For most people, estate planning is associated with retirement. When you are young, your focus is on your education, your career, getting married, and having children. We rarely think about our own death because it is an uncomfortable subject; therefore, we put off thinking about estate planning because we associate that with the end of our life.
However, estate planning is not just about what happens to your property after your death. Estate planning also encompasses what happens if you become physically or mentally incapacitated due to an accident, illness, or other condition making it impossible for you to manage your own affairs.
The best time to plan your estate is right now. Having an estate plan protects your loved ones and ensures your wishes and desires are carried out after your death or if you are unable to make decisions for yourself. Everyone, regardless of their financial situation, has an estate. Your assets may not be substantial at this time; however, you do own assets that will be inherited by someone.
Steps That Should Be Included When You Plan Your Estate
Each estate plan is different and you should plan your estate to meet your specific needs and desires. A variety of estate planning tools are available for you to use as you plan for your estate. While you may not utilize each of the documents below when you plan your estate, the following estate planning checklist is basic starter guide for planning your estate.
What is your current financial situation?
Your estate plan and the documents you need to protect your assets and your family will greatly depend on your current financial situation. As you begin to plan your estate, take an inventory of your assets and your liabilities. Consider how you want to distribute or use these assets after your death. As your financial situation changes, you will need to re-evaluate your estate plan and update your estate documents accordingly.
Prepare a Will
A will is the most important estate planning tool that you have and now is the best time to plan and draft your will. Your will allows you to name the person who will administer your estate, identify your heirs, distribute your assets, pay your debts, name a guardian for minor children, and set up a trust to manage the inheritance of minor children. Your will should be updated periodically to reflect changes due to divorce, marriage, birth of a child, death of an heir, or your changing desires.
Some assets pass directly to a beneficiary outside of your estate. These assets include life insurance policies, annuities, 401k accounts, individual retirement accounts, some investment accounts, and some trusts. Review and update your beneficiary designations to ensure these assets are paid to the proper person upon your death as you plan your estate.
Create a Healthcare Power of Attorney
When you plan your estate, you need to include documents to address incapacitation. If you become incapacitated or you are unable to make healthcare decisions for any reason, a healthcare power of attorney allows you to designate a person to make those important decisions for you. Do not leave this power up to state laws to decide who has the power to make medical decisions on your behalf.
A living will is not a healthcare power of attorney. A living will states your desires with regard to receiving life-prolonging medical treatments and care such as life support and feeding tubes. It allows you to designate a person as your agent to direct medical professionals to adhere to the wishes expressed in your living will. Some states permit you to include these provisions in your healthcare power of attorney; however, this is not always the case. You should check the laws of your state as you plan your estate to ensure your desires with regard to these medical decisions are protected.
Durable Power of Attorney
A power of attorney is used to appoint a person to act on your behalf with regard to financial decisions. Your attorney-in-fact can do anything in your name that you can legally do on your own behalf. Examples of actions your attorney-in-fact can take include opening and closing financial accounts, buying and selling real estate or other assets, managing investments, filing lawsuits, entering settlements, and negotiating and entering contracts. A durable power of attorney remains valid even if you become physically or mentally incapacitated thus allowing your attorney-in-fact to transact business if you are unable to do so yourself.
The Best Time to Plan Your Estate is Now
Remember, a basic estate plan is usually easy and inexpensive to put together. Everyone should have a basic estate plan to protect themselves and their loved ones. Do not make your death more difficult on your loved ones by making the probate process more difficult than it has to be. Take the time to plan your estate now.