No matter where you’re at in life, it’s always a good time to start estate planning—because if you don’t do it, someone else will!
Without proper estate documents, government authorities may end up deciding how to distribute your estate or manage your money. Important decisions like who becomes your child’s guardian or who gains control of a family business may go against your actual wishes.
So, it’s important to know the contents of your estate, appoint representatives to act on your behalf, and leave instructions for managing your affairs in a manner that you approve of.
What makes up an estate?
Your estate is made up of your assets (things that you own that hold monetary value). Common assets in an estate plan include:
- Personal property (such as jewelry, antiques, artwork, and electronics)
- Real estate
- Bank accounts
- Life insurance
Any debts you owe also count towards your estate. Debt collectors will seek to settle your outstanding debt before the remainder of your estate goes to your beneficiaries. For example, if you have $20,000 in debt and $100,000 in assets, you’ll be left with $80,000 to distribute to your beneficiaries.
What is estate planning?
Everyone has an estate, so planning is important if you want to retain some control over your assets when you’re unavailable, incapacitated, or you pass away.
Estate planning involves taking note of all your property, assets, and debts and deciding what to do with everything when you die. In essence, estate planning helps you create a legacy to leave behind. It also allows you to appoint representatives to manage your affairs both when you’re alive and after you’re gone.
If you don’t have a plan for your estate when you pass away, government authorities will distribute your belongings to surviving family members (if any) according to law. Authorities may also appoint someone to manage your financial, personal, and legal affairs on your behalf.
This process may go against your actual wishes. For instance, it’s possible to disinherit children. But authorities won’t know and can’t honor your wishes if you don’t state them explicitly within the proper legal documents.
Read more: What Happens If You Die Without a Will?
What does estate planning include?
Estate planning goals will differ depending on the size of your estate and how many beneficiaries you have. But, in general, estate planning addresses:
- Your health care wishes in case of a medical emergency
- A financial plan to support loved ones in your absence
- Beneficiaries you want to receive inheritances
- Guardians for any minor children
- Legacy gifts for charities
The following legal documents can help your loved ones and appointed representatives understand and execute your estate plans:
- A Health Care Directive specifies your health care wishes if you become incapacitated and are unable to speak for yourself.
- A Power of Attorney appoints someone to make financial, legal, and personal decisions on your behalf when you’re unavailable or incapacitated.
- A Last Will and Testament controls the distribution of your estate, names a legal guardian for any minor children, and appoints someone as the executor of your Will.
These three documents make up your core estate planning papers. They are essential for retaining control over your estate both during life and after death. LawDepot also offers a number of other estate planning documents to complement these core documents and help you manage your estate.
How does a Last Will and Testament work into my estate plan?
A Last Will and Testament is arguably the most important document in your estate plan. Indicating your wishes in a Will allows you to dictate how authorities should distribute your property, assets, and debts after you pass away.
After your death, the executor of your Will takes the document to probate court for validation. Once it’s deemed valid, the process of resolving your debts and distributing your assets according to your wishes begins. Without a Last Will, probate courts and state laws will decide how to manage your affairs.
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Create a Last Will and Testament
In addition to your Will, you can create a Revocable Living Trust for high-value assets such as company stocks, valuable antiques, or real estate. A Living Trust avoids the public probate process. In this case, beneficiaries or business successors gain control of their assets much quicker—usually in a matter of weeks rather than months or years.
Those with relatively straightforward estate plans or who don’t have many assets may not need a Living Trust. You still need to create a Last Will for the property and assets you don’t include in a trust.
Who should I choose to help manage my estate?
When creating a Last Will and Power of Attorney, you must select representatives to act on your behalf and protect your interests. In each of these documents, your representatives are known as your executor and attorney-in-fact, respectively.
While your representatives don’t have to be professionals, you should choose people who can manage the responsibility successfully. Consider qualities such as:
- The ability to handle difficult or sensitive decisions
- Experience with financial management
- Experience filing paperwork
- Organizational skills
You should also ensure your representatives meet all legal requirements. For instance, some local laws require your representative to live in the same region as you. Other common requirements include being the age of majority, being of sound mind, and not being a convicted felon.
Read more: When to Use a Power of Attorney
Can I Change My Estate Plans?
Yes, estate plans often change as significant life events occur over time. For instance, you might get married or divorced, have children, or gain a significant amount of wealth. Your estate plans should always reflect your current wishes.
You can use a Codicil to make small changes to your Last Will and Testament. Changes might include adding another important asset or changing the person appointed to be your executor. However, you should create a new Last Will if you need to make extensive changes (such as following a divorce).
Use a Revocation of Power of Attorney to cancel the authority you once granted to your attorney-in-fact. You might need to revoke their powers if they’re no longer fit for the job or you wish to appoint someone else. In this case, you’ll need to create a new Power of Attorney after revoking the previous one.
Planning your life and legacy
We can’t predict the future. So, whether you’re just starting to build your estate or you’ve spent years accumulating assets, it pays to have a solid estate plan in place. If the unexpected happens, you can trust that your representatives will respect your wishes.
You can avoid costly lawyer fees by planning your estate with LawDepot. Our affordable subscription options allow you to create and maintain your estate planning documents as needed.
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