Essential financial documents for beyond a will.
Key takeaways:
- A will might not be enough. You could utilize five additional documents to protect your finances, health decisions and digital assets.
- State laws will decide for you. Without proper documentation, the government can determine how things are handled.
- Many people face unique challenges. Digital lifestyles, pet parents and unmarried partnerships require special consideration when creating a financial plan.
Landing your dream job, exploring new cities, and building meaningful relationships are exciting milestones in life. Financial planning can take a backseat, seen as something to handle in your twilight years. Like many people, you might be putting it off and leaving yourself vulnerable during unexpected life events. Even if you have a will, it might not be enough to fully protect your financial assets, health and wishes.
5 Essential financial documents:
Beyond a basic will, here are five important documents that can help protect you and your loved ones:
- Power of attorney (POA): This document names a trusted friend, relative or other designee to handle your finances on your behalf.
- Trusts: Unlike a will, which takes effect after you die, a trust can protect your assets right now. A trust can be used to allow an individual (a “trustee”) to manage some or all of your assets on your behalf. Unlike an individual acting under a POA, a trustee can manage the trust after you pass away, as the trust can continue after your death.
- Healthcare directive (living will): This document informs doctors and your family what medical treatments you want if you’re unable to speak for yourself.
- Life insurance: Check your life insurance policy at least annually to make sure the people you want are listed as beneficiaries. After big life changes, like marriage or divorce, update your beneficiaries so the people you choose get the support they need.
- Digital asset plan: This document includes a list of your online accounts and digital property along with instructions for who should manage them if you’re unable to do so. It can work with a POA or trust by covering important accounts and assets those documents may not mention, like email, digital files and cryptocurrency wallets.
These documents work together to protect your money, health decisions and digital footprint during life’s toughest moments. An estate planning attorney can assist in drafting certain documents based on your circumstances. You can work with independent agents or brokers to explore life insurance policy options.
An estate planning attorney link opens in a new window can assist in drafting certain documents based on your circumstances. You can work with independent agents or brokers link opens in a new window to explore life insurance policy options.
What makes modern financial planning different:
Today, people can face some financial challenges that previous generations didn’t, and these affect how they need to plan. For example:
- Student loan debt affects millions, making the power of attorney document especially important as it can direct how to manage payments if something unexpected happens.
- Today’s assets look different, too. Your estate might include cryptocurrency wallets, popular social media accounts, or online businesses that require special attention.
- Many people see pets as family members. You can name a caregiver and set aside money for their care in your plan.
- If you’re living with a romantic partner but not married, it’s crucial to name them in your will or trust. If you don’t, then they might not inherit anything.
Understanding these differences helps you create a financial plan that protects what matters most.
Financial planning checklist.
Get started today by following these steps:
- Gather your information. Collect financial account numbers, insurance policies, property documents and digital passwords. Keep them all in a safe place, and share access with someone you trust.
- Think about your wishes. Decide who should inherit your belongings, who will care for your pets or children, and who should make healthcare decisions if you can’t.
- Seek professional guidance. Online templates can help, but having a lawyer or trusted financial advisor create your documents can give you peace of mind, especially if your situation is complicated.
- Review regularly. Life changes constantly. Update your documents after you get married, have kids, buy a home, or hit another big milestone.
Save a copy of this checklist to keep yourself on track.
Face the future with confidence. Ask a Commerce Banker for personalized assistance in putting together your financial plan today.
