Estate planning is ultimately about your loved ones. It is about making tough decisions and articulating your wishes while you are alive and healthy so that your loved ones do not have to make those difficult decisions while also caring or grieving for you. Estate planning also gives your loved ones confidence that they are carrying out your wishes. Despite the benefits of estate planning, an estimated 55% of Americans do not have a will, the cornerstone of an estate plan. This number is unfortunately much higher among Blacks and Hispanics. Part of this may be due to misunderstandings about what an estate plan is and why even the average American should have one.
Estate planning is not only for the rich, elderly, or terminally ill. An estate plan should be part of every responsible adult's overall financial plan, along with insurance needs, college tuition savings, and retirement goals. You should plan your estate now and then reconsider your needs each time your financial or familial circumstances change and adjust as necessary.
What is an Estate?
When most people think of an estate, they think of a large home or a huge portfolio of monetary assets. This common concept is misleading. Your estate is comprised of all of your earthly possessions (tangible and intangible) – everything you own, including, but not limited to your home and other real estate, vehicles, furniture, jewelry, pets, insurance, financial accounts, and benefits.
Why Do You Need an Estate Plan?
To plan for death
No one wants to contemplate death. It seems morbid to focus on one's own mortality. However, it is important and beneficial to confront this reality; it is crucial if there is someone depending on you. Without a valid estate plan, including a will, and possibly a trust, state law will dictate what happens to your property, and often as a result, your loved ones at your death. Have you taken the proper steps to designate who would take care of your children if you (and your spouse) were to pass today? What about your pets?
To plan for incapacity
An estate plan enables you to plan for mental or physical incapacity. While no one anticipates ending up incapacitated, the reality is that every day there are healthy individuals who unexpectedly face catastrophic, life-altering, events. What would you want to happen if you faced a major illness? Do those around you know what you would want? Have you talked with your loved ones about the care you would want to receive? Do those closest to you share the same ideas about faith or quality of life? The estate planning tools used to express your wishes and designate who will act on your behalf are the advance medical directive (commonly known as a living will), which includes the designation of a health care agent (medical power of attorney), and the durable power of attorney, which designates an agent authorized to make financial decisions on your behalf.
To coordinate with other kinds of financial planning
Like most Americans, you likely have specific financial goals. However, have you stopped to think about how those goals would be impacted by your incapacity or death? For example, are there charities that you are passionate about and continuously support? Are you providing for a loved one's education? What would you want to happen to these contributions if you became incapacitated or passed away unexpectedly? If you are a business owner, you have an obligation to consider what would happen to your business if something happened to you. Have you designated someone to continue running your business if you were to pass unexpectedly or become incapacitated? Would you want your business to remain in the family? Business succession planning is a must for the responsible business owner.
Estate planning does not have to be creepy or morbid. It can be a positive process that helps you to articulate your life goals. It can provide you with peace of mind knowing that you have done all you can to protect the people you love and the things you have worked so hard to obtain. If you have not yet created your estate plan, or if you have not had your estate plan reviewed in light of the current laws (e.g., post 2012), make it a goal to sit down with a trusted professional to discuss your needs and options before the end of the year.
© 2015 The Law Office of Aubrey Carew Sizer. All Rights Reserved.
Posted on: October 27, 2015