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Get Started With Your Estate Plan

Christine Benz

Christine Benz: Ask people what's holding them back from creating an estate plan, and you might get answers like this.

Woman on the Street 1: I do think an estate plan is important for guardianship and making sure it's clear who is going to get your assets. But like a lot of things, when you can't answer all the questions, you just put if off, and that's what we've done.

Man on the Street: No, I do not have an estate plan, and I'm entirely unaware of what that might be.

Woman on the Street 2: I used to have a will, but I don't know that it's been updated in years.

Benz: But many financial planners and estate planning attorneys will tell you just how important having an estate plan really is.

Jill Metz: It's important for you to do an estate plan, because you have the control. If you don't do an estate plan, other people, meaning the state, are going to make decisions for you, and the people that you love are not going to receive all of your estate, or maybe none of the estate, if you don't do a plan.

Benz: But do you even get started with an estate plan? The first step is to find a qualified attorney. Start by asking friends and colleagues for referrals. It's best to seek referrals from individuals whose situations are similar to your own, especially if your situation is somewhat unique. The website for the American College of Trust and Estate Counsel, a non-profit organization, allows you to search for highly qualified estate planning attorneys in your area.

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Next you'll want to take stock of your assets. Before you meet with your attorney, spend some time listing your assets and their value. That means your investment accounts, life insurance, personal assets such as your home, and your share of any businesses that you own. Also list any debts outstanding. Your attorney will likely have a worksheet to help you through this process.

Another key aspect of the estate planning process is identifying key individuals to carry out your wishes once you're gone. That means thinking of people to serve as your executor, powers of attorney, and guardians if you have minor children.

When you meet with your estate planning attorney, he or she will make recommendations about your plan and which documents you'll need. At a minimum, however, you should ask your attorney to draft the following:

A last will and testament: This is a legal document that tells everyone, including your heirs, how you would like your assets distributed after you're gone.

A living will: This document tells your loved ones and your health-care providers how you would like to be cared for if you should become terminally ill.

Medical power of attorney: This gives an individual the power to make health-care decisions on your behalf if you're unable to do so on your own.

A durable, or financial, power of attorney: This is a document that gives an individual the power to make financial decisions and execute financial transactions on your behalf, if you should become unable to do so.

Last, but not least, plan to keep your estate plan current. One of the biggest estate planning pitfalls is creating an estate plan, and then not keeping it up to date as your life situation changes.

Metz: Well, it's a good idea, for you at least, to look at your documents every five years or so. So pick a tax time or when you're going through your documents and take a look at them, and make sure that the people that you've appointed to be the people in charge are still people in your lives and still how you want. But you probably should talk to a lawyer somewhere around that five to seven years, also. The law changes frequently in this area. For circumstances, if you inherit, you divorce, you have children--you must come back and talk to your planner if you have children; it changes really the whole picture. So those are the kinds of things that you want to look at.

Benz: Your estate plan might not be the most glamorous or exciting thing that you do, but it could be one of the most important. For Morningstar, I'm Christine Benz, and thank you for watching.