Estate Planning: Why Everyone Over Age 18 Needs a Plan
March 30, 2016 | Your Finances
Estate planning might sound like something for the rich and famous to worry about, but everyone over the age of 18 should have an estate plan. If something were to happen to you, an estate plan spells out your wishes—and not just when it comes to who will receive your money and property. It also details who will take care of your children and your personal wishes when it comes to making medical decisions on your behalf.
No one likes to consider the worst-case scenario. But when you have an estate plan in place, you'll have peace of mind knowing that your loved ones won't have the stress of making tough decisions on your behalf when they're already dealing with your illness or death.
Don’t know where to start with creating an estate plan? Here are five easy steps you can take to make sure your wishes are known and your loved ones are protected.
1. Write down what you own and what you owe. Compile a comprehensive list of your assets (bank, investment and retirement accounts, property, life insurance, valuables, etc.) and debts (loans and credit cards), including account numbers and contact information for financial institutions and advisors. Also include the information for digital assets such as your social media accounts. Keep the list in a secure location along with original copies of other important documents, and provide a copy to someone you trust.
2. Document your wishes. Who gets what when you’re gone? What medical care do you want in the event of a serious illness or injury? You need to list all this in the right legal documents,such as a will (for who gets what) and a living will or health care directive (for your end-of-life wishes). You should also confirm beneficiaries for your life insurance policies, retirement accounts and other assets; and ensure possessions such as automobiles and property have proper titles.
3. Determine who will take care of your children (or other people who depend on you). Identify a guardian—someone who will take care of children under age 18. Also, if you’re leaving money to your children, think about whether you want your young children to have access to that money or you would like someone else to have control of it until they reach a certain age.
4. Name powers of attorney. Identify the people you trust, and give them the legal authority to act on your behalf in case of an accident or sudden illness. A power of attorney or agent for health care can make medical decisions on your behalf if you're unable to do so. A durable power of attorney for finances allows that person to handle your personal financial affairs, like signing checks and preparing tax returns.
5. Minimize risk to your family's financial future. Have you seen a GoFundMe related to someone’s unexpected loss recently? Don’t leave your family in that difficult position. Protect your loved ones with the right insurance for your situation. In the event of your death, life insurance provides a way for you to you take care of the people who depend on you for support. They may use the proceeds to cover funeral costs, meet living expenses or pay off debt.
Estate planning is not something you can afford to ignore. It can be complicated, but working with the right team will ensure that your wishes will be met. A financial professional and an estate planning attorney can help you get these documents and strategies in place. Even if you’re just starting out, an estate plan minimizes the impact of unexpected events on you and your family and ensures your wishes are carried out.