New research shows that 3 in 5 Americans do not have a will. Another recent study has also revealed that almost half of people over 55 do not have a will, and only 18% report having estate planning in place.
Although the data shows that it’s very common for Americans to go through life without estate planning—or even a will—this is not necessarily a good idea.
If you pass away without having implemented proper estate planning you expose your estate and beneficiaries to a number of risks.
Read this estate planning guide to find out what estate planning is, why it’s important, and how to go about it.
What Is Estate Planning?
Estate planning is the process of arranging your affairs so that upon death or physical impairment your wishes will be easy to have carried out.
During estate planning, you will need to draw up a series of documents that stipulate your wishes and puts in place contingencies for death or medical impairment.
One area that can get confusing for people is the differences between wills and testaments, trusts, living trusts, and estate plans. Let’s get clear on these terms.
Testaments vs Trusts vs Estate Plan
Estate planning often gets confused with the act of making a will and testament.
Drawing up a will and testament is part of estate planning, however, estate planning goes beyond creating a will. Forming different types of trusts (such as living trusts) is also part of estate planning.
Why Estate Planning Is Important
As you can see, estate planning is more comprehensive than drawing up a will and testament. It includes a will, but it can also comprise of trust formations, tax planning, living wills, power of attorney, etc.
The main benefit of estate planning is that it will take care of your estate in a more thorough way that a simple will and testament can. This will make your estate legally stronger, and will also include provisions for difficult circumstances, such as guardianship of a child.
Because of this, estate planning can work to protect your beneficiaries from unforeseen legal proceedings or any contesting of you will. Additionally, thorough estate planning can reduce family fights after your death.
Lastly, estate planning can help you to spare your heirs from unnecessary taxes.
Who Is It For?
Estate planning is generally a good idea. However, there are some instances where a will can suffice.
For example, if you are single and you have few to no assets, then a simple will and testament will probably be adequate.
On the other hand, if you are married, have children, have a number of assets and assets types, have a blended family, are older, or have a high level of financial responsibility to those around you, then it’s likely that you should implement estate planning.
In short, estate planning is advisable when you have more assets, more financial responsibility, and a more complicated will.
The Basics of Estate Planning
Now that you know about the importance of estate planning and who needs to do it, let’s take a look at the basics of estate planning.
First up, every estate plan needs a will and testament. To be valid, the will needs to be signed by yourself, as well as two witnesses. If you want to know more, take a look at this video on who needs to sign a will for it to be properly executed.
Besides this document, you will also need a few other things to put in place a solid estate plan. These include the following.
Beneficiary designations stipulate which of your heirs are entitled to receive the money from any life insurance policies, retirement accounts, and other savings accounts that you may have.
Living wills detail your wishes should you suffer severe illness or incapacity that leaves you unable to make decisions etc.
For example, if have religious beliefs around resuscitation, these should be included in a living will. You should also list any preferences you have around organ donation and life support machines.
Healthcare Power of Attorney
A healthcare power of attorney is someone who is authorized to sign and make medically related decisions on your behalf should be you be incapacitated.
This person would usually be your spouse, child, or someone else who you trust implicitly.
Durable Power of Attorney
Another important component of an estate plan is a durable power of attorney. By giving someone durable power of attorney, you will ensure that your family can remain financially stable in the event of you becoming incapacitated or passing on.
Giving someone signing power means that they can make financial decisions if you are unable to, among other things. A durable power of attorney can be given to a spouse or other trusted family member, or it can be given to your attorney.
If you have children that are underage, you should also include guardianship designations within your basic estate planning. However, if you have already stipulated guardianship for your children within your will, you do not need to create an additional document.
Letter of Intent
A letter of intent is left to your executor or beneficiaries and lets them know what you intended for your estate or for particular assets. This document is not recognized in the eyes of the law, however, if it comes to it, it can help a probate judge gauge what your true intentions were for your estate—should there be any complications or your will is deemed invalid.
A letter of intent can also list any funeral arrangements that you would like carried out.
Where to Start With an Estate Plan
Are you ready to start laying out your estate plan? If so, congrats, it’s a smart move.
The first things to get clear on are your assets and beneficiaries. What is the value of your estate, and how do you want to apportion it?
Once you have given this some consideration, your next step should be to contact your attorney and ask them to start drafting the necessary documents. You may also wish to speak to them or to your accountant about estate-related tax planning.
Use This Estate Planning Guide to Guarantee Your Legacy
If you have a legacy to leave, whether large or small, you need to use the information in this estate planning guide to ensure the safe transfer of it to your loved ones.
If you require the assistance of an attorney, look no further. I specialize in wills and estate planning and am excited to help you with everything you need for your estate plan. Contact me, or browse my services today.