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KEY TAKEAWAYS

• Estate planning is not only for the wealthy—everybody can benefit from ensuring their assets and finances are properly taken care of after their death.


• Without the proper planning and documents, probate court may lead to unintended distribution of assets.


• Estate planning also involves giving permission to family members or an attorney to carry out your wishes if you become incapacitated while still alive.

Here is a list of items every estate plan should include:

• Will/trust
• Durable power of attorney
• Beneficiary designations
• Letter of intent
• Healthcare power of attorney
• Guardianship designations

In addition to these six documents and designations, a well-laid estate plan also should consider the purchase of insurance products such as long-term care insurance to cover old age, a lifetime annuity to generate some level of income until death, and life insurance to pass money to beneficiaries without the need for probate.

Does your estate plan measure up? Let's examine each item on this checklist to make sure you haven't left any decisions to chance.

1 Wills and Trusts
A will or a trust may sound complicated or expensive—something only rich people have. That is an incorrect assessment. A will or trust should be one of the main components of every estate plan, even if you don't have substantial assets. Wills ensure property is distributed according to an individual's wishes (if drafted according to state laws). Some trusts help limit estate taxes or legal challenges. However, simply having a will or trust isn't enough. The wording of the document is critically important.

2 Durable Power of Attorney
It's important to draft a durable power of attorney (POA), so an agent or a person you assign will act on your behalf when you are unable to do so yourself. Absent a power of attorney, a court may be left to decide what happens to your assets if you are found to be mentally incompetent, and the court's decision may not be what you wanted.

3 Beneficiary Designations
As noted earlier, a number of your possessions can pass to your heirs without being dictated in the will (e.g., 401(k) plan assets). This is why it is important to maintain a beneficiary—and a contingent beneficiary—on such an account. Insurance plans should contain a beneficiary and a contingent beneficiary as well because they might also pass outside of a will.

4 Letter of Intent
A letter of intent is simply a document left to your executor or a beneficiary. The purpose is to define what you want to be done with a particular asset after your death or incapacitation. Some letters of intent also provide funeral details or other special requests.

5 Healthcare Power of Attorney
A healthcare power of attorney (HCPA) designates another individual (typically a spouse or family member) to make important healthcare decisions on your behalf in the event of incapacity.

If you are considering executing such a document, you should pick someone you trust, who shares your views, and who would likely recommend a course of action you would agree with. After all, this person could literally have your life in his or her hands.

6 Guardianship Designations
While many wills or trusts incorporate this clause, some don't. If you have minor children or are considering having kids, picking a guardian is incredibly important and sometimes overlooked. Make sure the individual or couple you choose shares your views, is financially sound, and is genuinely willing to raise children. As with all designations, a backup or contingent guardian should be named as well.