If you haven’t already heard, this week (October 15 through 21) is National Estate Planning Awareness Week. And now that summer is over, the leaves are changing, the kids are back in school, and it is not yet holiday season, it really is the perfect time to think about creating or updating your estate plan.
Review Your Estate Plan
Ideally, people should revisit their estate plan anytime they experience a major life change, such as the birth of a child, divorce or adoption. But short of any obvious life changes, it is a good idea to get into the habit of reviewing your estate plan every 3-4 years. While your priorities, objectives and goals will evolve over time, certain documents should be a given, even if the details themselves change.
An assortment of legal and financial tools are available for protecting your property. So think of your estate plan itself as more of a holistic approach to maintaining control over how your assets are treated, managed and distributed.
And as important as it is for your estate plan to identify who you want to inherit your assets when you die, it is just as important to designate trusted individuals to handle your financial affairs and make medical decisions for you in the event you become incapacitated.
For example, one piece of your estate plan might include joint ownership of certain property like real estate or bank accounts. When two or more people own property jointly, with rights of survivorship, then the property automatically passes to the joint owner(s) when another joint owner dies. Similarly, when you designate someone as a beneficiary of your IRA, 401(k) or life insurance policy, the proceeds will be paid directly to the named beneficiary at your death. Both of these types of planning avoid the need for probate, which only applies to property that is titled in an individual’s name.
Another component of a more complete estate plan, and perhaps the best known, is a will. Wills allow you to handle the distribution of any assets you own outright. You can also use a will to name a guardian to raise your minor children, pass specific pieces of property to selected people, name the person you want to serve as personal representative of your estate, disinherit specific individuals, and outline what you want to happen to your property if someone named in your will dies before you do.
Using a Trust
Depending on your situation, another important feature of a complete estate plan might include the use of various trusts. Trusts come in all shapes and sizes, and can be set up in a variety of ways to serve a variety of purposes. Trusts can be helpful if you want to keep your affairs private, minimize your exposure to gift and estate taxes, provide for a family member with special needs, or qualify for certain government benefits.
Set up Powers of Attorney
And finally, any compete estate plan should include planning for the possibility that you may experience some kind of debilitating injury or illness leaving you unable to make certain decisions. Financial and healthcare powers of attorney allow you to name trusted individuals to serve as your agent for making financial and healthcare-related decisions. Living wills provide guidance to your healthcare agent and family about the kinds of medical procedures you would authorize if you had the ability to communicate your wishes.
It shouldn’t matter if you are over 65 and dependent on your Social Security check. Or if you are one of the 120 million Americans who does not have an up-to-date estate plan. Or even if you are under the impression that estate planning is just for the wealthy. Neglecting to plan for the future could mean the difference between peace of mind and unforeseen headaches for your family.
In any event, National Estate Planning Awareness Week is as good an excuse as any to make those preparations now, rather than wait for a tomorrow that never quite arrives.