One thing I purposely left out of my last post on What to do when you’re expecting was basic Estate Planning. Estate Planning is not just for the old and rich. It’s important for people at every income level who want to help protect their finances and avoid future conflict between family members. This is something that Rebecca and I just started last week and it includes a Will, Power of Attorney and Health Care Proxy.
During our meeting with our attorney we had to think about:
What would happen with our estate if we died?
If we both died suddenly, who would take care of our children?
If we could no longer manage our finances because of illness, who would make financial decisions for us?
This is where basic estate planning comes in and makes sure you have legal documents in place to ensure your assets go to the desired people, and you are treated in the way you want to be. But all too often, creating an estate plan falls by the wayside: A 2014 survey by Rocket Lawyer found that 64% of Americans didn’t have a will—with 57% saying it was simply because they hadn’t gotten around to making one.
So, what documents do I need and what do each of them do?
Last Will and Testament
A Last Will and Testament is a legal document that includes your personal instructions regarding the distributions of your assets upon your death. The preparation of a Will allows you to designate the beneficiaries of your estate. Your Will may also name a person to serve as executor of your estate.
A Will may also name a guardian for any minor children and designate the age when the children will receive their inheritance. Parents of a child with disabilities can also express their preference relative to their child’s future care, education, job training and living arrangements and even establish a trust to supplement governmental benefits received by the disabled child.
If you die without a will, it is called dying intestate which means that the state in which you lived gets to decide what happens to your assets. If you have more than one person in your family, this will take a long time and your heirs will have minimal control over where your assets end up.
Remember the beneficiary forms of your accounts (401ks, 403bs, IRAs, Life Insurance, etc.) supersede a will. Be sure to review your beneficiaries annually and after life events. If you leave an asset to your kids in your will, but your former spouse e is listed on the beneficiary form, your former spouse will get of the assets inside the account. For us, we will have to update our contingent beneficiaries to the new testamentary trust being created in our will.
Power of Attorney
This document authorizes someone to manage your financial affairs if you’re unable to do so usually due to mental or physical issues. The named person can access your checking account, buy or sell your investments, buy or sell your house, your car, your business or other assets. It is a very powerful document, and you should be very careful whom you name.
Living Will and Health Care Proxy
This designates someone to make healthcare decisions on your behalf, and you can direct them as to what type of care you desire. For example, if you do not want to be kept alive on a ventilator, you can state that the proxy makes this decision when the time comes. A doctor will most likely keep you alive for as long as they deem viable (in part due to the Hippocratic oath), and their decision will be the driving one if there is no designated, legal agent in place. Great thought should be given to this decision as this could lead to medical bills for your surviving family members.
How much does all this cost?
The cost for these documents should range from $800 (single) to $1,200 (couples).
If you think that sounds too expensive right now, think about the potential costs, chaos and confusion you could inflict upon your family should something happen to you.
In summary, Estate Plans are not just for the rich and famous. They’re for anyone who wants a plan in place to help manage their healthcare decisions, distribute their assets and keep the family at peace during tough times. It is never too early to start thinking about putting one together.