What is Basic Estate Planning and Do I Need It?
In today’s world, it’s very common to want to leave the assets you have accumulated over your lifetime to heirs of your choosing, whether the assets are financial in nature, real estate, jewelry, family heirlooms, vehicles and even personalized license plates. There are also many types of heirs, including spouses, children, grandchildren, siblings, parents, cousins, other relatives, friends, charitable organizations, and yes, even your pets.
Yet only 45% percent of American adults – fewer than 1 in 2 – have a Will or other estate plan in place, according to legal research and publication powerhouse LexisNexis. Without a basic estate plan in place, you will lose that crucial ability to choose your own heirs. Yes, that’s right: if you pass away without even a very basic Last Will & Testament, the probate law in your state of residence at passing chooses your heirs for you, usually starting with spouses and children and going down and up and across your family tree as needed to locate a living heir, depending on which of your family members survive you.
What’s Included in a Basic Estate Plan?
- A Last Will & Testament to specify which heirs inherit which of your items/assets.
- Or a Revocable Trust paired with a Last Will & Testament for more sophisticated estate planning, often used with larger estates or more complex bequests to heirs.
- A Financial Power of Attorney to allow a trusted individual in your life to make financial decisions on your behalf if you are incapacitated (pay bills, make investment decisions, etc.).
- A Healthcare Power of Attorney to allow a trusted individual in your life to make medical decisions on your behalf if you are incapacitated (surgical decisions, etc.), and a Living Will/Healthcare Declaration where you are able to state your wishes on end-of-life care (“do not resuscitate” orders, life support, organ donation, etc.).
Who Needs a Last Will & Testament?
While everyone can benefit from creating a basic estate plan, families with minor children (under age 21 in most states) absolutely need a Last Will & Testament in order to nominate legal guardians for the kids if something were to happen to both parents. Otherwise, the state probate court will step in to locate suitable guardians for you, which may not be your first choice.
Creating a basic estate plan doesn’t have to be difficult or expensive, and by being proactive, you preserve your ability to be in control.