Have you ever left for the airport with just enough time to catch your scheduled flight, only to get stuck in traffic? Or packed for a beach vacation, only to be welcomed by a torrential downpour? It’s examples like these that give credence to the value of planning ahead and leaving room for the unexpected. Being similarly prepared for out-of-your control circumstances is exactly why it’s a good idea to consider laying out your estate plan now—and becoming familiar with the basic estate planning components is the first step for doing exactly that.
Experts in This Article
Timothy A. Nordgren is an estate planner with more than 25 years of experience.
“Estate planning is the process of getting necessary legal documents in place to address the possibility of incapacity or, eventually, the reality of death,” says estate planner of 25 years Timothy A. Nordgren. “Ultimately, it’s about peace of mind for the person who creates the estate plan as well as their loved ones.” And though you may not want to pay mind to your own mortality (or that of those close to you), Nordgren says doing so is nonetheless vital for all folks because having an estate plan in place makes unexpected circumstances a little easier to deal with should they arise.
A healthy estate plan contains three main components: a will or living trust, powers of attorney, and confidential information waivers. These legally binding documents (more on each below) designate what you want done should anything happen to you, as well as whom you trust to make decisions on your behalf should you be unable to make them on your own.
Having an estate plan makes unexpected circumstances a little easier to deal with.
To set yours up, you’ll want to chat with a professional—which you can find through a number of channels including the American College of Trust and Estates Counsel or Martindale-Hubbel—which is a global network of more than one million lawyers—or through word of mouth. (Read: Do you know someone who has an estate planner? Ask them for the contact info)
Once you set it up, plan to revisit your estate plan every three to five years, or in the event of a major life event (like moving to a new state or the death of a family member), because you may need to make some modifications. To learn more about the three components of estate planning, per Nordgren, keep reading.
The 3 components of estate planning (aka preparing for life’s what-ifs)
1. A will or trust
A will and trust are “both documents that direct how assets are distributed upon death,” says Nordgren. In the event that something happens to you, this component of estate planning makes your wishes legally known and ensures that they’re carried out the way you would have wanted them to be.
A main difference between a will and a trust is that when a person has a will, says Nordgren, their asset distribution goes through a court-supervised process known as probate, which leads to public record. Assets listed in a living trust, on the other hand, don’t go through the probate process—meaning the details of your assets are more so kept private. Specific details pertaining to both trusts and wills also slightly differ from state to state, so be sure to speak with an estate planner to figure out which option best suits your situation (and update it should you ever move to a new state).
2. Power of attorney
Power of attorney gives one or more people the power to act on your behalf in specified ways—like in financial or medical functions—in the event you are unable or unfit to make certain choices for yourself. This can include designating someone to take care of your financial matters—like selling your house or car, for example. You can also select a more limited form of power of attorney that specifies your agent can only act on your behalf in instances of your choosing.
Regarding financial power of attorney, Nordgren says the importance of this is if you are incapacitated, you will still need to tend to your finances and pay taxes. As you designate an agent to take care of your financial well-being, you should also pick a health care power of attorney to make medical decisions on your behalf. These can be the same or separate people, depending on how you spell out your specific estate plan.
If you don’t have financial or health care powers of attorney in place, Nordgren says that those decisions will be made by a judge. That said, different states have different laws surrounding power of attorney. So, get clear on your state’s guidelines and check in with your estate planner about how often you should be revisiting your document.
3. Provide waivers for confidential information
“Sometimes, even if you have the other documents in place, the people you’ve designated are denied access to health-care information or [other] digital information unless there’s a specific waiver in place,” says Norgdren. “The traditional documents [like a trust, will, and power of attorney] are very, very important to have, obviously, but we want to now go one step further and make sure that the key people have access to information that is electronically stored.” That’s where waivers come in as one of the key components of estate planning.
With certain waivers, you can grant people access to protected information, like medical records and financial records. Guidelines regarding this component vary from state to state as well as from doctor’s office to banking institutions, so check with your attorney to see which forms you need to fill out.
Ultimately, you may not be able to control flight-missing traffic or vacation-compromising weather. But, by making sure your estate plan has the components from above set, you certainly can prepare for at least some of life’s curveballs.
Oh hi! You look like someone who loves free workouts, discounts for cutting-edge wellness brands, and exclusive Well+Good content. Sign up for Well+, our online community of wellness insiders, and unlock your rewards instantly.
Sign Up for Our Daily Newsletter
Get all the latest in wellness, trends, food, fitness, beauty, and more delivered right to your inbox.
Got it, you've been added to our email list.
