Planning for what will happen to your family and your assets after you die isn’t always the most pleasant thing to think about. With proper estate planning, you and your family can have peace of mind knowing that your affairs will be in order if anything happens to you.
What Is Estate Planning?
Estate planning provides a blueprint of want you want to happen with your assets, financial affairs, and care if you become incapacitated or die. This includes:
- Who gets your money and assets (e.g., house, cars, investments)
- Who is named as power of attorney
- Beneficiary information for life insurance, retirement accounts, and other financial assets
- Who gets guardianship of your children and other dependents
- What happens to businesses you may own
Estate planning is more than just creating a will. Although wills are important, they generally only cover who gets what after you die and might not fully determine how your affairs will be handled.
For example, many financial institutions (including 1st United) have a pay-on-death agreement. This means that assets are distributed to the named beneficiary for your accounts, regardless of the details of the will. If there is no beneficiary named, family members have to go through probate. And if the Credit Union is unsuccessful in making contact with the family regarding the assets within three years, the funds are escheated to the state,
Good estate planning will take this into consideration, ensuring that your loved ones are taken care of after your death.
Why Power of Attorney Matters
Estate planning isn’t just for when you die. If you fall ill, are seriously injured, or are unable to make your own decisions, you need someone to make those decisions for you, following your pre-determined wishes. Typically, these decisions are made by a spouse or life partner. But if your partner is also unable to make decisions on your behalf, you can name someone as a power of attorney. This person can be permitted to:
- Make medical decisions for you
- Sign legal documents for you
- Approve your financial obligations
- Ensure your minor children and other dependents are taken care of in the short term
A power of attorney can be as broad or limited as you want it to be. A springing power of attorney, for example, can be placed on file with your financial institution. It only goes into effect when a medical note is provided that indicates you are incapacitated. Keep in mind that once the person who granted the power of attorney is deceased, the power of attorney expires.
Starting Your Estate Planning Early
Estate planning is important at all stages of life because the unexpected can happen to anyone, regardless of age. Without estate planning, you might unintentionally leave your loved ones a legal and financial mess. Here are steps you can consider throughout the stages of your life:
In Your 20s and 30s
Whether you have a few or many assets, you will want your financial concerns covered. If you have young kids, a trust and a will are a must. Also, make sure your immediate family members are listed as beneficiaries of your life insurance and financial accounts.
In Your 40s
Generally by this stage, your needs and your family’s needs have changed. You might have kids in school or, perhaps, a small business that you own. This is also the time to realize that retirement isn’t as far off as it once seemed. Update your estate plan at this age to reflect your changing priorities. Your 40s are also a good time to discuss estate planning with your aging parents so you know what their wishes and goals are.
In Your 50s
Are your kids in college or are they adults by now? Do you have grandkids? Whatever your situation, amend your estate plans to provide less immediate support to your adult children and consider setting up trusts for your grandchildren. You might also want to plan for your partner’s financial well-being in their later years, in the event you’re not around.
How to Start
Estate planning can be complex, and it tends to get more complex as you grow older. Rather than tackle the finer details of estate planning all at once, start with these three questions:
- What assets do you have?
- How do you want your loved ones to be cared and provided for?
- What are your medical end-of-life wishes?
Simple online tools are available to help with estate planning, but estate attorneys can provide more in-depth assistance. They are experts at sorting through state and federal probate laws, advising you on options and concerns, and setting up trusts and complex legal documents.
Understandably, planning your estate and continually updating that plan may feel overwhelming. However, estate planning is one of the best things you can do to protect your interests. You owe that to yourself and your loved ones.
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