7 Estate Planning Essentials: The Building Blocks You Need

When it comes to your estate and how it will be managed upon your death, there is no such thing as being too prepared. Thorough, careful planning — and the right documentation — creates a solid foundation for your estate and your family, in your absence.

For the financial health of your assets and your peace of mind, it may be critical to include these seven essential elements in your estate plan. They each play an important role in providing financial stability and protection for your beneficiaries — and fulfill the legal requirements necessary for making critical decisions and distributing your assets.

From wills and trusts to powers of attorney, let’s look at how these documents can work for your plan.

1. Will

A will is a legal document that spells out how the assets of an estate will be distributed once a person dies. The document should list certain assets — as well as the beneficiaries of those assets — and may also designate who will care for minor children. Without a will, any real property assets you own will be governed by the laws in the state where you live.

While a will generally focuses on the disposition of assets owned by an individual, it cannot address the disposition of any assets that are part of a designation on another contract, such as life insurance or pension benefits.

»Tip: Your attorney can help draft and keep your will for you, while a trust administrator can help ensure that your wishes — including those outlined in your will — are carried out after you’re gone.

2. Trust

A trust is a legal contract and fiduciary arrangement with a third party to manage your assets as directed. Not only for those with extensive wealth, a trust allows your assets to be managed both while you are alive, and after your death, on behalf of your beneficiaries. Trusts can provide greater control over how assets or your personal wishes are addressed.

While a trust is similar to a will in that it will manage asset distribution, the versatility of a trust means you can do much more than simply designate beneficiaries. Although you need an attorney to help establish a trust, in many cases having a trust minimizes or avoids probate, protecting the privacy of your estate. Trusts may also help you realize tax benefits.

»Tip: While you can choose a family member or close friend to manage your trust, another option is to utilize a trust administrator. A trained professional experienced in helping clients navigate an array of estate planning scenarios, this person is obligated to act in the best interests of the beneficiaries and in alignment with the benefactor’s wishes. Common responsibilities may include overseeing investments, bill payment, distribution of estate income and assets as well as tax return filing.

3. Durable power of attorney

A power of attorney (POA) gives legal authorization for a specific person to make decisions about your property, finances or medical decisions. A durable power of attorney¹ is the most common type of power of attorney. The term "durable" means that the document — and the powers it grants — remains in effect when you are incapacitated. The document can give general or specific powers and may be broad or limited.

Because the document provides protection in situations when you are not able to make decisions for yourself, many estate planners consider POAs to be one of the most important documents in your estate plan. Once you are incapacitated — either from illness or an accident — a POA cannot be executed.

»Tip: You can have more than one durable POA with each principal assigned specific responsibilities.

4. Beneficiary designations

Beneficiary designations allow you to outline who will receive certain, specific assets such as life insurance, annuities, retirement accounts, 401(k)s and IRAs, upon your death. Beneficiary designations allow your accounts and funds to directly pass to the named beneficiaries.

»Tip: These designations involve contacting the bank, brokerage firm or pension office to complete the necessary forms to designate a beneficiary for those accounts upon your death. In some cases, you can designate multiple beneficiaries, as well as how the assets are to be distributed.

5. Letter of intent

Also known as a "letter of wishes,"² a letter of intent communicates your final wishes to your loved ones. It can be used to provide instructions to your beneficiaries as it relates to your personal property, assets and even your preferred funeral arrangements.

»Tip: While a letter of intent may include specific details regarding your financial assets, it may also be personal in nature with wishes related to distribution of other property. It can also include digital information such as usernames and passwords.

6. Health care power of attorney

A legal document similar to a durable power of attorney, a health care or medical power of attorney³ focuses on all medical decisions that will need to be made if you become incapacitated and a doctor determines you cannot make them for yourself. The document requires it to be signed before two witnesses, and you must read a disclosure statement and sign a document saying that you have read and understood the disclosure.

»Tip: A health care power of attorney is effective immediately and stays in effect unless there is a termination date to revoke it. You can limit the decision-making authority and designate alternate agents to act on your behalf.

7. Guardianship designations

A guardianship designation serves in the interests of a minor child or yourself, should you become incapacitated. Texas allows⁴ for two types of guardianship: a guardian of an estate or a guardian of a person.

»Tip: Even if you already have other designations in place (executor, trustee or power of attorney), it is important to have a guardianship designation, especially as it relates to being a guardian over a person. All designations should be consistent across your estate planning to avoid any future conflict.

As you build your estate plan, it's important to note that changes to federal estate tax laws are on the horizon. Some estate and gift tax breaks are set to expire⁵ in late 2025. Experts say waiting until the last minute to look for an extra tax cushion could be a mistake.⁶

Are you looking to establish a trust as part of your overall estate planning strategy? Or are you curious to know how a trust might be beneficial? Between our in-house RBFCU Trust Services staff and network comprised of attorneys, wealth managers and tax professionals, we’re here to help you protect your legacy.

Contact us for your no-cost, no-obligation initial consultation today.

210-637-4117 | trustservices@rbfcu.org | rbfcu.org/trustservices

Last updated January 2024

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

RBFCU Trust Services is a division of RBFCU Investments Group LLC. RBFCU Investments Group LLC is a wholly-owned subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph-Brooks Federal Credit Union (RBFCU). Trust services available through Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency.

Trust and Investment products are not federally insured, are not obligations of or guaranteed by the credit union or any affiliated entity and involve investment risks, including the possible loss of principal.

This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.

Sources

The following sources were last accessed December 2023.

^1,3“Understanding Power of Attorney.” The American College of Trust and Estate Counsel, https://www.actec.org/estate-planning/understanding-power-of-attorney-poa/.

²AARP Education & Outreach, and AARP Education & Outreach. “Letter of Instruction: Preparing Your Intentions for Your Estate.” AARP, Apr. 2009, https://www.aarp.org/money/estate-planning/info-04-2009/letter_of_instruction.html.

⁴“Estates Code Chapter 1104. Selection of and Eligibility to Serve as Guardian.” Texas.gov, https://statutes.capitol.texas.gov/Docs/ES/htm/ES.1104.htm.

⁵“Estate and Gift Tax FAQs.” Irs.gov, https://www.irs.gov/newsroom/estate-and-gift-tax-faqs.

⁶Zhuang, Victoria. “4 Estate Planning Tax Tips for Rich Clients before the 2026 Sunset.” Financial Planning, 26 June 2023, https://www.financial-planning.com/list/4-estate-planning-tax-tips-before-2026-sunset.