According to a 2021 Caring.com survey, only 44% of adults over 55 have estate planning documents. While the reasons for not having a will or trust vary, many respondents to the survey say they just haven't gotten around to it. Another 8% say they don't know how to set one up.
If that includes you, here is an estate planning checklist to help you get your affairs and finances in order.
Find an Estate Administrator
We'll cover the role of estate administrators and executors in the next section, but the first thing you should do when estate planning is find someone who can carry out your will.
This person's exact role will depend on the terms of your estate plan, but it should be someone you trust. It can be a family member, but because wills and estates are often emotionally-charged, sensitive issues, attorneys or financial planners are great choices.
Know the Five Elements of an Estate Plan
A robust estate plan goes beyond a last will and testament. Before you begin gathering documents, it's important to know the function of the five parts of an estate plan.
The primary function of a will is to name assets and assign who they go to. It also names an executor or the person who will carry out your will. This can be a lawyer, accountant, trust company, or a trusted friend or family member.
A trust is an agreement in which a trustor (the person setting up the trust) gives a trustee the right to hold ownership of assets for a third party. Known as beneficiaries, this third party is often younger relatives that your assets will eventually go to.
While there are numerous kinds of trusts, the two most versatile types for people with any amount of wealth are revocable and irrevocable trusts. In a revocable trust, you reserve the right to change the terms of a trust at any time. With an irrevocable trust, you move assets out of your name and cannot change the terms.
3. Power of Attorney
For seniors, power of attorney is one of the most vital factors of an estate plan. When you grant someone power of attorney, they can make important decisions about your estate if you become ill or incapacitated.
Power of attorney can be general, meaning the person with power of attorney can make decisions about any matter. It can also be specific, meaning a person only makes decisions on your behalf in a very limited capacity.
4. Medical or Health Care Directives
A medical directive outlines what kind of medical care you want in the event that you can't make those decisions yourself due to serious illness or incapacitation.
The first component of this is a living will — a document providing specific health care instructions. This might include do-not-resuscitate orders or hospice care directions.
The second part is a health care proxy, which gives someone the power to make medical decisions about you on your behalf.
5. Beneficiary Designations
When you establish beneficiary designations, they supersede what's in your will. These designations name who receives the assets of your retirement plan, life insurance policy, or other important financial benefits.
Make an Itemized Inventory
With the five cornerstones of an estate plan in mind, make an itemized inventory of every valuable item you own. This can include:
This will be a long list, but the more detailed it is, the better. You don't have to name who receives these items immediately, but if someone comes to mind first, put it on your list.
After tackling physical items, move on to non-physical assets such as 401(k) plans, IRAs, life insurance policies, and investments. Be very detailed and include account numbers, passwords, and anything else that grants beneficiaries access to these resources.
Assemble Debt Information
If you still owe money on mortgages, student loans, auto loans, or credit cards, make a list with account numbers. Also, list who or what companies own these debts. For credit cards, make note of which ones you actively use and which ones you don't.
Copy Everything at Least Three Times
For everything you do, make at least three copies and sign and date each one. Give the original to your attorney or estate administrator. Other copies can go to a spouse or be placed in a safety deposit box for your own records.
Get Important Documents Notarized for Probate
After establishing an estate plan, your will and other important documents must be notarized. Notarization is the process of making sure a document is authentic and unaltered. This is so it can go through the probate process.
After a person's death, their will must go through probate — the court-supervised process of paying off debts and carrying out your will. To go through probate, the court needs the original signed copy of your will.
Review Your Estate Plan Frequently
If you've set up your estate plan early, it should be reviewed at least every three to five years, because:
- Your family may grow or shrink
- Terms of financial or insurance policies may change
- Your wishes may change
- Assets may grow
Remember, an effective estate plan is very specific. For it to be carried out correctly, it needs to be updated to match your circumstances.
Research State and Local Laws
Laws and requirements vary by state, so research your state's will laws or consult an attorney. Every state has its own laws about inheritance taxes, spouses' and children's rights to inherit, and when families can avoid going through probate.
This is where a skilled estate administrator helps. Responsible family members may be competent enough to handle your affairs, but a trained and impartial attorney navigates and avoids problems before they come up.
Plan for Long-Term Senior Living or Medical Care
As seniors age, they may not be able to remain in their homes safely. Finding a suitable senior living community can alter estate planning significantly. To ease that stress, Friends Fellowship Community of Richmond, Indiana, offers a Life Care program that assures lifetime care for many residents. Through an endowment fund, we ensure life care residents continue to receive much-needed care when their assets run out through no fault of their own.
To find out more about our Life Care program and our wide continuum of care, contact FFC today.