Countless people make the mistake of believing they don’t need an estate plan. After all, only the extremely wealthy have an “estate”… right?
You might be surprised to learn that you have an estate—at least you do if you have:
- a house,
- a car, or
- a savings account.
Don’t have any of those? How about personal possessions? If you have clothes on your back, you have an estate.
We all want to know that our wealth—whether that’s an investment account or a beloved collection of dog-eared books—will go to the right people when we’re gone.
At its most basic, that means having a will that tells your loved ones who should receive which possessions, and when they should receive them. This includes the classic stuff you think of in a will—“my book collection I leave to my brother, the avid reader; my investments, to my husband; my heirloom jewelry, to my daughters” and so on.
But, there’s much more to an estate plan than just “who gets what.” You want to rest assured that your loved ones will be cared for, that your wishes for medical care will be followed to the “T.”
Other components of your estate plan
To that end, your estate planning may include several aspects:
- A financial plan, to ensure your surviving family members are taken care of after you’re gone. This often includes life insurance, which can protect your family from lost income if you become disabled, or pay to support your family after you pass away.
- Tax planning, aimed at preventing your family from paying too much in taxes on your estate (without such planning, the government could take as much as 35% of your estate!).
- A sale or succession plan (if you own a business), ensuring that the company can thrive in your absence.
- Providing for minor children, in the form of guardianship, as well as someone appointed to manage their inheritance until they come of age.
There’s another aspect of estate planning that is often overlooked: planning for medical care. Depending on your situation, that may mean purchasing long-term care insurance, establishing a health care proxy able to make decisions on your behalf, and more. When it comes to your care in old age or disability, most people feel very strongly. By leaving instructions for your family, you can make sure your wishes are carried out.
What happens if you don’t have an estate plan?
As you can imagine, it’s critically important that most of this planning are put in place long before you need it. Some things simply can’t be planned for—unexpected death or sudden disability can strike without provocation. By planning early—just in case—you can spare those you love both the expense and frustration caused by a poorly planned estate.
If you die or become disabled without a solid estate plan in place, the state will intervene. For instance, if you die without a will, the state will divide your wealth between your spouse and children—and they may not get the share you would want. Likewise, the state would control a minor’s inheritance.
The government’s control of your wealth is frustrating enough in life—you don’t want them in charge of your estate when you’re gone!
Now is the best time to get started.
None of this is fun to think about—most people find estate planning even less exciting than preparing taxes. But, like responsibly dealing with your taxes, an estate plan is necessary for the sake of your family. And, like your taxes, there’s great help available. The best estate planning firms are able to be sensitive to your wishes and suggest solutions that you may not have though of. An estate planner can remove most of the burden from you, and give you the peace of mind that your intentions will be honored.