Estate planning is the process of figuring out what happens to you, your loved ones, and your property upon your incapacitation or death. Life events such as disability or death can happen at any time. Estate planning is preparing for how to deal with these events, giving you and your loved ones peace of mind.
Here is a quiz to see how much you know about estate planning.
Question: When should you think about estate planning?
(a) When you have a lot of money
(b) When you are old
(c) When you are sick
Answer: (d). Now is a good time to put down your wishes for the future. Estate planning has less to do with the amount of money you have but more with protecting what you do have. While it is critical if you are seriously ill or near death, you could face incapacity at any time.
Question: What do you need to know before starting an estate plan?
(b) My estate tax liability
(c) Details about every single thing I own or will own in the future
(d) Some basic information about my wishes
Answer: (d). To start your estate plan, all you need to know is your wishes about your property, money, and health care. Estate planning is flexible to handle property you own or will own in the future and provide for children adopted or born after you make your will. So, you don’t have to worry that your estate planning is wrong if you acquire additional property or add more children to your family.
Question: If you do not have a will in place and you die, your property:
(a) Goes to your loved ones
(b) Goes to your family members
(c) Goes to the state
(d) Is distributed by the probate court according to state law
Answer: (d). If you die without a will, called “dying intestate,” a probate court determines the distribution of your estate according to state law. And you may not like the result.
A will specifies who should receive your property, whether that is your spouse, children, significant other, or charitable organization. However, not all of your property transfers by will. Real estate in your name transfers by deed. And most of your assets pass through beneficiary designations. You may list beneficiaries (and contingent beneficiaries as backups) to receive your assets when you die. Accounts and policies that transfer to named beneficiaries include:
- Bank accounts and savings accounts
- Investment or brokerage accounts
- Retirement accounts, IRAs
- Proceeds of life insurance policies and annuities
These assets pass outside your will, so while a will is critical for naming guardians for children, not all property transfers through your will.
Question: What makes up a complete estate plan?
(a) Last will and testament
(b) Last will and testament and lottery tickets
(c) Last will and testament and funeral plans
(d) Last will and testament, power of attorney, and health care directive
Answer: (d). The basic estate planning documents you need are a last will and testament, a financial power of attorney, and a health care directive.
- A last will and testament identifies your property and beneficiaries and instructs your personal representative on handling your estate. You also may name guardians for young children or caretakers for pets.
- A durable power of attorney is a legal document where you appoint someone to handle your financial decisions if you cannot. You specify when the power of attorney begins and ends and what powers your agent has the authority to do.
- A health care directive, or medical power of attorney, is a document where you appoint someone as your health care proxy to receive your medical information and make health care decisions for you when you cannot. A living will is part of advanced health care directives. You may also leave your instructions about life-prolonging procedures and treatments for end-of-life medical care.
Question: The easiest way to start estate planning is to:
(a) Talk to friends and family about their estate planning
(b) Make an appointment with an estate planning attorney
(c) Read articles on FindLaw’s estate planning resource pages
(d) Go to FindLaw’s DIY Legal Forms and Services to create your legal documents
Answer: All of the above. The estate planning process does not have to be complicated. Unless you have significant wealth and need tax planning or have dependents with special needs and want a trust, you can do most of your estate planning yourself.
If you can answer the following questions, you are well on your way to beginning your estate plan:
- Who do you want to handle your estate when you die (your personal representative or executor)?
- What property do you have to give away?
- Who do you want to inherit your property?
- Who do you want to care for your minor children, dependents, or pets?
- If you are incapacitated, who do you want to handle your money and pay bills for you?
- If you are incapacitated, who do you want to make medical decisions on your behalf?
In conclusion, estate planning is a crucial process protecting you and your loved ones during incapacity and death. It is not reserved for only wealthy or older adults but everyone regardless of age or income. By answering a few basic questions and formalizing your wishes in legal documents like will, powers of attorneys, and health care directives, you can preserve your legacy and provide for your loved ones.