Just because you don’t own a mansion and a condo in Belize doesn’t mean estate planning isn’t for you. In fact, good estate planning actually could mean more to families with modest assets, simply because you cannot afford to lose.
No One Plans to Fail, They Fail to Plan
There are many reasons people decide not to look into estate planning. Maybe because you’re not a Kardashian, you think you’re not rich enough. Or maybe you feel estate planning is something you do when you’re old (and you haven’t hit that number yet). A lot of people just don’t feel like getting into it because the topic is confusing, there will be a better time later when they figure out who can help them with it. But life is unpredictable and should something happen to you, do you really want it to fall to your family to pick up the pieces?
Unfortunately, even people who think it’s important often don’t do any meaningful planning. You’ll say you know it’s important, but you never really do. Like so many other things in life, procrastination here is your worst enemy. There are lots of reasons why, but first you need to know just what estate planning really is and some of the issues that can affect you and your family.
Essentially, Estate Planning is making a plan in advance about where you want your things to go in case you died and who you would want taking care of you in case you became sick or injured in a way that prevented you from making your own decisions or being able to take care of yourself. Maybe you want your dear, sweet mother-in-law to help out, but maybe not.
Trust Planning should include:
More than just your stuff, trust planning should offer some instructions about your values (religion, education, hard work, etc.) so decisions can be made as much in keeping with your wishes as possible.
Here are some important elements you’ll want in your plan:
•Include instructions for your care if you become disabled before you die.
•Include a Power of Attorney, in case you are unable to make financial decisions for yourself.
•Name a guardian for minor children.
•Provisions for family members with special needs, without disrupting any government benefits.
•Provisions for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
•Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
•Provide for the transfer of your business at your retirement, disability, or death.
Estate planning doesn’t just protect you and your family, it can also help you save a lot of money, too. For example, Estate Planning:
•Helps to minimize estate and income taxes today
•Avoids probate in the State of California which can be very expensive and stressful
•Helps to avoid unnecessary legal fees and family disputes
Estate planning should also be an ongoing process, not a one-time event. Your responsibilities will grow with your family and shrink as your children hit majority, hopefully, your assets will continue to add up.
Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.
Follow Your Plan
If you don’t have a plan, your state has one for you, but you probably won’t like it.
If you die or become unable to make your own decisions without an intentional estate plan, your assets will be distributed according to the probate laws in your state and your fate could be up to a bunch of lawyers who’ve never met you. In many states, if you are married and have children, your spouse and children will each automatically receive a share of your assets. That means your spouse could receive only a fraction of your estate, which may not be enough to live on, while an irresponsible adult child has a chance to waste everything you tried to provide, only to need it later in life. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.
Given the choice—and you do have the choice—wouldn’t you rather keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?