In our last blog, we introduced some important facts about what an estate plan is — and who should consider having one. This week, we continue the series to focus on the key components of an estate plan, along with how to create one that best serves your needs.

What are the main elements of an estate plan?

Will. Also known as a last will and testament, this document directs how your assets will be managed and distributed after death. It also identifies who you wish to be your children’s legal guardian and names an executor responsible for overseeing your estate plan process.

Durable power of attorney for finances. This vital document allows for a person you select to handle your financial affairs — including everything from paying bills to selling property — if you’re unable to do so. In addition, some financial institutions may require their own power of attorney authorization form.

Healthcare power of attorney. Also known as a healthcare proxy, this document lets you name a trusted relative or friend to make medical decisions on your behalf if you can’t.

Living will. Also referred to as an advance medical directive, this arrangement spells out your wishes (for both family and healthcare professionals) about end-of-life care and treatment ahead of time. This document goes into effect only if you’re incapacitated or can’t communicate the decisions yourself.

Trust. This legal arrangement creates a more detailed plan that controls how assets will be held for a beneficiary you designate or managed and distributed according to terms you set. There are two general types of trusts:

• Revocable (or living) trusts, which can be changed or canceled at any time while you’re living
• Irrevocable trusts, which typically can’t be changed or revoked once created

Trusts are separate legal entities, and they work in coordination with a will. Unlike a will, however, trusts can be used to help trim or eliminate estate taxes as well as bypass probate. For instance, trusts can transfer (or retitle) property ownership into the trust’s name.

How much does an estate plan cost?

A basic will can be created online or with store-bought legal forms relatively inexpensively — around $100.  You can expect a simple, state-specific will and maybe some help completing a more comprehensive set of documents for that price. Filling out the forms is only the first step. To be valid, these documents will need to be witnessed and notarized.

But your estate plan needs may be more complex than what you can accomplish with a DIY approach — if, say, you have a special needs child to provide for, a blended family or hold property in more than one state.

The cost of developing a customized estate plan with the help of an estate planning attorney will vary widely depending on your personal situation, your assets, where you live and whether you choose to establish a trust.

Some estate planning attorneys may offer a free consultation or an initial meeting for an hourly fee. Then, they will be able to propose options, estimate the time involved to draft the legal documents you need and quote either a flat amount or the number of billable hours they expect to charge.

If the cost of creating an estate plan gives you pause, consider the cost of not having a living trust or estate plan in place. In California, for example, if you die without a will and have an estate worth over $166,250, the transfer of property goes through probate. Probate can take up to two years to complete and is expensive — effectively eroding the value of your estate.

Who can help with estate planning?

To get help with building an estate plan that meets your needs, start by asking trusted relatives for their recommendations. You can also ask your accountant, tax preparer or financial advisor to refer you to a qualified estate planning attorney with whom they have long-term experience.

Another valuable estate planning resource is close at hand for Chevron FCU members. Through a new partnership service with Affinity Trusts, you can access complimentary educational workshops and connect with vetted estate planning attorneys to help you create a comprehensive plan that reflects your wishes.

Why you should regularly review an estate plan

Finally, it’s important to know that an estate plan isn’t a “set it and forget it” group of documents. Instead, it requires an ongoing commitment to review and discuss every few years or when life changes.

For instance, you’ll want to make sure all your choices and instructions still accurately reflect your wishes. Do your beneficiaries need to be updated? And are your powers of attorney still willing and able to serve? Importantly, you should also always revisit your plan whenever there’s a major life event, such as a birth, marriage, divorce or death.

Confidently planning ahead

Preparing an estate plan could be one of the most important things you can do to ensure that your wishes are carried out in the ways you intend. Plus, it can avoid financial complications and eliminate some of the burdens left behind for loved ones. Refer to Part 1 of our series to get an overview of how and when to begin your planning process.