Completing Your Estate Plan Is Not Difficult
More than half of American adults don't have a will. It may seem like you don't need an estate plan unless you are wealthy or have young children; false! In reality, an estate plan covers a variety of different scenarios. For example, it can help protect you if you get in a car accident and need medical care while unconscious, or keep your finances private if that same car accident kills you. For those of us with minor children, the number of Americans without a will is even worse; 64% of us ignore our end-of-life plans. Who will take care of your children if something happens?!
I'm guilty of neglecting my own family's estate planning for way too long. It wasn't intentional neglect, but there were many reasons why estate planning kept getting bumped down my to-do list. First, I made the appointment with the attorney; but my husband had a last-minute work trip, so we canceled. Then, we received a pre-questionnaire to complete before rescheduling. That document sat on our kitchen counter for at least three months before it disappeared. It may have been accidentally tossed in the garbage during one of my caffeine-fueled cleaning binges. More likely, my husband filed it away in a drawer of miscellany, never to be seen again. We kept avoiding this critical task for many reasons, some practical/logistical, some emotional and subconscious(avoidance of my mortality, etc.).
Today, I'm writing this from the other side, having completed my family documents. If I can do it, so can you! It gives us great comfort to know our affairs are in order and guardians have been named for our young children. I promise that getting past your hurdles/excuses (real and imagined) to get this done for your family will be very rewarding.
What is Estate Planning?
The process of making explicit instructions for how your life (money, home, belongings, and your children!) will be handled if you become incapacitated or pass away. Typically the estate planning documents include:
A will is a legal guide for what you want to happen to your possessions when you die. One of the essential parts of a will is who you name executor. This person becomes responsible for carrying out the wishes outlined in your will. If you don't name an executor, a judge will appoint one — usually your closest living relative. When you die, your will goes through probate, which is a public process involving a court. Having a valid will makes this process easier, but you still go through probate. And probate is public, which means any information that goes through this process becomes part of the public record. Many people don't want details of their estate made public.
Trusts do not go through the probate process, so they can be an excellent way to pass assets on to beneficiaries efficiently. There are various types of trusts (revocable and irrevocable) for different purposes (legacy, charitable giving, special needs, and so on). Revocable living trusts are the most commonly used in estate planning.
When you create a trust, you are the trustor. You also name a trustee — the person who will control your trust, as well as beneficiaries, who receive the assets within it.
Durable power of attorney
A power of attorney gives someone (the agent) the right to act on your behalf regarding financial matters. A durable power of attorney lasts after you're incapacitated. Essentially, if you are hit by a car and unconscious, this is the person who makes sure your mortgage gets paid.
Frequently, the executor, trustee, and the financial power of attorney are the same person simply because things go more smoothly when these three roles work well together. That said, they do not need to be the same person.
There are different types of powers of attorney. Medical powers of attorney are often granted as part of a broader healthcare directive (sometimes called an advanced care directive), which details your wishes if you're unable. You can tell your agent what you'd like them to do. The rules and forms for these directives vary by state.
Your estate plan also needs to detail who gets what. Things like retirement accounts and life insurance policies don't go through probate and instead pass directly to the named beneficiaries. That means you need to name who you want to be the beneficiary on these accounts. (If you have a trust, it's possible to name a trust as the beneficiary for these.)
Finally, if you have kids, your estate plan needs to detail who you want to be their legal guardian if anything should happen to you. You're not legally required to notify this person (they don't need to agree to it), but most people have this conversation ahead of time to ensure whomever they name as guardian is comfortable taking on that role should the need arise.
How much does it cost?
Essential estate plan document creation will range from $750 to $1,250. If you own multiple real assets or desire more nuanced asset distribution instructions or control of assets, you should also create a Trust. Trust document creation can be expected to cost an additional $1,000 or more, depending on the complexity and your State of residence. In addition, there may be additional fees to re-title assets/property to your new Trust.
Keep in mind that you can always start with the essentials and make changes at a future date as your financial situation becomes more complex.
For most people, estate planning isn't fun. It requires you to think about, in great detail, a lot of worst-case scenarios. But planning ahead ensures that your family and friends are not burdened by both grief and the logistics of managing your affairs without knowing how you would have wanted things handled. Creating an estate plan ensures you make the critical decisions versus a probate judge.
Call us for a recommendation to a local attorney or access to an online platform to help you get this done in the easiest way for your family. Commit to getting this done for your family this year. You'll never regret it.