Do You Need an Estate Plan?

by Kate Luther on 15 June 2010 2 comments
Photo: Stock Xchng

Say the words "estate planning" and what typically comes to mind are extravagant estates worth millions of dollars. Estate planning is for celebrities and the very wealthy, right? I  mean, the average working guy or gal can make do with a standard do-it-yourself Will.

Well, not necessarily.

One of the benefits of being a freelance writer is that I get to work with a variety of different clients on a variety of different topics. And in the process, I learn quite a bit about subjects I had never explored before, estate planning being the latest.

What I found is that estate planning is much more than just divvying up your coin collection and jewelry. Quite the contrary, there are a number of issues that a good estate plan can address.

A living trust for example, can provide you with a way to offer incentives to your heirs for personal accomplishments. Want to ensure your son or daughter goes to college? Make that a condition of receiving their distributions. Want to teach your children the importance of carving out their own place in the world instead of just relying on their inheritance? A trust allows you to do that as well.

You can also use a trust to provide for disabled dependents without affecting their eligibility for government assistance programs, and depending on how you structure your trust, you can ensure that your assets stay in the family, even in the face of taxes or a divorce.

Heck, there's even a specialized trust to protect your pets after you're gone.

A financial Power of Attorney allows you to designate someone to speak on your behalf if you become disabled or incapacitated and are unable to handle your own affairs. A Healthcare Directive provides the same protection in regard to your healthcare and medical decisions. 

But estate planning doesn't stop there and this is what really won me over.

A good estate plan also encompasses all the non-financial aspects of your life, like the old photo album in the top of your closet, grandma's quilt that lies at the foot of your bed, the tapes you made of Great Aunt Ethel's family stories and all the memories and knowledge that up until now, you've been carrying around in your head.

In short, creating an estate plan is about leaving a legacy...not just a few bucks and the deed to the house.

That's all well and good you say, but I don't have enough of an estate to worry about. 

Are you sure?

The problem with not having an estate plan is that you're still going to pass on someday. And when you do, the courts will step in and make all these decisions for you. That means that if property needs to be sold to pay creditors or taxes, you won't have a say over which property is used to cover those expenses. And someone must oversee the distribution of all your belongings, a process known as "probate." If you haven't designated that person yourself, then the court will make the designation for you and there's no guarantee you'll agree with their choice or the way your belongings are divided among your heirs.

Of course, by then, it would be too late to do anything about it.

Now, I know that no one likes to think about a time when they're no longer around but the truth is, it will happen whether we're ready or not. And I've realized that when that day comes for me, my kids will need to know where the important documents are. They'll need to know that I have life insurance and savings accounts as well as journals I've created for them over the years and keepsakes that are stored in my great-grandmother's hope chest. Personally, I kind of like the idea of taking care of things before I go...after all, that's what Moms do, isn't it?

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Clayton

Estate planning is extremely important in order to take care of your family in the event something happens. The power of attorney for example. If you get in a wreck and lose your ability to communicate, your still there, but if you have given power of attorney to your wife, then she can take care of things for you.

Planning for divying up your estate also takes out all of the huge emotional turmoil that goes on after the loss of a loved one. Families have gotten into huge fueds and long term fights when they try to decide who gets what.

Guest's picture

Everyone needs an estate plan. This is a good start for explaining what an estate plan is and why it is so important and what it can do for you.