Making an estate plan is one of the most important things you can do. It can give peace of mind to yourself, a surviving spouse, and your family members.
Despite its importance, estate planning is often considered a low priority by many people, even as they age. It can also be hard for people to think about their own eventual death or incapacity.
Creating a proper estate plan can make the difference between having:
- Your assets and other property following your beneficiary designations
- A court making decisions that may not reflect your wishes
People who plan their estate have the advantage of avoiding probate costs, supporting minor children, and making changes to their plan during their lifetime.
Types of Estate Plans
A will, a power of attorney, a health care directive, and a trust are some of the types of estate plans. All these legal documents together are also called "an estate plan."
As you begin planning, it's important to be informed about the various forms of estate plans, so that you can decide which is the most suitable.
For example, one plan might be more advantageous than another when it comes to estate taxes.
Estate planning can also include choices about your end-of-life care and medical care through:
- Health care power of attorney (POA)
- Living will
- Advance health care directive
These documents can give a loved one or another person the right to make medical decisions on your behalf. They can legally act as your health care proxy.
As part of your estate plan, you can also create documents that give someone else the power to make financial decisions. A financial power of attorney is helpful if you ever face incapacity or accidental death.
Life Insurance Policies Within Your Estate Plan
You can have an estate plan without having life insurance. However, life insurance will provide benefits to your beneficiaries when you pass away. It can be a useful tool within your estate plan.
Retirement Accounts Within Your Estate Plan
Retirement plans can also be part of your overall estate plan. Your estate plan documents will create a plan to transfer your money and assets after death. Often this includes retirement accounts you created earlier during your life. IRAs,
Estate Laws 101
The federal government and each state have estate laws. These laws cover issues such as:
- Estate taxes
- Income taxes
- Tax exemptions
- Estate planning process requirements
- Probate process
- Dispute settlement process
If you're considering an estate plan, make sure you fully understand the laws that apply. An attorney or at-home DIY guided process can help you make an informed decision about the plan that most suits your needs and wishes.
The Consequences of Failing to Plan
In extreme cases, a failure to plan one's estate can lead to ugly disputes and costly lawsuits between family members.
If a court is asked to distribute assets, it may do so in a way that doesn't reflect the decedent's wishes.
Also, it can take a year or more for a court-appointed executor to locate and manage estate property. Another consequence of lacking an estate plan is the payment of unnecessary taxes and other costs.
Estate Planning Help
You have options for estate planning strategies. You can:
- Learn more with free resources and guides
- Talk with an estate planning attorney
- Use a guided, state-specific process to create documents
If you have a complex estate or family dynamic, you may want to contact an estate planning attorney first. State laws vary considerably and communicating this essential information without vagueness can be difficult. An attorney can make sure you still comply with local rules.
A guided online process can take complex ideas and help simplify them for you. It can also help you get paperwork organized and start the framework of your plan. The better you understand the requirements, the easier and more effective your time with an attorney will be.
First Steps In Your Estate Plan
Organization and preparation are always helpful in estate planning. The time spent preparing yourself and your paperwork can often translate into a cheaper and more thorough analysis of your needs.
You may want to review an intake questionnaire to know what types of questions to think about. Choices about your health, property and family connections may need weeks of thought before you know your wishes.
Learning More Before You Start
The articles below can educate you on the types of big decisions you will need to make. Though the decisions can be hard to think about, an estate plan will ensure that your wishes are communicated clearly and with the maximum weight of the law. It will also anticipate and avoid negative tax implications.