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Estate Planning: Create Your Legacy
Estate planning is not only for the wealthy, it’s for everyone. Here’s how you can get started.
Nov. 9, 2020, at 11:29 a.m.
Times of uncertainty, like today’s global pandemic, can underscore just how important it is to have an estate plan.
Estate planning is crucial to leave a lasting legacy for your family no matter your health status. But more than half of Americans – 56% – don’t have an up-to-date estate plan, according to the National Association of Estate Planners and Councils.
A good estate plan can ensure your property is given to the person you feel is most deserving. It can also eliminate the stress of hard decision-making for already grieving family members and friends. Here’s what you need to know about starting and managing your estate planning:
- What is estate planning?
- How can you create an estate plan?
- How to keep your estate plan up to date.
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What is Estate Planning?
Estate planning is a powerful phrase with a simple aim: To create a plan to protect yourself and your loved ones in the event of sickness, accidents or death.
It’s not a luxury reserved for the wealthy. If you’re a spouse, parent, single person, part of a blended family, homeowner or business owner and want to control your health care and assets if you become incapacitated or pass away, you need to answer important estate planning questions.
Estate planning can include everything from the type of health care you want to receive, who is allowed to make medical and financial decisions, and who you want to inherit your assets after you pass away. Despite its importance, many adults overlook estate planning perhaps because considering your mortality is uncomfortable.
No one wants to think about life after they’re gone, but you also don’t want to leave your family without the guidance they need to care for you, your health and your assets if you become unable to manage it on your own.
Why You Need an Estate Plan
Rather than letting your family fight among themselves to decide how to distribute your property and assets, your estate plan can spell out your wishes after your death.
There are also estate planning laws to consider. Without a plan, the state’s probate laws could determine how your property is divided after your death and that can lead to unwelcome surprises.
Each state has its own probate code that governs how a decedent’s property is distributed after death. It’s important to understand the laws of your jurisdiction and how it could affect your assets.
For instance, without an estate plan, Michigan law requires the deceased spouse’s belongings to be equally distributed between you (the spouse) and his parents if you and your spouse don’t have children together. By setting a plan in place, you’ll designate the beneficiaries to receive your assets. Otherwise, your property could be dispersed to unintended parties by default through the complicated process of probate.
What’s Included in an Estate Plan
Estate planning involves many legal documents and processes. It also requires a comprehensive understanding of the laws in your state, which is why it’s recommended to seek the help of an attorney who specializes in probate and estate planning.
It’s also helpful to educate yourself on what you might need to include in your estate plan to ensure your final wishes are carried out. While no two estate plans are the same, several similarities exist among even the most complex situations.
Most estate plans include:
- Last will and testament. A will is the principal component of every estate plan whether or not you have substantial assets. In your will, you name who receives your property, your children’s guardian and an executor to oversee the probate process.
- Durable power of attorney. A standard power of attorney gives another person the authority to act on your behalf in financial or legal matters. A Durable POA will remain in effect if you become mentally incapacitated.
- Living will. A living will applies only to end-of-life care. It allows you to specify your desires regarding life-prolonging measures if there’s no hope of recovery.
- Trust. A trust can transfer your property without going through probate. Because probate records are public, a trust can be preferred if you have privacy concerns. It also can control your assets while you’re still living and after your death.
Another common part of estate planning is beneficiary designations. Assets such as 401(k) plans, life insurance, bank accounts and investment accounts typically allow you to name a beneficiary to receive the funds once you pass away. By designating a beneficiary, you don’t need to include the asset in your will or trust because it can skip the probate process.
How to Get Started with Estate Planning
It’s easier than you think to establish your estate plan. It starts with a comprehensive look at your possessions and your family’s needs. Inventory your belongings, including real estate, vehicles, collectibles, personal items, checking and savings accounts, life insurance policies, retirement accounts and business assets. Consider your family’s needs by ensuring you have enough life insurance, name a guardian for your children and document your wishes for your children’s care.
Ask a financial professional to refer you to a qualified estate planning attorney. You can also ask family and friends or check local listings. Interview several candidates and understand the fees involved before making your final decision.
Once you hire an attorney, work with them to review your beneficiary designations and establish your estate planning documents. Remember: The attorney has the legal expertise, but it’s your estate plan. If you’re not comfortable with the attorney’s suggestion, make your concerns known.
Keeping Your Estate Plan Up-to-Date
Setting up your estate plan is only half the process. Like other areas of financial planning, your estate plan should evolve. As life changes, your assets, beneficiaries and wishes can also change. It’s a good idea to review your estate plan regularly or at key life events:
- The birth or adoption of a child or grandchild.
- When a child or grandchild reaches the age of majority.
- Death or a change in circumstance of the named guardian for your minor children.
- Marriage or divorce.
- The purchase of a home or other significant asset.
- If you start or close a business or experience a career change.
- Federal or state law changes regarding taxes and investments.
- If a beneficiary passes away or becomes disabled.
Your estate plan can become more complicated as you experience life-changing events. Review your estate plan on your own and with an attorney to get the legal advice you need to set up your estate plan. Then, revisit it regularly, at least once every five years, to keep it up-to-date and ensure it reflects the legacy you want to leave for your family.
Takeaway
Estate planning isn’t new. The passing along or distribution of property has been around for as long as people have had property. However, laws have changed the way inheritance, investments and taxes are handled and we must also change the way we pass along our assets.
Tags: retirement, 401(k)s, IRAs, financial advisors, financial goals, financial literacy
Renee E. Nesbit, Attorney at Law
1415 Panther Lane, Suite 434
Naples FL 34109
LEGAL DISCLAIMER:
The information contained on this website is presented for informational and marketing purposes only and is not to be understood as legal advice. You should consult an attorney for advice respecting your individual needs. Renee E. Nesbit, Attorney at Law looks forward to speaking with you about your particular needs. Please note, however, that the mere act of contacting our firm does not create an attorney-client relationship. As a result, you should never send any confidential information to our office until a Representation Agreement has been signed by both you and Renee E. Nesbit, Attorney at Law.