Many young couples and families are under the impression that estate planning doesn’t apply to them. They think that only middle-aged or older people with significant assets need to plan their estates.
However, nothing could be further from the truth. Estate planning doesn’t have anything to do with age or how much money or other assets someone has. Tomorrow isn’t assured for anyone, regardless of their age. Therefore, it’s important to conduct basic estate planning no matter how old you are.
One of the biggest risks of young people not doing estate planning is that their assets might have to go through probate after they die. In this scenario, assets are distributed by the state rather than according to the wishes of the deceased, since the deceased person’s wishes cannot be known. The probate process also exposes the details of an estate to the public.
Here are 5 steps to follow as you go about the process of drafting your estate plan:
1. Think about how you want your assets distributed and complete the necessary legal documents. If you’re married, you probably want your assets to go directly to your spouse, or to your children if you and your spouse die at the same time. Some assets will transfer automatically to a surviving spouse via beneficiary designations if they are titled properly.
However, it’s still important to formalize your wishes regarding asset distribution in an estate plan. The primary vehicle for doing this is a last will and testament. If you don’t have one, you should talk to an estate planning attorney about drafting one as soon as possible.
2. Name an executor or trustee for your estate. Your executor will be responsible for handling the financial affairs of your estate. This includes such tasks as managing assets in trust on behalf of your beneficiaries, paying any outstanding bills and taxes, and distributing assets according to the terms of your last will and testament.
You can name an individual as your executor (e.g., a family member, friend or business associate) or designate a corporate trustee (e.g., a bank or trust company). In making your decision, keep in mind that the job of trustee can be difficult, complex and time-consuming, especially for someone inexperienced in this area. If you don’t have an individual you feel comfortable naming as your executor, you should consider designating a corporate trustee.
3. Name a guardian for your minor children and someone to manage their inheritance. This is critical in case both you and your spouse die at the same time. The guardian should be named in the appropriate legal documents that are part of your estate plan. This guardian might also be responsible for managing the assets that will be distributed to your children according to your wishes, which is usually handled via a trust.
4. Decide how end-of-life decisions will be made if you can’t make them yourself. Your estate plan should include instructions for how life-sustaining medical decisions will be made if you can’t make them yourself. This is usually accomplished via two separate legal documents:
- A living will — This will detail how life-sustaining medical decisions should be made in the event of your mental or physical incapacity.
- A durable power of attorney and healthcare power of attorney — These will identify an individual who will be responsible for handling your financial affairs if you are incapacitated or in a vegetative state.
5. Review your life and disability insurance. Do you have adequate insurance coverage to provide enough income for your surviving family members in the event of your unexpected death or disability? Determine how much income would have to be replaced should you and/or your spouse die or become disabled and unable to continue working. And don’t forget to include enough money to pay for your children’s college educations.
Please contact us if you have more questions about estate planning or need assistance in creating a comprehensive estate plan for your family.