Think you don’t have an estate? Almost everyone does, including you.
Your estate is what you own. That includes your car, home, checking and savings accounts, investments, insurance, and personal possessions. And no matter the size of your estate, you can’t take it with when you die.
What would happen to your assets if you were to pass away?
An estate plan helps answer this question. An estate plan is something that, upon your death, will guide the transfer your assets according to your wishes, minimize the transaction costs of transfer, provide liquid money for common costs, and protect and provide for loved ones.
Almost of all of us will need at least three things in an estate plan: a will, a durable power of attorney, and a living will. A will will dictate how your property is distributed and provide instructions for taking care of any minor children. A durable power of attorney helps someone make healthcare and property decisions when he or she is incapable of doing so alone. A living will contains your last wishes regarding sustaining life.
I’m A Millennial. Do I Really Need An Estate Plan?
As someone in your 20s or 30s, you’re probably focused on living your best life now. Estate planning might seem like something to tackle when you’re older (or richer!). But if you have assets, and especially if you have anyone depending on you, you need to take care of this important financial planning task. An estate plan provides peace of mind that your loved ones are taken care of, even if the worst were to happen.
If you don’t have your affairs in order, the processing of your estate will be dictated by state law — and you might not like the result. Probate laws vary from state to state, but the unintended consequences could include:
- Single: A court-dictated property distribution, even for pets
- Married: Some states dictate sharing of property between parents and siblings.
- Married with children: Some states automatically give a part of your estate to both your spouse and your children. If you have 5 kids, it could be that only 12% of your estate would go to your spouse. That money might not be enough to live on. Plus, many people prefer for their spouse to have more control to provide for the children in the best way they see fit. If both parents pass away before establishing a guardian, the care and custody of your children will be up to the courts.
- Married to a non-US citizen spouse: If your spouse isn’t a U.S. citizen, he or she could face an estate tax. This applies even to permanent residents. A trust will be needed in this case.
- Own Property in Multiple States: Your assets will go through probate court in multiple states. That’s costly and time-consuming for surviving family or friends.
This is just an introduction into the complexity of the probate system. Many other situations — like those of a business owner, blended family, or a family with a special needs child — will benefit greatly from an established estate plan.
Given the choice, wouldn’t you rather your estate be handled by your family — not the courts — in the way you see fit? Probate does provide a legal, open way to administer an estate. But it’s costly, complex, and it takes a long time. Make an estate plan to simplify the process for your family.
Get Started Now
No one likes to think about their own death or disability. That’s why so many families are unprepared when the worst does happen. The best time to start is now. Even if money is tight, you can keep the costs in line by starting with the basics. Your estate plan can evolve over time.
So how do you take the next step?
You might be considering using one of those legal sites online. Most likely, it’s not worth the money. Estate planning is very complex, and it varies from state to state. The document might not hold up in a court of law. You might as well save your money and put it towards the cost of an estate attorney.
Look for an estate attorney licensed in your area. Consider asking a financial advisor or a CPA for a few recommendations of good estate lawyers. Interview a few lawyers, and you’ll find the one that’s right for you.
Take the first step towards putting an estate plan in place today. It’s not fun or easy, but it’s a great boon to your loved ones if the worst were to happen.