Most people think of a Last Will and Testament as the cornerstone document for an estate plan. While it will accomplish dividing your belongings among your heirs, estate planning generally requires much more than your wishes on a notarized piece of paper.

When an individual dies, the deceased’s will is reviewed by a probate court to determine its validity and appoint an executor who will pay any debts or taxes owed by the deceased. After debts are paid, the executor distributes assets according to the will. The downside to probate is that it can become a lengthy process.

Additionally, not all of your assets pass via your will. Some assets like real estate or certain types of bank accounts may be titled as joint tenants with right of survivorship, where two people jointly own the asset and have equal rights to it. In the event one of the account holders or property owners dies, the ownership is inherited by the surviving owner. Most often, this is used between spouses, so when one dies, the other inherits the property outside of probate.

Other assets like retirement accounts, insurance policies, or investment accounts often pass via beneficiary designation, which is also outside of probate. Investors should always review and discuss their beneficiary designations with both the estate planning attorney who prepares their will and their financial adviser to ensure that wishes are clear and work in concert with other estate planning documents.

While the will, jointly titled assets, and beneficiary designations are some of the important documents one should have in place for death, several other documents should be in place in the event you live in an incapacitated state.

Unfortunately, not dying can often create bigger problems for the surviving family. A durable power of attorney (also referred to as a financial power of attorney) authorizes someone to make financial decisions on your behalf should you be unable to do so. This means your bills can be paid, taxes can be filed, and assets can be sold, providing it is in the best interest of the principal’s behalf. While many people fear turning over control of their financial life to someone — no matter how trusted — rest assured, your named agent has a fiduciary obligation to manage your finances in your best interest.

Finally, you’ll want to look into a health care power of attorney, also known as an advanced directive for health care depending on your state of residence. An advanced directive for health care combines what used to be known as a living will and a health care power of attorney. What you may need often depends on your state’s laws. Essentially, these documents allow you to appoint someone to make medical decisions on your behalf when you are incapacitated and can express your decision to approve or decline medical care, even if you may die as a result of your choice.

These key estate planning documents are not do-it-yourself. It is highly recommended that most individuals consult an estate planning attorney to draft the documents. Families should also review their estate documents every few years to ensure they comply with current estate tax laws, state laws, and your wishes.

William G. Lako, Jr., CFP®, is an Executive in Residence at Kennesaw State University’s Coles College of Business and a principal at Henssler Financial and a co-host on Atlanta’s longest running, most respected financial talk radio show “Money Talks” airing Saturdays at 10 a.m. on AM 920 The Answer. Mr. Lako is a CERTIFIED FINANCIAL PLANNER™ professional.


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