By May 23, 2023 Financial education
Why You Need An Estate Plan (And What Should Go In It)
Many people still believe that an estate plan is reserved for those with millions and mansions. This could be part of the reason why just 42% of adults in the U.S. have estate planning documents in place, including wills and powers of attorney. But here’s the thing: Anyone who cares about what happens to a) the people they love or b) the stuff they leave behind can likely benefit from setting up an estate plan. Although you might not plan to leave a whopper of an inheritance to your loved ones when you die, an estate plan is still the only way to make sure your assets go to the people or charities you love most. And, often more importantly, the will that sits at the heart of that plan is also the only way to name guardians for minor children.
But what is an estate plan, exactly? It’s a collection of legal documents that dictate who can make decisions on your behalf if you’re unable to do so, and who will inherit your assets after your death. Your estate planning documents should include a will, which dictates guardianship of your children and property, a living will which tells a hospital about your preferences should you need life support, and powers of attorney. As for the latter, you need two — one for finance and one for healthcare. These grant your chosen person the right to act on your behalf, and make financial and health decisions for you. As part of your estate plan, you may also want to consider creating a revocable (or living) trust, which can help you avoid probate.
Exactly how you choose to structure your estate plan is up to you and your attorney; the most important thing is that you have one. Without an estate plan, there can be confusion and stress among your heirs. With one, you’re able to control what happens to your assets, and make life easier on your loved ones. But, it's one thing to know that estate planning is useful, and another to know where to begin. Here are the steps you need to take to get started.
Work With An Attorney You Trust
To begin the estate planning process, you should work with a trusted attorney who can help you make sense of the necessary estate planning documents. They can assist in listening to your needs and wants and then translating them into legal documents that will stand the test of time. If you have a financial advisor, your attorney can coordinate with that person to determine what should be included in your estate plan.
If you don’t have a trusted attorney in your life, look to people you trust and ask who they’ve used. You can also check with the American Academy of Estate Planning Attorneys and the National Association of Estate Planners & Councils to find a trusted professional near you.
If the cost of an attorney is too great, or you’d prefer to go the DIY route, there are some good estate planning software programs and tools on the market (specifically Willmaker and LegalZoom.) However, if you can swing it, having an attorney review the forms you create with software is a nice compromise.
Make Your Plan & Include Your Family In The Process
Part of creating your estate plan means making sure all of your assets have a place to go upon your death. To ensure things go smoothly for your heirs, you’ll need to set up beneficiary designations on all of your financial accounts, including retirement, checking and savings accounts.
You’ll also want to talk to your loved ones about the goals for the future of your estate. This will not only help you solidify a plan for your assets, but will also create a foundation of openness that will help your family later if they need to communicate your wishes to others. Instruct them where your estate planning documents are kept, and direct them to any other details they may need after you are gone. Ideally, you’ll also put together a summary of all the most important information they’ll need (passwords, important individuals like your lawyer and financial advisor, account details, etc.) to make the administration of your assets easier.
Update Your Documents Regularly
If you’re worried about creating an estate plan only to have to change it later, you should know that no estate planning document is ever final. As you get older, your circumstances, goals, and means will change. So, you’ll want to revisit your estate planning documents every three years or so to make sure they still reflect your wishes. (In much the same way that you revisit your budget and financial plan often to make sure it still works for you!) Maybe you decide to leave more or less to a specific heir or charity, or you want to change guardianship of a child. Your documents can change as often as your goals do. Remember that the purpose of an estate plan is to give you more control over your assets, and to give your family peace of mind for the future.