The vast majority of Americans have not taken the time to craft an estate plan for retirement or the administration of their assets after they are gone. Studies show that 68 percent of community members do not have basic legal documents in place. This lack of direction typically gives rise to disagreements among heirs and unnecessary probate court litigation. Helping loved ones avoid these and other difficulties is one of the reasons why creating an estate plan is an act of kindness.

What is Estate Planning?

The term “estate plan” is something of a catch-all phrase that refers to a variety of legal documents that lay out your vision regarding how wealth, real estate, personal belongings, and other assets will be handled in the event you become incapacitated or pass away. A comprehensive estate plan can also help minimize tax liability and account for minor children as well as loved ones with special needs.

How to Create an Estate Plan

Although some people attempt to draw up their own Wills, the importance of working with an estate planning attorney cannot be understated. An actionable estate plan includes several key documents that are backed by the force of law. Minor mistakes can result in litigation and beneficiaries not receiving the assets you set aside for them in a timely manner. These are estate planning steps people near or in retirement would be well served to have in place.

Create an Inventory of Wealth and Assets

Make a list that includes all real estate, stocks, investments, 401(k), pensions, bank accounts, business endeavors, automobiles, expensive jewelry, artwork, and anything with significant value. It’s also a good idea to compile a list of items that have personal worth, such as family heirlooms and items loved ones are likely to cherish.

Compile a List of Outstanding Debts

After you pass, a designated person, known as an executor, will be tasked with administering the estate. Part of this trusted person’s duties involves paying off debts. Once all debts have been cleared, assets can be distributed to your beneficiaries. Compile a list of loans, liens, and anything the estate would need to pay before consulting an attorney.

Consider Your Estate Planning Wishes

It’s important to do some soul-searching before mapping out how you wish your assets to be distributed. You may discover there are aspects of your estate that lend themselves to relatively straightforward monetary distributions. However, things like family homes or prized possessions carry a sense of nostalgia and connection. Take time to make a list of assets and who receives them before scheduling an appointment with an estate planning attorney.

Building A Comprehensive Estate Plan

Depending on your portfolio and life situation, an estate planning attorney recommends crafting specific documents that provide protections while you are alive and for loved ones after you pass. These are common estate planning documents worth discussing with a professional.

Last Will and Testament

A Last Will and Testament is a fundamental document that outlines how your assets are to be distributed. It allows you to name beneficiaries, guardians for minor dependents, pets, funeral wishes, and things that are not necessarily financially related. It’s essential to select a trusted and responsible individual to serve as the executor. Your executor will be tasked with administering the Will.

Health Care Directive

A health care directive establishes the medical procedures you will allow and those you do not if you become incapacitated. This legally enforceable document authorizes a specific person — known as a proxy — to engage with doctors and medical professionals on your behalf. Also called a “living will” or “advance declaration,” it’s not uncommon to empower your proxy to indicate you do not want extraordinary resuscitation procedures used. The document can also outline preferred healthcare treatment and facilities if you become cognitively impaired.

Durable Power of Attorney

In the event you are rendered unable to manage your financial affairs, a durable power of attorney effectively appoints a trusted professional, friend, or family member to handle these endeavors. It can be as simple as paying bills and filing taxes to running a company. The scope of a durable power of attorney is largely determined by your financial portfolio and wishes.

Create a Trust

Placing assets in a trust can prove beneficial for a variety of reasons. A trustee can manage any real estate, business interests, investments, and bank accounts, among others, if you are rendered unable. Whatever you decide to place in trust passes directly to your beneficiaries. That means it does not require probate court review, saving your heirs time and money.

Consult with an Estate Planning Attorney

Just as every person and life situation differs, so are the intricate details of a comprehensive estate plan. Estate planning firms typically provide a no-cost initial consultation. Set an appointment and bring any pertinent documents and lists to the meeting. During the discussion, a legal professional can make general recommendations about which estate planning documents best serve your interests.