate plan can be a recipe for disaster. 

If no beneficiary is stated, your estate may end up in the hands of the court, which can be an impersonal way to handle your assets because a judge has no familiarity with your wishes. 

Power of Attorney

Power of attorney (POA) is given to the agent or person you designate to act on your behalf and oversee your will if you are unable to do so. It’s important to designate POA because if you don’t, the court may decide how your will and assets should be managed. 

You don’t have to give POA to a family member, either. You can choose a trusted friend or financial advisor to act as the agent of your will, especially if they have a strong financial and estate planning background.

Letter of Intent

A letter of intent might cover other details that aren’t included in a will, such as funeral arrangements or a decision for a particular asset. Unlike a will, most letters of intent aren’t legal documents, but they provide supplemental information for your estate and the more information you have for your beneficiaries, the better. A letter of intent can help supplement gaps in a will and answer questions your beneficiaries or probate court might have. 

These are just a few of the important documents you should consider adding to your estate planning strategy in 2023. Talk with your financial advisor about everything you need to know when getting your estate in order. 

 Material discussed is meant to provide general information and it is not to be construed as specific advice. United Planners and its representatives do not offer tax or legal services.