law gavel

Why You Need an Estate Plan

Posted by

An estate plan might be the last thing you want to think about. Talking about what would happen if you were to pass away isn’t exactly light conversation. So of course I brought it up randomly one day to my husband. We talk about money often and are at the point in our lives where we need to address this too. One of my optional employee benefits is for legal work that includes basic estate planning. I’ve done a will on my own online but I was never completely sure it was done right. So, after a little nudging my husband and I met with an estate planning attorney. Here is what I’ve learned from the experience.

What is an estate plan?

An estate plan provides instructions that will help the courts carry out your wishes when you are unable. Basic estate planning documents include a last will and testament, power of attorney, guardianship, beneficiary designations, and health care power of attorney. Some of these may not apply for every situation but most people can benefit from at least a few of them.

Everyone has things. Your home, business, pets, clothing, jewelry and furniture are all items to consider when you make an estate plan. Even if you don’t have much there may be something you want to leave to a specific person. Putting it in writing will help make sure that happens. Without instructions the courts decide who gets what. This could delay your estate from settling for years while people fight over what they want. No one wants that but it does happen, even in loving families.

When do you need one?

You might be thinking an estate plan isn’t that important if you don’t have much of an “estate”. The living portions of the estate plan might be more important if you are just starting out. When you become an adult no one else can make decisions on your behalf. While this is a great part of being an adult it also leaves you vulnerable. No one can just help you without the legal right to do so. A health care power of attorney allows someone you choose to make medical decisions on your behalf if you can’t.

A power of attorney allows someone to handle your legal or financial situation for you. If you are married and have separate bank accounts you need power of attorney to be able access those funds. Without one you would need to go to court which could take more time than you have. If one of you “handles the money” make sure your spouse knows what accounts and bills you have. They could be in a really tough situation if something happened to you and they don’t know what to do.

Got kids?

My biggest concern and reason for wanting an estate plan is my children. They are young and would need a guardian if something were to happen to us. The great thing about my family is there are several relatives that would step up to the task. However, if everyone stepped up it would be chaos. It could actually cause drama if we didn’t document what we wanted. This situation would already be stressful for our children and family so having this done helps avoid that issue.

The truth is if you don’t choose the guardian for your children the court will. They will gather information and try to make the best decision for the child. Lets be real here, no court would know better than you. Also, minor children can’t handle insurance proceeds or property so someone else will need to do that to. By structuring things the right way you can make sure wealth passes properly by using trusts and updating beneficiaries. You can also choose the ages the children will inherit once they become adults. We chose 26 for the age that they would be able to handle the money on their own. My son would be a senior in high school at 18 and it seemed early. The trustee will help them until that point.

What about trusts?

Not everyone needs a trust. Depending on your assets and where you live (or die) they might be really important for some people to consider. I live in Massachusetts which is just about the worst state to die in when it comes to estate taxes. You may be over that million dollar threshold without even realizing it. If you own a home, have retirement accounts or insurance keep reading. This might apply to you even if you don’t feel like a “millionaire”.

A revocable trust isn’t going to do anything when it comes to estate taxes. A lawyer can help you determine if irrevocable trusts, charitable trusts or qualified personal residence trusts make sense. When the situation gets complicated a financial planner can help by working with your attorney to make sure the right accounts fund the proper trust. Making mistakes in this area can cost you. If you have a beneficiary with special needs trusts can be very important. They may keep them from losing benefits that they need. Also, it makes sure a trustee is there to handle the finances properly.

How often do you do this?

The attorney we spoke to recommended looking at the estate plan every 7-10 years. One questions she asked made me realize how important this is. She asked if something happened to one of my children where I would want their inheritance to go. We quickly said to the other child. Of course, they are 4 and 6. However if we never update this it could mean disinheriting our future grandchildren. This is not on our radar right now but life changes and the plan should adjust accordingly.

How much does it cost?

There are lots of different ways to get this work done. One way is to use an online legal service. This can be done inexpensively and quickly. If you just need a simple health care proxy or basic will it is better than nothing. Unless you don’t get it notarized and filed properly. Then it is not better than nothing because you paid for something that has no value. If you want to make sure it is done right you will want to work with an attorney. I found mine through our legal benefit at work and the cost is covered by my $12 payroll deduction. You may be able to find someone to help you in your price range. I’ve talked to a few that will do the basic work for under $1000. Find someone you feel comfortable with since you may have a lot of questions. The cost is worth it for the costs and chaos you will help avoid. I’ve seen people shell out more for a first birthday party but drag their feet on this one. I will continue to beat this drum for my clients until they do it because it really is that important.

Do you have an estate plan?  Still on the fence? Check out some of the most famous celebrity estate dramas here, here and here.

estate law legal

Join the conversation! Comment below

This site uses Akismet to reduce spam. Learn how your comment data is processed.