5 Must-Have Estate Planning Documents

Estate planning is an essential task, particularly for high-net-worth families, that aims to secure your legacy, protect your assets, and make sure that your loved ones are cared for after you’re gone. Because estate planning can be a complicated and potentially expansive process, a number of estate planning documents may be required to convey your wishes, work to secure your family’s financial future, and provide a clear roadmap for the distribution of your assets. 

So, which documents are necessary for estate planning? While each individual’s plan may vary, there are a few essential documents that nearly everyone should have in place for their wishes to be carried out, including a will and testament, applicable trusts, power of attorney documents, and advanced directives.

In this article, the wealth managers from Avidian Wealth Solutions will lay out five essential estate planning documents high-net-worth families should have to cover their bases.

1. Will and testament

The most basic document associated with estate planning tools is the will and testament. A will is a legal document that outlines how your assets will be distributed after your passing. It also allows you to name an executor who will oversee the execution of your wishes. Having a valid, up-to-date will helps to ensure that your assets are distributed according to your wishes, rather than being subject to directives issued by state laws (aka. Intestacy Laws).

It’s important to periodically review and update your will as life changes such as marriage, divorce, births or deaths in the family, or changes in financial circumstances occur. Without a will in place, the distribution of your assets may not align with what you would have wanted.

If you are responsible for the estate planning for elderly parents, you’ll want to make sure they have a valid will in place as well to help avoid any potential family conflicts and plan for their assets to be distributed according to their wishes as family dynamics grow and evolve. Additionally, a basic will tends to start at a very low cost and is easy to set up.

2. Trusts

Trusts are commonly considered to be an estate planning essential, particularly for high-net-worth individuals. A trust is a legal entity that holds assets on behalf of the beneficiaries named by the grantor (the person who created the trust). 

There are several types of trusts available depending on your needs, including: 

• Revocable living trusts
• Irrevocable trusts
• Testamentary trusts 

Each type of trust has its own unique benefits and uses. For example, a revocable living trust can help avoid probate (the legal process of distributing assets after death) and provide more privacy for your estate.

Irrevocable trusts are typically used as an estate tax reduction strategy and can help protect your assets from creditors or lawsuits, while testamentary trusts are created through a will and are only active upon the grantor’s death.

Working with an experienced estate planning advisor can help you determine which type of trust is best suited for your particular situation, as well as help you when setting up a trust to protect assets.

Learn more about the cost of transferring property into a trust.

3. Power of attorney documents

These documents are pivotal for high-net-worth families, serving as a powerful legal tool in the estate planning process. Power of attorney documents designate an individual, typically a trusted family member or professional advisor, with the authority to make financial and legal decisions on your behalf. 

This capacity to promptly and effectively react to unexpected circumstances is crucial in preserving assets and maintaining the financial strategy of the estate. Moreover, it provides families with peace of mind knowing they’ve put proactive measures in place for unforeseen situations. With power of attorney, families can maintain control over their assets and ensure that their wealth is managed in accordance with their wishes, even in the event of incapacity.

There are two main types of power of attorney documents: durable and springing. A durable power of attorney goes into effect immediately upon signing, while a springing power of attorney only takes effect if a qualifying event takes place (i.e. incapacitation). You will also want to name a medical power of attorney or someone who can make healthcare decisions on your behalf if you are unable to do so.

4. Advanced directives

Advanced directives outline your medical preferences in the event that you are unable to communicate them yourself. Another tool to deploy is a health care proxy, where you name an individual that can make medical decisions on your behalf, in the event you cannot. These estate planning documents allow you to appoint a healthcare proxy and provide guidance for end-of-life care decisions. 

Creating advanced directives ensures that your wishes regarding life support, resuscitation measures, and other medical procedures are known and followed by your loved ones and medical professionals.

It’s important to regularly review these documents and update them as needed, especially if there have been any changes in your health or personal preferences.

5. Guardianship designations

Guardianship designations play a vital role in estate planning, particularly for high-net-worth families concerned with the preservation of multigenerational wealth. This legal instrument designates trusted individuals to assume the responsibility of care for minor children or other dependents in the event of the estate holder’s incapacity or death. 

Without a clear guardianship designation, the state may decide who will take over the guardianship roles, and their decision might not align with the family’s wishes. A thoughtful and well-considered guardianship plan makes sure that the care, education, and upbringing of children or dependents align with the family’s values and wishes. 

Moreover, it forms an essential part of a comprehensive estate plan focused on preserving and transferring multigenerational wealth. It allows for the seamless transition of stewardship, planning for assets to be managed in a manner consistent with the family’s long-term financial goals and values, thus fortifying the family’s legacy through generations.

What happens if you don’t have an estate plan upon death?

If you do not have a will and estate planning documents in place upon your death, your assets will be distributed according to the laws of intestacy in your state. In other words, your assets may not go to the people or causes you care about most. Not to mention that without a designated guardian, the court will determine who will take care of any minor children or dependents. This can lead to family disputes and potential challenges in managing assets left for minors.

Furthermore, without an estate plan in place, the court will appoint an executor to carry out the distribution of assets. This can be a lengthy process that is open to public records, potentially causing privacy concerns for high-net-worth families.

For these reasons, it’s important to proactively review your estate planning checklist with your advisor and create an estate plan that reflects your wishes, values, and long-term financial goals.

*Keep in mind that estate planning is an ongoing process and should be regularly reviewed and updated as needed. Changes in tax laws or personal circumstances may require adjustments to be made to your estate plan. 

Put plans in place that work to secure your legacy with Avidian Wealth Solutions

Estate planning documents play an integral role in wealth management, especially for high-net-worth families. They provide a legal framework that allows for the effective management, preservation, and transference of wealth. These documents are however just the beginning of estate planning, and countless other factors should be considered to help preserve your legacy for generations to come.

At Avidian Wealth Solutions, we understand the unique needs of high-net-worth families and have extensive experience in developing tailored estate planning solutions that address their specific concerns and goals. 

Whether you want to know how estate taxes in Texas will impact inherited assets or you’re looking for multi-disciplinary estate planning advisors in Houston, Austin, Sugar Land, or The Woodlands who can assist with comprehensive wealth management, our team is here to help. 

Schedule a conversation with us today to learn more about our estate planning services.

More Helpful Articles by Avidian: 

• Will AI Replace Financial Advisors?
• What is an Exit Plan (And Why Does it Matter?)
• What is the Baby Boomer Wealth Transfer?
• How is Passive Income Taxed?
• How Do Charitable Contributions Affect Taxes?

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