Who Needs an Estate Plan?

For many, an estate plan sounds like something only the wealthy or the retired would ever want or need. But the truth is, an estate plan is vital for people in all stages of life. An estate plan is about taking control of your affairs to protect your wealth, your health, and those that you care about.

Consider what would happen if you become hurt, sick, or experience loss of life. This worst case scenario is something no-one ever wants to think about, and sometimes think of too late.

Every solid financial plan should include an estate plan that protects your health, wealth, and the people you care about. It is not only essential to grow your wealth, but also to protect those assets for yourself and your loved ones futures. And while the topic isn’t comfortable, it is essential to safeguarding your future.

What are the risks of not having an estate plan?

Like so many things, it is important to consider what your plan is if something were to happen. Your estate plan is the answer to these many “what if’s” in life.

What happens to your estate? In the absence of estate planning documents, the state and the courts are left to decide what happens with your estate and who inherits. Without instructions from you, your family has no control over the process or results.

What happens to you? Another big “what if” is who is legally able to make decisions should you become sick or incapacitated. If you are unable to act on your own behalf, there may be no-one who is able to manage your finances or make urgent medical decisions. Medical professionals may make decisions without consulting your family. Your family would need to get a court order appointing someone as your guardian, which is neither a quick nor cheap process.

What does the process look like for your loved ones? Probate is the process where the state and courts determine what happens to a person’s estate. Where a person passes without a will, the process can be more complicated, take longer, and can tie up your assets for months, leaving your loved ones with no control during a time that is already difficult.

What if your estate plan is outdated? Estate plans are documents that must evolve with along with you and your family. Life events are always something to celebrate, but are also a reason to re-evaluate your financial and estate plans. Marriage, divorce, purchasing a family home, children, starting a new business, and moving to a new state are all moments when you need to re-evaluate your list of “what-if’s” to see if you need to make changes.

What does an estate plan look like?

In this day and age, there is no such thing as a “one-size-fits-all” estate plan. You and your estate are unique, as is your plan for the future. A good estate planner has a number of tools in their toolkit to provide you with an estate plan that carries out your wishes and gives you peace of mind.

Your Will. A last will and testament is the cornerstone of every estate plan. It is this document that describes how your estate - money, real estate, and personal property - is to be distributed after you pass away. In this document, you appoint an Executor, who will have the legal authority to file your will with the court and start the probate process. This is also where you can name a guardian to care for your children.

Medical Power of Attorney. Also called a Health Care Power of Attorney, this document appoints a person to make medical decisions on your behalf. With this document, you can outline your wishes for care and give your family peace of mind.

Physician’s Directive or Living Will. Sometimes called an Advance Directive, outlines how you wish to be treated should you become incapacitated, including end-of-life care.

Financial Power of Attorney. A Financial Power of Attorney (POA) appoints someone to manage your financial affairs should you be unable to do so yourself. There are two types:

• Effective immediately: This POA takes effect immediately, allowing the appointed person act on your behalf, even if you are able to make decisions for yourself.

• Springing power: This POA takes effect only upon two medical professionals finding you are incapacitated.

Trusts. A trust can take several different forms, depending on your wishes. The basic principle is that a trust manages the distribution of an asset, be it property or cash. The property or cash is transferred to the trust which “owns” the property for the benefit of the person you designate as the beneficiary.

You can create a revocable living trust during your lifetime and transfer assets into that trust. This can help your family avoid probate, provided all of your estate that can be transferred into the trust has actually been transferred.

You can also create a trust in your will, called a “testamentary trust”. This is often done where there are minor children who may inherit cash or property. You choose someone to manage the trust for your children and outline how and when the property can be used for their benefit until they are ready to inherit the remainder.

Life Insurance. This estate planning tool can provide your loved ones with income-tax free cash to pay expenses, maintain assets, and carry out your distribution wishes. It is never too late (or too early!) to be thinking about this as a financial safety for those you care about.

How to create your estate plan.

As with anything, there are quite a few digital platforms and services that offer inexpensive estate planning documents. These documents are generally boilerplate terms that are not crafted with your specific wishes in mind. Every estate plan is as unique as the individuals creating and benefitting from it. A good estate planning attorney will talk to you about your goals for the future for yourself and your loved ones. It is vitally important to me that my clients understand their options in making their goals become reality, which is something that a digital service cannot necessarily provide.