For those just starting out, especially when they haven’t accumulated significant wealth yet, there can be a tendency to feel like maybe an Estate Plan isn’t really needed. But the reality is, nothing, and we repeat nothing, could be further from the truth.
Even if you don’t have a huge estate, even if you don’t yet have substantial wealth yet, even if you don’t own a ton of assets, you still need an Estate Plan. Because the simple fact is if you’re over 18 and you have a job, you need some form of Estate Planning to protect yourself, your loved ones and your future legacy. What’s inside that Estate Plan, however, is where things could differ.
Keep reading to learn everything you need to know how important your Estate Plan is, and why you need one, regardless of your current status or wealth.
[In honor of Financial Literacy Month, we are hosting an Instagram Live "Ask Me Anything" with our very own General Counsel, Patrick Hicks, and expert CFP, Rianka Dorsainvil! Join us on April 29th! Have something you want answered? Comment your question on any of our recent Instagram posts.]
5 Ways Your Estate Plan Can Be Beneficial (Hint: It’s Not All About the Money)
Estate Plans aren’t just about fancy car collections, mansions and millions of dollars in assets. They function as a much more basic tool than many people realize.
Yes, your Estate Plan can do the basics, like establish who in your life should receive your assets. But it does so much more than that, too. Let’s look at the ways your Estate Plans can work for you.
Estate Plans Can:
Help your estate avoid probate - Using the right tools and vehicles inside your Estate Plan (like a Trust) can help your family avoid the costly, stressful, often lengthy process known as probate. Probate is a court-supervised proceeding that validates a Will and oversees the distribution of your estate.
Provide for your loved ones - Not preparing a valid Estate Plan means you leave everything in your estate - from personal property, to financial assets, to life insurance policies and retirement plans (that don’t have named beneficiaries) - up to the state you live in to figure out who gets what. If you fail to properly identify beneficiaries in an Estate Plan, you have no say in who gets what.
Prepare for future medical conditions - If your health declines suddenly or unexpectedly, and you haven’t prepared a proper Estate Plan, you’re leaving a lot up to chance. Not only that, you’re also placing an incredible burden on your family. They’ll be forced to make decisions on your behalf, even if they don’t truly feel confident they know what you’d want. You can set up legal provisions in your Estate Plan to make sure your wishes about future medical care are understood.
Drastically reduce the potential for family disagreements - Even if your family may not agree with your decisions, an effective Estate Plan makes your intentions explicitly clear. They may not like it, but Estate Plans can reduce a lot of headache and strife within families by simply and clearly noting what you want.
Effectively communicate your wishes and desires - Many people have a tendency to think of an Estate Plan as being purely about finances, assets and property. But you can use your Estate Plan to make sure everyone knows what you want in terms of your final wishes. Do you want to be buried, cremated, an organ donor? All of these preferences can be included in parts of your Estate Plan, so your loved ones can focus on grieving your loss, rather than grappling with figuring out what you’d want and how to say goodbye.
What Happens If You Don’t Have an Estate Plan?
If you fail to create a comprehensive, all inclusive Estate Plan, you’re essentially leaving everything up to the courts. The first thing that will happen after you pass away is a court will step in to appoint the appropriate people to handle your estate. This could include appointing:
A guardian if you have children
A Personal Representative to oversee the distribution of your assets. This often will be a close family member, but it may not be the person you would’ve chosen or wanted.
Drawbacks to Not Having a Proper Estate Plan
There are several ways that not having an Estate Plan can have a negative impact. Here are the top ways not having an Estate Plan can be more difficult for your family.
When you die Intestate (without a Will or other Estate Plans), the courts will ultimately make all the decisions about your property and assets
You don’t get to designate an Executor (to oversee and manage your Will)
You don’t get to appoint a Trustee (who would manage and distribute your Trust)
You won’t have the opportunity to name guardians (who would care for your children in the event you cannot care for them yourself)
You won’t have the opportunity to legally identify beneficiaries (the people or organizations you want to benefit from your estate)
Heirs will receive everything at once, which could prove problematic on a number of fronts, including potential tax issues and other complications for minor beneficiaries. Equally important, if you plan on leaving assets to anyone who receives government assistance, inheritances need to be carefully planned so they won’t interfere with eligibility.
Tools in Your Estate Plan
There are many different pieces to a complete Estate Plan. They’re about more than just a Will or Trust (two of the more common vehicle’s people tend to associate with Estate Plans).
Your Estate Plan Can Include:
Will - Also called a Last Will and Testament, used to document where, how and to whom you want belongings (property and assets) to go after you pass away.
Trust - Many types available, establishes a three-way relationship between a Trustor (or, Grantor, who creates the Trust), an Executor (who manages the Trust assets) and a Beneficiary (who will benefit from the Trust). Some Trusts can offer tax-benefits, depending on the type you choose.
Living Will - Shares detailed wishes about your preferences regarding medical care and medical treatment or intervention you would (or would not!) want, should you become incapacitated.
Healthcare Power of Attorney (POA) - Authorizes a person you trust the authority to make healthcare decisions on your behalf should you be unable to make them on your own.
Durable (Financial) POA - Authorizes a person the authority to make financial and business-related decisions on your behalf. The “durable” part is important because it means the authority stays in effect even if you suddenly become incapacitated. Normal or basic POAs would terminate at this point.
Guardianship - Allows you to appoint someone of your choosing who would take care of your dependents if you cannot care for them yourself.
Trustee - Appoint someone to oversee your Trust, both in the managing assets inside it, as well as distributing or administering assets to beneficiaries at the appropriate time.
Executor - Appoint someone to oversee the distribution of items in your Will after you pass away.
Beneficiaries - Names the people or organizations you want to benefit from your estate.
Even if you don’t have a huge estate or own a lot of assets right now, having an Estate Plan in place is still important. It allows you to ensure your loved ones and your legacy are both set up for the future.
Learn more about how Trust & Will can help you set up a complete, comprehensive, valuable, affordable Estate Plan today, regardless of what your worth is. Our process is simple, effective and best of all, we made sure it won’t cost you an arm and a leg to get through it.
Want to read more from our “Myth Buster” series? Click the links below to follow along as we break down these other common estate planning myths:
Part 2: Why You Need An Estate Plan, Even If You Don’t Have Kids
Part 4: Why You Need an Estate Plan Even if You’re Young and Healthy
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