I recently streamed “The Beekeeper,” and Adam Clay is right at home with the John Wicks, Robert McCalls, and Bryan Millses of the world. While the movie was entertaining enough, with a few new elements and twists here and there to make it different, I was struck by a particular scene where a character asks: “I’m 28 years old, why would I need an estate plan?” This article is inspired by that question and tries to answer other estate planning FAQs.
Estate Planning FAQs
What Is An Estate Plan?
An estate plan outlines how your assets will be managed or distributed in case of your death or incapacity. It includes legal instructions on what you want done to your assets or properties, who will receive them, how much, or even when.
Aside from your assets, a comprehensive estate plan also incorporates instructions as to your healthcare and other responsibilities. The main goal of an estate plan is to be prepared and to ensure that your wishes will be followed.
Why Is Estate Planning Important?
Estate planning is crucial because it allows you to control how your assets are distributed after your death, ensuring your loved ones are provided for according to your wishes and minimizing potential family disputes.
It enables you to designate guardians for minor children, plan for incapacity, potentially reduce estate taxes and avoid the often lengthy and costly probate process. It provides peace of mind knowing that your affairs are in order and your family will be taken care of.
What Are The Key Documents In An Estate Plan?
The specific documents differ based on the size and complexity of an estate, but the core ones include a last will and testament, a durable power of attorney, a healthcare proxy or advance directive, and possibly a trust.
The will is the most basic form of estate planning document. It tells how assets under your name and without beneficiary designations will be distributed. However, it does not avoid probate, so may need to use other tools such as a revocable living trust. The durable power of attorney, healthcare proxy, and advance directive allow you to assign other people to make decisions for you in case of your incapacity.
At What Age Should You Start Estate Planning?
It depends on your circumstances, needs, assets, and financial goals, but you can start as early as 18 years old. When you reach legal age, your financial and medical decisions become your own. Since your parents do not have automatic authority over you, this might be a good time to set up a healthcare proxy or durable power of attorney.
It can never be too early to plan ahead and layout a basic will to tell your loved ones how you want your assets to be distributed. This is especially important if you already earn income or have other assets. As you age, your career and situation change, so you also have to periodically review and adjust your estate plan. Do this every three to five years or if there is a significant life change such as marriage, divorce, having children, or moving to a different state.
Is writing a will enough, or do you need more comprehensive estate planning?
Writing a will is a good place to start your estate planning. Nonetheless, depending on your situation, you may need to secure other legal documents to ensure your wishes are followed and your assets and beneficiaries are protected.
Remember that estate planning is more than just asset distribution, it may also include healthcare decisions, incapacity management, probate avoidance, and tax planning, which are beyond the scope of a will.
What happens if you die without an estate plan?
Your assets will be distributed according to your state’s intestacy laws. The process may lead to lengthy court proceedings and potential disputes between your family, friends, or other beneficiaries.
This is why it’s important to at least have a last will and testament so your wishes are known and you can avoid intestacy.
Can you create an estate plan on your own?
It’s possible but generally not advisable. While you can find online do-it-yourself estate planning guides and services, most experts still suggest working with a lawyer or other professionals.
An attorney can guide you through the intricacies of preparing the core estate planning documents, making sure they are legally binding. Depending on the complexity of your estate, you may even need help from other financial professionals in ensuring that you have a plan that not only reflects your wishes but also maximizes the financial benefits and minimizes taxes and other fees.
Do you need an estate plan if you don’t have a lot of money or property?
This is a common misconception, that estate planning is only for the wealthy. It’s not. As long as you have assets or other property, you should have an estate plan. The value of you estate is immaterial. Of course, if you have a lot of assets, the tools and strategies you use become more complex.
You should also remember that estate planning isn’t just about asset distribution. It also includes healthcare directives and other instructions for when die or if you become incapacitated. Just like building an emergency fund or saving for retirement, estate planning is an essential component of your personal financial management.
How much does estate planning cost?
It will depend on the complexity of your estate and the kind of plan you want to make. For example, a simple will may cost around $200 to $300, while a comprehensive estate plan can range from $2,000 to more than $5,000.
Generally, DIY estate planning services are cheaper upfront, but as mentioned above, it’s better to seek professional and legal guidance. Consider the costs an investment that will save you and your family from stress and other potential financial burdens later.
Final Thoughts
Estate planning is an essential part of personal finance. It ensures that your wishes are followed after you die or in the event of your incapacity. Regardless of your age or the amount of your assets, everyone needs an estate plan. It’s a matter of being prepared for the inevitable, something that that character from “The Beekeeper” movie failed to understand. Consult a financial advisor or estate planning lawyer for more information.
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