What did Heath Ledger, Marilyn Monroe, Michael Jackson, John Wayne, Jacqueline Kennedy Onassis, Princess Diana, and Anna Nicole Smith all have in common? They all had lousy wills. Because of this, their deaths left not just emotional turmoil for their friends and families, but also financial uncertainty, legal battles, and expensive, long-term, court-ordered supervision of the estates, draining the assets away from the people they wanted to benefit. In other words, their financial legacy was one of frustration and questions.

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No matter what your net worth, whether you have assets of millions or thousands, you need to have a basic estate plan in place.

What exactly is an estate? Your estate consists of all the property you own at the time of your death, including real estate, bank accounts, stocks and other securities, life insurance policies, and personal property such as automobiles, jewelry, artwork, and household items. Having a comprehensive plan for all these items can resolve a number of legal questions that may arise after you die, such as: Who gets what? Does a personal guardian need to be appointed to care for minor children? How much tax will need to be paid in order to transfer property ownership? What funeral arrangements are appropriate? In essence, a good estate plan ensures that your wishes are carried out, that your family’s future financial goals are met, and that you leave a positive and empowering financial legacy for all.

Realize that having a will is not enough. A will, written and signed properly, directs “who’s in charge” and “who gets what” from your assets at the date of death, but it’s of no use before you die. If you become incompetent, a will doesn’t control your assets or designate who can make healthcare decisions for you. After you die, a will doesn’t avoid probate of your estate. In fact, a will can be a one-way ticket to the fees and delays of probate court.

Creating a Plan

If your financial life is simple and straightforward, you may be able to create your estate plan by yourself. However, if you have multiple bank and investment accounts, real estate investments, or a non-traditional family situation, you may want to consult with a lawyer. Regardless of which route you pursue, here are some suggestions to get you started.

Take inventory of your assets — Your assets include your bank and other investment accounts (such as money market or mutual funds), retirement savings, insurance policies, and real estate or business interests. After making a list of all your assets, ask yourself three important questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you’re ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?

Discuss your estate plans with your heirs — Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you’re gone. Even if your family is close and loving today, the potential for gain can and does cause people to act out of character. By being open, honest, and clear with people upfront, you can minimize conflicts later.

Create and fund a living trust — A living trust is a useful tool for managing your assets during your life and following your death, and it enables you to avoid the time and expense of the probate court. Trusts, however, only manage those assets that you officially transfer into trust. So once your trust is set up, be sure to transfer your assets into your trust. For assets with a legal title, such as real property and automobiles, you have to change the title into the name of the trust (although in some states you can keep the car registered in your name but use a “transfer on death” title so that the car is automatically registered to the person you name on the title). For non-retirement accounts, you can simply contact your bank or the portfolio manager of your accounts and request that they change the title on your accounts from your name to the name of your living trust (some banks have accounts that are “payable on death” to a specific beneficiary). For assets with no legal title, such as household goods, you simply include them in the list of trust assets in a “schedule” at the back of the trust document.

Designate a healthcare power of attorney — No one plans to be incapacitated, but if you are, who will make healthcare decisions for you? You must make sure to complete a healthcare power of attorney so can you be protected. In this document, you appoint a trusted individual (and an alternate) to make important medical decisions for you in the event you are unable to make them for yourself. Make sure your wishes are respected by giving a copy of your healthcare power of attorney to your physician.

Always designate alternates — Extend the usefulness of your estate documents by appointing more than one agent to represent your interests. In this way, if your first choice isn’t available for any reason, you’ve already provided for one or more alternates. Otherwise, someone else will make the choice for you.

Keep your papers in a safe place — Make sure your Trustee (the person who manages your trust) and Power of Attorney know where you are going to keep these documents and how to get to them. You can put them in a safe deposit box; just make sure the Trustee and Power of Attorney have signed the signature card and have a key. Additionally, a Power of Attorney for healthcare is only useful if the documents can be accessed when needed, so it’s a good idea to give the Power of Attorney his or her own copy, but make sure the original signed papers are in a safe place.

Check your beneficiary designation forms — Wills are not the only documents that govern the disposition of your assets. Insurance policy proceeds and retirement accounts both pass in accordance with the terms of your beneficiary designation form when you die. Make sure the information on these forms is current and accurate to ensure these assets pass to the individual you intend.

Protect your homestead — The best deal in asset protection today is the homestead. If you own a home as your primary residence, for a modest fee, you can place protection on your home from creditors for up to $500,000 of the equity in your home. Simply contact your attorney to complete and file the necessary documents.

Update your estate plan — Be sure to review your estate planning documents every three years to ensure they are still current. Changes in personal circumstances, economic fortunes, and tax laws may warrant revisions.

Leave Your Mark

Granted, no one likes thinking about their mortality. And there’s always something else vying for your attention, forcing you to put estate planning on the back burner. But when you take the time to plan for the inevitable, you ensure that your assets are preserved and properly executed, thus eliminating the need for your heirs to take the expensive, time-consuming path through the courts. Ultimately, good estate planning is the only true way to leave a financial legacy — one that protects your loved ones and shows them what is possible when you simply take the time to do it.