Most of us spend little time thinking about death or losing the capacity to manage our own affairs. These are unpleasant topics and banishing them from our minds is easier than entertaining them. Death, however, is inevitable and becoming incapacitated is not likely, but possible.
What would happen if you could no longer handle your finances or communicate your health care decisions? Who would make important decisions for you about these kinds of things or manage and distribute your assets after you die? These are some of the underlying questions in estate planning.
What Is Estate Planning?
Estate planning is the process of organizing your financial and legal affairs to ensure your wishes are followed after you pass away or if you become incapacitated. It involves more than just drafting a will. It also focuses on preserving your assets, protecting your loved ones, and minimizing the tax burden on your estate. Creating an estate plan can give you peace of mind knowing that your family members and other loved ones will be taken care of according to your wishes.
Why Estate Planning Is Important
Estate planning may be the most overlooked important part of adulthood. According to a Caring.com survey, only 32 percent of Americans have a will.
People forgo estate planning for various reasons. They may think that they don’t have enough money or property to constitute an estate. They may not want to think about dying or losing capacity. Or they might delay taking the first step because the process seems overwhelming, and they don’t want to bother with it.
Yet estate planning is important for many reasons, and everyone should have an estate plan. Here are some reasons:
- Planning for Incapacity: A thorough estate plan should include a health care directive and a durable financial power of attorney. These two documents will allow a person of your choice to make important health care and financial decisions for you.
- Passing Along More of Your Assets: By using a will, also known as a last will and testament, and possibly a trust, your estate plan can increase protection of your assets and reduce taxes owed. This means that you will be able to pass along more of your property to your heirs or charities you want to support.
- Avoiding Probate: Without an adequate estate plan, your estate may have to go through probate court. This legal process can be time-consuming, expensive, and public. Estate planning can help you bypass or minimize the probate process, thus saving your loved ones time and money, while potentially keeping your affairs private.
- Expressing After-Death Wishes: By leaving memorial instructions for your loved ones, you can let them know what you want to happen to your body after your death and what type of service or celebration you want.
Estate Planning Starter Checklist
Now that you know what estate planning is and why it is important, here are five steps to take to get started – even before you meet with an attorney to work on any legal documents:
1. Choose Agents
Think about who in your life would be best suited to make medical and financial decisions for you. You can choose one person to make both types of decisions or you can nominate different individuals to make those decisions. It can also be a good idea to pick backup agents, also known as attorneys-in-fact, to step in if your first choices are unable to fulfill the role.
2. List Your Assets
Make a list of all your valuable assets. This list could include your home, automobiles, jewelry, financial investments, retirement accounts, and family heirlooms. Alongside this list of property, you can put the names of people you want to have each item when you are gone. Since the beneficiaries of life insurance policies and retirement accounts are usually listed on the account documents, be sure to update those so that they match what is in your estate plan.
3. List Your Debts
If you have any debts, such as credit cards, loans, mortgages, unpaid back taxes, or child support, make a list of them. The executor of your estate will need to be aware of them so that they can pay those off before any of your assets can be distributed to your heirs.
4. List Your Digital Assets and Accounts
Making a list of all your digital assets, bank accounts, email accounts, etc., along with log-in information, will help your agent and executor better manage your virtual life and digital assets.
5. Choose a Guardian for Minor Children
If you have minor children, or an adult child with a disability, you need to choose someone you trust to care for them if you and their other parent are unable to do so.
Next, Work With an Estate Planning Attorney
After you have completed your estate planning starter checklist, you are ready to start working with an estate planning lawyer. They can discuss your specific situation and help you prepare the estate planning documents that will work best for you.
Reach out to Amy Stratton or Kristen Prull Moonan.