An estate plan is one of those things many people think they DON’T need, but everyone SHOULD have. There seems to be a misunderstanding among people today that only wealthy people need to have an estate plan. That couldn’t be more wrong.
Do you have a bank account? Do you have a car? Do you have a house?
If you answered yes to any of those, you should have an estate plan in place. No doubt about it. It doesn’t matter how much or how little you have in your estate. In order to save your loved ones a great deal of time and potentially money, you should have an estate plan.
Think of an estate plan in a similar way to car insurance. Buying your car insurance AFTER you get in an accident will do you no good at all. The same goes for an estate plan. You need to have the plan in place BEFORE something happens to you or a loved one.
There are a handful of things that confuse people about estate planning, and we wanted to outline a couple key parts to the process for you to get a basic understanding of what it entails. Here are seven important points about estate planning:
- If you don’t have a plan in place, someone else will have one for you whether you like it or not.
It is extremely important to make sure you have an estate plan in place before something happens to you or a loved one, because if you don’t, you are leaving it up to the state to decide how to handle all of your assets. Each state, depending on where you live, has their own laws in place called intestacy laws. These laws determine who will inherit your estate, and how much they will inherit. To ensure you have a direct say in who inherits what from your estate, and how much, be proactive in planning your estate. Your family will thank you for it.
- Make sure all of your assets have named beneficiaries.
For certain intangible assets (checking accounts, workplace retirement plans, IRA’s, etc) having a beneficiary will save your family members considerable amounts of time when dividing your estate. In most cases, filling out a simple form for any bank accounts, or investment accounts will allow you to specify a beneficiary.
- Have an up to date Last Will and Testament.
There is a lot of morbidity while discussing estate planning, but it can save your family a great deal of time and money to have everything in order. Having a Last Will and Testament will certainly serve a clear road map to make the process as smooth as possible. Keep in mind, your will is not finalized until you pass away or become incapacitated. That means you can change the details of your will whenever you wish. Over the years situations change all the time, so don’t feel like you need to delay making a will. You can always go back and amend it.
- If you’re a parent of a minor child, name a guardian.
This one is almost self-explanatory, but I’ll break it down for you just in case. If you are a parent of a child who is a minor, and you pass away without naming a guardian, you won’t get a say in who the child ends up with. The thought of a parent passing away is scary enough, but then thinking about your child being under the care of someone you don’t approve of? I think the importance of naming a guardian for your child is one of the more extremely important parts when considering your estate.
- Continuously update your estate plan.
As mentioned before, estate planning is not a one time event. It’s extremely important to START the planning process, but it is almost equally as important to CONTINUE the planning process throughout the remainder of your life. Things can change in an instant, and it is very important to make sure your estate plan is up to date, and relevant for the current time in your life. An outdated estate plan isn’t going to help very much, so be sure to continue to check up on your plan from time to time to make sure everything is current.
- Have someone make your will.
There are a lot of Do-It-Yourself programs available for making wills. A will is NOT something you want to be cheap about. This a very important document that will ultimately tell everyone how to distribute your assets upon your death. Find a lawyer who specializes in estate planning and wills, and have a meeting with them. Have that person draft your will, and constantly update it with them. Trust me, you will be grateful you did, and so will your family members after you pass away.
- Who pays estate taxes?
Roughly only 2 out of every 1,000 estates face the federal estate tax. That’s 99.8% of estates will NOT face the federal estate tax. DO NOT confuse that for state tax though. The rules for every state are different when it comes to paying estate taxes. HOWEVER, just because you may not have to pay estate taxes does not mean you don’t have to worry about estate planning. EVERYONE should have some sort of estate plan in place regardless of if they will be paying federal or state estate taxes.
Estate planning can be a very complex situation for a lot of people. The great part is, however, there are plenty of professionals out there ready and willing to help you make your estate plan. If you need help getting your estate in order, don’t wait!
We’ve ALSO published TWO videos recently about estate planning, and living trusts. You can find those videos below!