Planning an estate is when someone legally determines who will be left with your assets and names someone to oversee their distribution in the event of death or incapacitation. Taking the time now to ensure that things are planned for your future will give you peace of mind and help ensure that what you leave behind will be taken care of according to your wishes.
Everyone has an estate.
If you own even one thing, you have an estate. Many people do not think that they have an estate, so do not take the time to plan what will happen with their assets and belongings in the event of death or incapacitation.
Estate plan basics.
What is an estate plan? An estate plan documents your wishes if you are unable to make them known due to severe illness or death. It is a group of documents that explains your assets, responsibilities, and your wishes for how they should be handled.
Even young people need an estate plan.
Although it is less likely for younger people to die unexpectedly, it does happen. Many younger people pass away every day, some with young children and assets, and it is important that everything is planned for in the event of the unexpected.
The most common part of an estate plan is a will.
Although estate plans consist of a variety of documents and assets, the most common document included in an estate plan is a will. According to the American Bar Association, “A will provides for the distribution of certain property owned by you at the time of your death, and generally, you may dispose of such property in any manner you choose.”
An estate plan can include a living will.
A living will, also known as a medical care directive, explains what you would like to happen if you are no longer able to make medical decisions for yourself. Authority to make additional medical decisions can be given to any trusted person you choose via a medical power of attorney.
Giving someone power of attorney is a big decision.
Giving someone power of attorney could make yourself vulnerable to mistreatment should the wrong people be given authority. Financial power of attorney would place all of your assets into their hands, for better or worse. Some individuals choose to give financial and medical power of attorney to two different people to help prevent misuse of the authority.
Listed beneficiaries can supercede designaries in a will.
Forgetting to update a beneficiary on a retirement or insurance account could prove to be a hefty mistake. Often, the listed beneficiary designations on insurance policies and retirement accounts will outweigh who is listed in a will. So if you forgot to take your ex-spouse off of your beneficiary listed for a policy, they would still receive the benefits even if you name someone else a beneficiary in your will.
You will need to revisit your estate plan occasionally.
As your life changes, so should your estate plan. Life events, such as marriage, divorce, birth, death, or job changes, you should consider whether changes need to be made to your estate plan.