Even Regular Folks Need an Estate Plan

Do you have an estate plan? If not, it's time to think of putting one together.

One of the biggest misconceptions about long-term financial planning is that only the wealthy need estate plans. Many of us hear the term “estate plan” and immediately shrink from the idea. Not only is it difficult to face the possibility of one's own demise, but an estate plan seems like a lot of complicated work.

As unpleasant as the thought is, an estate plan is necessary. “Anybody with any type of assets — homes, investments, and retirement accounts — should be concerned with estate planning,” says Steven Kolinsky of Kolinsky Wealth Management.

He points out that most states don't allow the federal $10 million exclusion for your estate. “And besides,” he continues, “you never know when that federal exclusion could lower. Everyone should be involved in estate planning, whether you have $2 billion or $200,000.”

Last Will And Testament

What Do You Need for Your Estate Plan?

Kolinsky says that there are some estate planning issues that even the most “regular” of us need to be aware of. Since an estate plan is really about wealth transfer, it makes sense for you to understand some of the basics, and prepare your assets the best way that you can.

“Everything needs to be titled properly,” Kolinsky says. “You need to have a plan for where you want your assets to go. Without a plan, the government will divide your money between your spouse and your children. And maybe do it in a way you don't want.”

At the basic level, Kolinsky suggests the following estate planning documents:

  • Will: “This is where you want your assets to go after death,” Kolinsky says. This is the most basic of documents, specifying the division of your assets. It's important to make sure that the beneficiaries on your accounts, especially your retirement and life insurance accounts, match the information in the will. In the event of a difference, what's listed on your accounts takes precedence over what's in your will.
  • Living will: “Your living will basically says what means of medical support you want given you,” says Kolinsky. “It has to do with your wishes, and any type of special assistances that you want, or don't want.”
  • Health care proxy: “A health care proxy makes health decisions on your behalf, if you are unable to,” Kolinsky explains. “The health care proxy carries out what you wrote in your living will.”
  • Power of attorney: “The durable power of attorney allows someone else to take care of financial issues,” says Kolinsky.

These are the four basic documents everyone needs when it comes to an estate plan. The more involved your finances are, as they increase in complexity and your estate grows, the more planning you'll need. Business owners need to consider succession, and many of those whose assets grow like to make use of tools like trusts.

Getting Started with Your Estate Plan

It's really not too hard to get started with an estate plan. “To take care of the four basic documents,” Kolinsky says, “it's usually possible to find someone who will do it for $1,200 or less.”

Kolinsky recommends getting help from a professional. Even though it's possible to use sites like Legal Zoom to put together your basic estate plan documents for cheap, there are times it makes sense to sit down with someone and truly understand the situation. “The average person doesn't know how to prepare these estate plan documents, and cut-rate services might not take into account differences in state law.”

Now matter how you go about it, now is the time to think about the future. Get the basics of your estate plan squared away as soon as possible.

3 thoughts on “Even Regular Folks Need an Estate Plan”

  1. You may also want to consider a trust. Placing assets in a trust, such as your home, can have significant tax savings in the event one spouse passes away before the other, but does require some cost and paperwork to set up.

  2. Tushar @ Everything Finance

    We have made an estate plan, but one of my parents hasn’t. It drives me nuts, because he just seems to think that he will never pass. This is an insane notion, since he’s well into his retirement years. I’ve seen so many instances where power of attorney isn’t granted before the person is no longer able to make decisions, and it always ends up being a huge hassle (time consuming, too).

    1. That is frustrating! And a good example of why we need to think of these things when we’re younger. An estate plan isn’t really for us; it’s for those who love us.

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