The Importance of Estate Planning Regardless of Asset Size
Yes. While protecting assets is one of the significant goals of estate planning, it is not just for the ultrawealthy. Whether you have a lot or just personal property in your home, an estate plan gives you the power to determine who inherits that property. Without one, the distribution of your assets will be determined by the state’s default rules, which may result in allocations that you, and your family, would not want.
Nominating a Personal Representative to administer your estate after your death, and dictating who will receive your property, can add much-needed clarity and certainty for your loved ones after your death. Unfortunately, that lack of confidence can easily lead to disagreements and litigation among family members, such as disputes over the division of personal property and the proper person to serve as a personal representative.
Second, estate planning is much more than protecting and disposing of assets after death. There are important legal documents which can aid you in ensuring your wishes are carried out as you age. Durable financial powers of attorney allow you to select a trusted individual– usually a family member or friend– to manage your financial and legal affairs when you cannot.
Medical powers of attorney/advance directives allow you to select a trusted individual to make medical decisions for you when you lack that capacity, give informed consent, and let you outline your medical care wishes.
A “living will” is an example of an advance directive in which you outline the conditions under which life-sustaining procedures and artificial nutrition should be continued or withheld.
Finally, suppose you have minor children or a dependent family member for whom you provide care. In that case, you must consider and plan for that person’s continued care if you pass away or cannot continue providing care. For example, who will be the legal guardian of your minor children, and who will manage any income or assets they are entitled to?
Even if you do not have many assets, your minor children may be entitled to receive income after your death, such as survivor benefits from the Social Security Administration. The feasibility of obtaining life insurance should be considered, particularly for those with minor children.
If minors inherit a substantial sum, such as life insurance, it is crucial to ensure that those funds are properly managed and available for their care. Revocable living trusts are one vehicle that can be used to control a minor’s inheritance until they are old enough to handle the funds themselves.