Although the term estate planning makes it sound like something for the wealthy only, it is something every person needs to do. Estate planning covers a broad range of life and financial management actions that let you define how to manage your assets, even if you become incapacitated. Keep reading to learn why you need an estate plan.
What Estate Planning Includes
Your estate plan’s details will differ from everyone else’s, but the core tools of writing the plan remain the same. They include:
- Last will and testament
- Living will
- Trust, revocable or irrevocable
- Medical power of attorney (POA)
- Financial power of attorney (POA)
- Life insurance
- Beneficiary forms.
Combined, these forms and documents provide a legal means for you to direct the management of your assets during and after your life.
Planning Now Saves Your Family Time Later
When a person dies without a will, the probate court determines how to divide the assets the individual owned. Without a trust, the assets must pass through probate, which could take between months and years. Without life insurance and beneficiary forms that stipulate the distribution of the death benefit, the spouse or other closest living relative could receive all of the benefits.
Consult an estate planner to create your custom plan. Many types of trust exist that can help you protect your money and homes, including the spousal lifetime access trust (SLAT), which results in tax savings to your spouse upon receipt. According to Perlin Estate Planning, using a SLAT lets you move up to $12.06 million from your estate into an irrevocable trust for your spouse.
Plan Your Own Funeral
The funeral industry’s annual revenue of $15 billion should not include unneeded expenses that a funeral director talked your grieving spouse into adding. By creating and funding your funeral with life insurance or other means, you save your family the heartbreaking task and pre-pay for it. This method saves them from making tough decisions when least prepared for it and provides for a significant expense when accounts could become frozen.
Trusts Circumvent Probate
Without a trust, the ownership of everything you and your spouse currently own comes under question and depends on the probate court to decide. That means if you’re one a millennial homebuyer, and, in 2022, 43% of homebuyers belonged to that generation, says the National Association of Realtors (NAR), your spouse might lose the house without a trust. A probate court could award the current home to a previous spouse or other family member in the case of family homes (ancestral homes).
With a trust, everything placed in it transfers legally immediately upon your death to the individuals you named. Your spouse gets the house. You pass away knowing that you took care of your spouse, even in death.
Other Estate Planning Uses
Use your plan to provide for family members who cannot care for themselves, such as a special needs child or elderly parent in ill health. In your will, you can name the guardian of your children. Doing so ensures that if something happens to you and your spouse, the child or incapacitated adult has a legally appointed, caring individual to care for their needs. Typically, this person merely administers their finances and medical care, but you can use a will or trust document to indicate a parental guardian.
Get Started Planning Your Estate
Don’t let another minute pass without preparing for the inevitable. Use estate planning to decide who gets the house, cars, and other assets. Doing so ensures your spouse and children continue to live normally, although they must do so without you.