Four Documents You'll Need as Part of Your Estate Plan

Here are some thoughts from the great personal finance book Grow Your Money!: 101 Easy Tips to Plan, Save, and Invest. They list four documents you'll need as part of your estate plan as follows:

• A will.
• A durable power of attorney.
• An advance (health-care) directive.
• Letter of instructions.

We've talked a lot about the first three, so I want to focus in on the last one (also because I'm in the process of putting one together.) Here's what they say should be included in a letter of instruction:

• A list of information you'll need to know in case of an emergency.

• Information on medical insurance plans, Social Security number, date of birth, names and phone numbers of doctors, accountants, and brokers; veteran discharge dates; marriage dates.

• Locations and information on life and disability insurance policies, the deed for the home, the car title, stocks and mutual funds, bank certificates, and pre-paid funeral receipts.

• A list of the contents of any safe deposit boxes.

• The location of the checkbook and ATM card.

I would add that you should include passwords for key accounts -- banks checking accounts, investment accounts, etc.

Also, this list sounds a lot like 12 Critical Things Your Family Needs to Know (FYI, if you had subscribed to my giveaway newsletter, you would have had the chance to win a copy of the book in September.) :-)

Comments

[Old Limey]

I don't see any mention of a Living Trust, this is particularly essential for a married couple.

[Jennifer]

I'd include in the letter of instruction information about pets and children. If someone else is raising your children, what do they need to know? Bed time, likes and dislikes, allergies, medical history, doctor, philosophies for the future such as paying for college or how you want them to be raised would be helpful to someone raising your kids.

I disagree that a living trust is "particularly essential" for a married couple. Whether or not a trust makes sense depends upon their tax situation, size of their estate, the State of residence, whether they own property out of state and family situation. Only a GOOD lawyer can make that determination. Too many people end up with attorneys who are essentially trust mills. They do nothing but create these trusts that are completely inappropriate (and sometimes they cause more problems that have to be undone) for the client. Trusts generally cost more money and time to establish and maintain. They are subject to many of the exact same administration issues that tie up an estate (final income and fiduciary taxes). They can be more efficient than a probate if done and maintained correctly, but the costs might outweigh the benefits for many people. You need to talk to your attorney about your personal situation before making the determination that a trust is right for you. And, if a trust is ALL your attorney talks about . . . walk away. Your attorney owes you a responsibility to discuss both a will and a trust (you'll need a will even if you have a trust as a safety net) and to help guide you to a decision between them based upon your personal situation.

[Old Limey]

Jennifer:
In my case, living in California, owning multiple real estate, and a very large investment portfolio, a living trust makes a huge difference in being able to avoid or minimize inheritance taxes. Without it, when the first spouse dies everything passes to the surviving spouse OK, but the inheritance tax exclusion for the deceased spouse is lost. I have used a very experienced and knowlegeable attorney to draw up our documents, certainly not one of the 'trust mill' attorneys that advertise in the newspaper all the time.