No one likes thinking about death — especially their own. But creating an estate plan, a set of documents that details what will happen to all of your assets when you pass away, provides your heirs guidance on how to follow your final wishes after you're gone.
Despite this, the process of how to start estate planning can feel overwhelming. That may be why only four in 10 Americans have an estate plan in place, according to a recent survey by caring.com. Opens in new window
Creating an estate plan is simply a matter of breaking it down into its component parts. Here are seven components to consider and how to get started:
1. A will
Your will is a legal document that lists how you would like any assets distributed. If you have children, you will also name who will care for them if both of their parents have passed away.
First step: Use an online service to create your will or work with a lawyer if you have a more complicated estate.
2. Health care directives and a health care proxy
Health care directives are a set of documents that convey how you would like to handle a medical crisis if you're unable to communicate. You may also name a health care proxy, or someone you entrust to make medical decisions on your behalf.
First step: Call your Area Agency on Aging to get the forms necessary for your state, or hire a lawyer.
3. Financial power of attorney
Similar to a health care proxy, financial power of attorney gives someone the authority to make financial decisions on your behalf if you're unable to do so. Your power of attorney can pay your bills while you're in the hospital or make larger decisions such as managing your investments or selling real estate to help pay for medical care.
First step: Think about who you'd like to appoint, then hire a lawyer or use an online legal service to create the documents.