Five Reasons Why Everyone Needs an Estate Plan

  Five Reasons Why Everyone Needs an Estate Plan A survey in 2023 found that only 1 in 3 Americans have any kind of estate planning document...

 

Five Reasons Why Everyone Needs an Estate Plan

A survey in 2023 found that only 1 in 3 Americans have any kind of estate planning document. This is concerning because all adult Americans should have a plan in place. A good estate plan includes a power of attorney, a healthcare directive, and a last will and testament. It's not just about what happens after you're gone; it also helps you and your family while you're alive.

Here are the top five reasons why having an estate plan is crucial to protect yourself, your family, your money, and your estate.

You May Become Incapacitated

You might not think it's likely that there will be a time when you can't manage your money or make financial decisions. However, the Social Security Administration says that 1 in 4 Americans who are currently 20 years old will experience a disability before they turn 67. Even though we don't expect to face a sudden medical issue or incapacity, it's essential to consider who will handle your bank accounts, pay bills, and manage taxes if you can't.

A financial power of attorney lets you choose someone you trust to take care of your money matters. You decide what powers they have, like paying bills or handling investments, and when they can act, especially if you become unable to do so. Your chosen person, known as your agent or attorney-in-fact, is obligated to act in your best interest, making decisions that benefit you and your family.

A financial power of attorney is also a document for convenience. For example, if you travel frequently and need someone to manage your financial life when you are away.

You May Get Sick

If you are hospitalized and can't speak for yourself, who will make medical decisions for you? You may assume hospitals must consult with your next of kin, but that isn't necessarily true. You want to make sure you have a say in who can oversee your health care. To do this, you can name a healthcare proxy, someone you trust to talk to medical professionals and make healthcare decisions for you when you can't in a healthcare directive. A healthcare directive lets you do the following:

• Name someone to be in charge of your medical decisions.
• Direct what treatments you want or don't want.
• Specify what life-sustaining measures you want taken if you are in a permanent vegetative state or end-stage terminal condition (also called a living will).

You Will Die (Sorry About That)

Death comes for us all. If you don't have a will, the state has one for you. A probate court distributes your assets according to state law if you die intestate (meaning without a will). You may not like the result. For example, married couples may assume that all assets go to their surviving spouse, but it depends on your state's laws.

With a will, you control the following:

• Who will manage your estate
• Who will receive your property and assets
• Who will care for your minor children and or pets

In your will, you can use a testamentary trust to hold assets for your minor children and other beneficiaries until they reach the age you designate.

Also, you may want to disinherit a family member. For example, if you have two children but one is more financially well off, you may want to disinherit the wealthy one or leave unequal shares of your estate.

And you have a digital life. What happens to all your social media accounts, electronic communications, digital photos, etc.? You can incorporate digital estate planning into your will.

You Care About Those You Leave Behind

If you have young children or dependents, you will want to name guardians for their care if you die prematurely. And you also want to make arrangements for your pets. You can do both in your will. By specifying your wishes in your will, you streamline the probate process and avoid family conflicts since everyone will know what you want. And when you have a healthcare directive, your loved ones have instructions on what treatments you want or don't want at the end of your life. They don't take on the burden of making these decisions.

You Have Assets That Aren't Covered by a Will

Not all your assets transfer by your will. If you have bank accounts, investments, retirement accounts, IRAs, life insurance policies, or annuities, those assets transfer through beneficiary designations. Make sure you have designated beneficiaries for these accounts and policies. Otherwise, they may become part of your probate estate. Real estate transfers by deed, so you may consider filing a transfer on death deed for your property. But make sure to talk to an accountant regarding any tax benefits or liabilities when transferring real property, such as a capital gains tax.

Get Started Today

Benjamin Franklin once said, “For every minute organizing, an hour is earned." This is even more true for estate planning.

It is easy to start creating your own legal documents with online estate planning services. Or you can consult with an estate planning attorney, especially if you have complex matters such as:

• A child with special needs and want to set up a living trust.
• Concerns about inheritance taxes or estate taxes and need an asset protection plan.

Creating your estate plan today will save your loved ones time, money, and stress if you are incapacitated or die in the future.