By Wesley Howard Triani
When we think about financial planning, we often focus on saving for retirement, managing investments, or sticking to a budget. However, equally critical—and frequently overlooked—are the financial documents that ensure your wishes are honored when you can no longer make decisions for yourself. Wills, trusts, and directives are the foundation of this preparation, offering clarity and peace of mind to you and your loved ones.
Over the decades, I’ve seen how these documents prevent confusion, avoid family conflicts, and safeguard legacies. Unfortunately, many people delay creating them because the process seems overwhelming. Let’s break it down, explain why these documents are essential, and discuss who you should consult to get them right.
Why a Will is Non-Negotiable
A will is one of the most fundamental financial documents you can have. It specifies how you want your assets distributed after you pass away. Without a will, the courts decide how to divide your assets based on state laws, which might not align with your wishes.
A will allows you to:
- Name beneficiaries for your assets, such as real estate, savings, or personal belongings.
- Appoint a guardian for minor children, if applicable.
- Specify who will serve as the executor of your estate.
Even if your financial situation is straightforward, having a will ensures your loved ones avoid unnecessary stress and delays. It’s a vital tool for providing clarity during a challenging time.
What is a Trust, and Do You Need One?
A trust complements a will and can manage your assets both during your lifetime and after. Trusts are especially valuable for those with significant assets or complex family dynamics.
Two common types of trusts include:
- Revocable Living Trusts: These allow you to retain control of your assets during your lifetime. They can be modified or revoked as your circumstances change. After you pass, the trust’s assets are distributed according to your instructions, avoiding probate (the legal process of validating a will).
- Irrevocable Trusts: These cannot be altered once established. They are often used for tax planning or to protect assets from creditors.
Trusts can help with:
- Avoiding probate, which can be time-consuming and costly.
- Providing for dependents, especially minors or individuals with special needs.
- Protecting assets from mismanagement by beneficiaries who may lack financial experience.
Whether you need a trust depends on your unique circumstances. Consulting with an experienced estate planning attorney is crucial to determine if this is the right tool for you.
The Importance of Directives
While wills and trusts address asset distribution, directives handle critical decisions about your medical care and finances if you become incapacitated. These documents include:
- Living Will: Specifies your wishes for medical treatment, such as life support or resuscitation, if you cannot communicate.
- Durable Power of Attorney (POA): Designates someone to make financial or legal decisions on your behalf while you are alive but unable to act.
- Healthcare Proxy: Appoints someone to make medical decisions if you’re incapacitated.
These documents ensure your preferences are respected and allow someone you trust to act on your behalf. Without them, your loved ones may face difficult decisions or even legal battles over who has the authority to act.
I recommend working with an estate planning attorney or elder law attorney to draft these directives. These professionals ensure your documents comply with state laws and are tailored to your needs.
Who Should You Consult?
Creating wills, trusts, and directives isn’t a one-size-fits-all process. It requires a collaborative approach involving various professionals:
- Estate Planning or Elder Law Attorney: Drafts legal documents like wills, trusts, and directives to ensure they meet your specific needs.
- Financial Planner: While I don’t draft these documents, I help identify the financial aspects that need to be addressed in your estate plan and coordinate with other professionals.
- Accountant or CPA: Tax implications play a significant role in estate planning. An accountant can help you understand potential tax burdens and recommend strategies to minimize them.
This teamwork ensures your financial life is fully aligned. For example, when I suggest setting up a trust, I always recommend consulting an estate planning attorney to execute it properly. Similarly, for strategies like maximizing 401(k) contributions, I encourage my clients to work with their CPA to confirm tax implications.
Updating Your Documents
Once your will, trust, and directives are in place, the work isn’t done. Life changes, and your financial documents should evolve with it. I recommend reviewing your estate plan regularly—every three to five years—or after major life events, such as:
- Marriage or divorce.
- Birth or adoption of a child.
- Significant changes in assets or income.
- Moving to a new state, as laws regarding wills and trusts vary.
Keeping your documents up to date ensures they reflect your current wishes and continue to protect your loved ones.
My Approach: Start with a Plan
When working with clients, I always start with a non-obligatory first meeting. This allows us to discuss your goals and review your current situation. At the end of this session, I provide an actionable plan and clear options tailored to your needs.
I also emphasize the importance of working with trusted professionals, such as insurance agents, tax advisors, and attorneys, to ensure all aspects of your financial and legal life are covered. By collaborating with specialists, we create a comprehensive strategy that safeguards your future.
Final Thoughts
Wills, trusts, and directives may not be the most exciting aspects of financial planning, but they are among the most critical. These documents provide clarity, prevent conflict, and protect your loved ones during difficult times.
If you haven’t addressed this part of your financial plan yet, I encourage you to start today and to contact an estate or elder law attorney to see if any of these directives or trust would be advantageous for you. The peace of mind that comes from knowing your wishes are in place is invaluable. And remember, you don’t have to navigate this process alone—reach out to trusted professionals who can guide you every step of the way. Your future self—and your family—will thank you.