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By Michael Schoonmaker - May 17, 2019
Estate planning isn't just for the wealthy or "fifty-somethings." An important part of a financial plan is deciding what to do with your assets or property if something should happen to you. And it's not just about your stuff, either. Planning ahead will make it easier for those you love.
Your family and your wishes are the best reasons to plan ahead. Even if you don't think your stuff is worthy of "estate" status, you likely have assets that will need handling. That includes bank accounts, homes, investments, insurance policies, vehicles, jewelry and even pets. If you have minor children, your decisions become even more critical.
And if you don't plan? Decisions about your property, final arrangements and even medical care (if you are incapacitated) will rest on someone else's shoulders—without your input. It could also subject your family to a lengthy process with attorney fees and court costs to sort out your estate.
It's a good idea to start estate planning as early as your 20s, especially after landing your first job. Haven't started yet? You're not alone. According to a recent survey , only four in 10 U.S. adults have a will, while 64% of Gen Xers and 78% of millennials do not. However, no matter your age, it's never too late to start.
A good place to begin is to contact a financial consultant/advisor or an estate planning attorney. Below are some basics to help you think about your plan and have those conversations with an expert.
Most people think about wills when it comes to having their wishes known. They are generally considered the basis for an estate plan because they document the division of property and assets.
Trusts are legal arrangements that give a person or persons the right to hold and manage certain assets and make sure possessions go directly to the people you want to inherit them. Here are some ways to compare two.
* Probate courts deal specifically with wills, estates, conservatorships and guardianships among other similar matters.
Sources: Will vs. Trust: What's the Difference? Investopedia 2019; Will vs. Living Trust: What's Best for You? Legal Zoom, 2019.
A critical way to ensure assets from investments, banks, life insurance and other financial accounts go directly to the people you want is to name beneficiaries. This also helps simplify the transferring of these assets, especially with a will and through the probate process.
In addition, keeping beneficiary information updated is important. Life changes are good times to review your beneficiaries, including marriages (or divorces), births and deaths. Also consider naming contingent beneficiaries in case your primary beneficiary precedes you in death. You should review your beneficiaries at least annually as part of your overall financial plan.
An important element of your estate plan is where you keep vital documents and how easily the people who will need them can find them. Consider this list when you're thinking about what to include:
Don't forget about your digital assets. Online bank, investment and shopping accounts will need handling, as well as your social media accounts. You'll want to think about how and who to give access and instructions. Compiling this information before starting your estate plan can also make that process easier.
One last thing to consider is having a family conversation after developing your plan. While it can feel uncomfortable, talking about your wishes, how you came to your conclusions and who you appointed to carry them out can help your family members in the long run, especially during a time of grieving and high anxiety.
As part of an overall financial plan, we can help you think through your legacy considerations.
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This information is for educational purposes only and is not intended as estate planning advice. Please consult an estate planner or attorney for advice regarding your situation.
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