You want nothing more than the well-being of your family — and that includes their financial security. That’s why it’s so important to think about how you can continue protecting them financially even beyond your own lifetime, or in case you become ill or incapacitated.

The most effective way to ensure your assets are used in the best way to provide for your family’s needs is to have an estate plan, which is basically a set of documents that say who will receive your assets, who will care for your children, and who can make decisions on your behalf.

Yet, as the National Association of Estate Planners & Councils notes, an estimated 56% of Americans don’t have an up-to-date estate plan. 

If you’re among those who haven’t yet made an estate plan, the first step is to understand what it involves.

Here’s a look at how these basic estate planning documents work and what you should do to ensure the timely, proper execution of your estate plan.

Keep in mind that it’s a good idea to consult a tax professional or an attorney for help in drafting your estate planning documents. Another option is to use will-writing software or fill out templates available online. However, if your estate involves a complex set of assets and circumstances, it’s probably best to hire an experienced professional rather than take the do-it-yourself route.

Will and Trusts

Both wills and trusts indicate your wishes regarding who will receive your assets. The main difference between them is that a will is only enacted after your death, while a trust can become effective while you are still alive. 

Once you have created your will, you can appoint a person, called an executor, to be in charge of distributing your assets the way you’ve specified in the document.

A trust authorizes a third party — the trustee — to hold your assets on behalf of someone you want to receive them later. A revocable trust, also known as a living trust, can end any time you decide, and it typically dissolves automatically when you die. An irrevocable trust is one that you cannot change once you have established it.

An estate attorney can guide you in making sure the will or trust you prepare is legally valid.

Naming Beneficiaries

As part of your estate plan, you will need to state who will get the proceeds from your life insurance, retirement plan and other financial accounts when you die. The paperwork for these accounts includes spaces for you to list beneficiaries. Most people choose family members, but a trust, a nonprofit organization and even your estate itself can be a beneficiary.

Guardianship

If you have minor children, you should specify in your will the people you want to take care of them if you die and they have no other parent.

The guardian you choose to raise your child or children will also be in charge of managing the assets they inherit.

LGBTQ+ couples with children may need to take additional steps to ensure that the surviving parent is recognized as the legal guardian when one of them dies. Because only biological parents automatically receive that right, a court judgment or adoption is usually the only way a non-biological parent can become a legal guardian.

Powers of Attorney

A power of attorney (POA) lets another person of your choice (your agent) make decisions on your behalf if you become unable to carry them out yourself. That incapacity could be either physical or mental. This estate planning document comes in two basic types: a durable POA, which covers decisions about financial and legal matters, and a healthcare POA, which covers decisions about your medical care.

The most important thing is to act sooner than later when it comes to your estate planning. Getting these documents in order will ensure that your family understands and can carry out your plans to provide them with a financially secure future.