You just landed your first “real” job and are looking forward to the exciting opportunities ahead. Your new job is accompanied by a 401k and opening a savings account. You have a car and you are thinking about buying your first home. If you have a 401k, you have an estate. If you have a savings account, you have an estate. If you have a car, you have an estate. An estate refers to your possessions including your home and other tangible personal property items, such as your car, furniture, and jewelry, as well as bank accounts, investments, pension, and life insurance policies. Since you have an estate, it is essential to have an estate plan. You may think estate plans are only for people with actual “estates” or maybe you may feel that you do not have enough money to warrant needing an estate plan. However, this is not the case. By creating your estate plan, you can ensure that your possessions, also known as assets, will be handled in the way that you want if something should happen to you.
What is an Estate Plan and Why is it Needed?
An estate plan consists of a set of legal documents that allows you to outline your wishes describing how you would like your assets to be managed and distributed upon your death. Estate planning documents also allow you to identify who you want to carry out your wishes upon your death or incapacity. There are a few key reasons why having an estate plan is necessary.
The first important explanation is that estate planning documents give you the ability to select who you want to help handle your assets upon your death or incapacity. They also allow you to decide who you want to leave your assets to and which assets you want them to receive upon your death. Without an estate plan, the court system will interpret your state’s laws to determine not only what happens to your assets but also who administers the distribution of your assets upon your death. In this case, a person who you do not trust could be chosen by the court to manage your estate. This could result in one of your most cherished possessions landing in the hands of someone who you do not wish to have it.
Additionally, not having an estate plan can also put an unnecessary burden on your family who are left to deal with sorting out your finances and distributing your assets during an emotional and difficult time. If there are no clear instructions on how to manage and distribute your assets, arguments can unfold among family members that lead to possible litigation over your estate. When you devise your estate plan, you have control, security, and peace of mind knowing that you, your family, and your hard-earned assets are protected.
Lastly, having an estate plan can also assist with managing and planning for probate. Probate is the court-supervised process used to value your estate, settle any debts you have, pay taxes, and distribute your assets to your beneficiaries. Without an estate plan, the probate process can take longer than expected and cause the process to be more expensive while your assets are left in legal limbo for an extended period of time.
What Documents Are Needed for An Estate Plan?
If you are young and single, you may need only a few relatively simple documents including a Will, a Durable Power of Attorney, and an Advance Medical Directive. If you have children, you need to name a guardian for them, which can be done in your Will. If you have substantial wealth, you may need a Trust to help control how your assets are managed and distributed. These documents can be explained as follows:
- A Will, also known as a Last Will and Testament, allows you to outline how you want your assets to be distributed and who you want to take care of your children, dependents, or pets.
- A Durable Power of Attorney enables you to pick someone who you would like to help you manage your finances when you cannot do so, such as upon your incapacity.
- An Advance Medical Directive allows you to define your wishes for end-of-life treatment if you are too ill to direct your own care and also allows you to select a person to communicate with doctors and make medical decisions when you are incapacitated.
- A Trust is an agreement that allows a third party, known as a trustee, to manage assets on behalf of your beneficiaries.
Once your estate plan is created, it is essential to review your estate plan every few years or upon a life-changing event, such as marriage, divorce, or the death of a family member or beneficiary, to ensure that your plan continues to reflect your wishes.
Conclusion
Regardless of your financial status, everyone can benefit from having an estate plan. Dunlap Bennett & Ludwig’s experienced estate planning lawyers are happy to meet with you to discuss the specifics of your estate and will assist you in preparing an estate plan that best fits your situation.
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