How to Get Started With My Estate Plan
Have you started your estate plan? Everyone should have an estate plan regardless of his or her age, financial status, marital status, or health condition. Having an estate plan protects your family and ensures that your desires and wishes are carried out after your death or incapacitation.
No one enjoys contemplating his or her death; however, we all eventually run out of time. Assuming that you have plenty of time to take care of estate planning is risky because your loved ones will have a much more difficult time settling your affairs if you do not have the necessary estate planning documents in place before your death.
What Happens When You Die Without an Estate Plan?
If you do not have a will when you die, your estate is administered according to the intestate laws in the state where you reside. In other words, the courts determine how your assets are distributed and who inherits your property.
The court oversees every step of the probate process making the process more costly and time-consuming for your heirs. This could delay your heirs receiving the money and property they need to support themselves after your death.
You can avoid this situation by taking steps to plan your estate now. Having an estate plan is a wise decision for many reasons:
- Avoid the state controlling how your assets are distributed
- Dictate who will take care of your children
- Minimize or reduce estate taxes
- Ensure that your wishes and desires are carried out
- Avoid family conflicts
- Avoid delays and unnecessary probate costs
- Protect assets
- Provide for children with special needs
- Ensure children from blended families are treated fairly
- Naming a successor for your business and establishing a plan for the business after your death
- Protecting your beneficiaries
- You may be able to avoid probate or make probate easier for your family
By having an estate plan, you avoid much of the red-tape, confusion, and unnecessary costs that families must deal with when they lose a loved one who died without a will or other estate planning documents.
Where Do I Begin to Make an Estate Plan?
When you are ready to begin preparing your estate plan, you need to take several steps before you are ready to sign your estate documents.
Step 1. Prepare an inventory. Create a comprehensive inventory of your assets including the current value of each asset. This includes your retirement savings, insurance policies, real estate, personal property, business interests, jewelry, collectibles, investments, and sentimental items.
Before you can begin to decide who you want to inherit your assets, you must first know what those assets are and know the value of those assets.
Step 2. Answers to important questions. Now that you have an inventory, you must ask yourself several questions before you begin drafting your estate documents. The answers to these questions determine the types of estate documents you need, as well as, what is included in each document.
Ask yourself
- Whom do I want to name as beneficiaries for my life insurance policies and other financial accounts?Whom do I want to inherit my property?
- What do I want to leave to each of my heirs?
- Whom do I want to be responsible for the physical care of my children?
- Whom do I want to be responsible for handling the financial affairs for my children?
- Whom is the person in my life that I trust to administer my estate?
- Whom do I trust to make healthcare decisions for me if I am incapacitated?
Step 3. Draft your estate documents. Now that you know what you want to happen after your death or incapacitation, you need to begin drafting your estate documents. Several estate documents are essential and should be a part of every estate plan.
Last Will and Testament – Your will details who you want to receive your property after your death. Depending on your financial and personal situation, you may only need a simple will or you may need a more complex will that names a guardian for your children and establishes a trust to provide for your children until they reach a certain age. You must also name your executor or personal representative in your will. This person will administer your probate estate to ensure that the terms and conditions of your will are carried out.
Power of Attorney – You may want to consider drafting a power of attorney naming a person to manage your finances should you become physically or mentally incapacitated. A will does not take effect until death; therefore, having a power of attorney will protect your assets in the event you are incapacitated prior to your death.
Living Will – A living will or an advance medical directive names a person to carry out your wishes regarding life-sustaining medical treatments in the event you are unable to make the decision for yourself. If you do not want medical intervention to save your life if you become terminally ill, you need a living will to ensure your wishes are followed.
Healthcare Power of Attorney – A healthcare power of attorney appoints an agent to make medical decisions on your behalf if you are unable to do so for any reason. Some healthcare powers of attorney may include provisions regarding life-saving medical treatments; however, not all states permit this to be included in a healthcare power of attorney.
Trust Agreements – Trust agreements are useful estate planning tools that can protect your assets and provide privacy for your estate. Because there are several different types of trusts that accomplish a variety of goals, you may want to discuss the pros and cons of various trusts with an estate planning attorney before choosing a specific trust for your estate plan.
Step 4. Sign and secure your estate documents – Once your estate documents have been drafted and signed, place them in a secure location. If you use a bank safe deposit box, you need to notify your executor and agents and add those individuals to the list of authorized persons to access the box. You may want to consider a fire proof safe for your home as a way to protect your documents.
Step 5. Discuss your estate plan with your family – Once you have your estate plan in place, discuss your wishes with your family so there are no surprises after your death. Make sure that your family understands your wishes and desires and that anyone who needs access to original documents knows where those documents are located and can readily access them if needed.
An estate plan does not need to be complicated to be effective nor does it need to be costly but it does need to be done as soon as possible for your peace of mind and to protect your loved ones.