Thinking about how you’d like your assets to be distributed after your passing is a start, but putting those thoughts into an estate plan ensures that your thoughts will translate into reality.
Even if you aren’t wealthy or even near retirement age, you still need an estate plan. If you own anything, including a home, any financial accounts or even a car, you have an estate.
As Vanguard’s recent article, “5 estate planning facts you need to know now” explains, your estate includes both tangible and intangible personal possessions and real property.
An estate plan is a set of legal documents used, if you become incapacitated or die. The documents detail your wishes when you’re unable to communicate on your own behalf.
A typical estate plan contains the following:
- A will: it says who’ll get your assets and in what manner;
- A general power of attorney: designates a person to look after your financial needs, if you become incapacitated;
- A healthcare power of attorney: designates a person to make healthcare decisions for you, if you become incapacitated or are otherwise unable to do this for yourself; and
- An advance directive for healthcare (or living will): this states your wishes, if you can’t make decisions for yourself.
Before you sit down with an estate planning attorney to create your estate plan, look at the whole picture, including both assets and liabilities. Make a personal financial inventory that includes details about your holdings as well as your debts.
Remember that if you die without an estate plan, your assets will be distributed according to your state’s intestate laws, and if you have minor children, the court will determine who will care for them.
Once you have your estate plan, it’s important to keep it up-to-date. Review your estate plan—especially your beneficiary designations—every three or four years. You’ll need to make changes after a major life event, like a marriage, divorce, death, adoption or a birth.
A word to the wise: software programs and websites may claim to let you create a will on your own. The problem is, you won’t know if these conform to the laws of your state, or if they will even be appropriate to your situation, until you have passed away. Many estate planning attorneys devote a great deal of time for cleaning up the messes left behind by do-it-yourselfers. Protect your family by working with an experienced estate planning attorney.