Many young individuals and couples think that the time to start thinking about estate planning is when they’re older, or perhaps if they ever have “estates”. On other occasions, the impetus to plan may be due to a recent death of a friend or family member without an estate plan or as my friend Tom, an estate planning attorney says, “Right before they take a trip over water.”
However, many young individuals should start thinking and “doing” some estate planning right away. Before we get to specific recommendation, let us first understand what estate planning is – and, what your “estate” is.
Essentially, your estate is everything you own. This includes your home, personal property, life insurance policies, invested assets, etc. Deciding how these assets are controlled and divided in the event of your death is called estate planning. Additionally, estate planning includes who will care for your children if you die, and who may make decisions on your behalf should you become incapacitated. More complex estate planning may involve legal aspects of trusts, taxation, gifting, etc.
Dying without a will (intestate) leaves the decision of how your assets will be divided, and more importantly, the guardianship of your children in the hands of the laws of the state you’re domiciled. This can lead to individuals inheriting your assets and caring for your children that you’d rather not. To prevent this individuals and couples can take steps now in order to make sure their requests are followed.
The following documents should be considered by everyone concerning estate planning.*
- A Will. Executing a will ensures that your assets are distributed to those individuals you want to inherit or disinherit your assets. Additionally, a will establishes who will be guardian of your children should both parents pass away. A will also determines the executor of your estate and may establish a trust for assets in order to provide monetary support for your children.
- Power of Attorney for Health Care. This document names a specific individual to make health care decisions on your behalf should you become incapacitated and can no longer make those decisions on your own. Readers in the state of Illinois can find a great example of a health care POA here.
- Power of Attorney for Property. Similar to the health care POA, the POA for property enables an individual you appoint to make property decisions on your behalf. Such transactions include real estate, investments, banking and taxation. Again, Illinois readers can find a great example here.
- A Living Will. A living will states your desire to have or not to have death-delaying procedures implemented in the event of your diagnosis of a terminal condition by a health care professional (your attending physician). This document assures your wishes will be followed in the event you’re unable to actively make that decision. Another excellent example for IL readers can be found here.
- Beneficiary Designations. It’s important to make sure your beneficiary designations are up to date ion your life insurance policies, annuities, retirement accounts and other investment accounts.
It goes without saying that in addition to having these documents prepared and available, individuals should talk to their family or individuals they want to have these responsibilities about their wishes, requests and potential responsibilities. Personally, and as a planner, I’ve seen families argue, fight, and ultimately discontinue speaking due to lack of communication when estate planning.
*Note: We recommend consulting a competent estate planning attorney for all of the above. The documents listed are merely examples and should not be considered replacements for professional, legal advice.