Wealth Management logo

4 reasons you need an estate plan

Most of us know how important it is to have a will, but an estate plan goes beyond deciding how to distribute your assets. 

Tags: Estate planning, Life events, Planning, Retirement
Published: August 10, 2020

According to a recent survey, only 32 percent of Americans say they have a will or other type of estate planning document.1

Here are 4 reasons why you should have an estate plan.

 

1.  It accounts for your assets, health and final wishes

Many people think an estate plan deals exclusively with large financial assets. But that’s only a part of it. “A good estate plan includes deciding who would make decisions for you with regard to your finances and your health, no matter your age or level of wealth. That’s something that a lot of people might overlook,” says Nancy Hermann, vice president and regional trust manager at U.S. Bank.  

For example, if you’re moving away from family for the first time, “it’s important that you designate someone to make healthcare decisions should something happen — preferably someone local,” says Hermann. An estate plan includes provisions for what happens in an accident or injury in which you become disabled; these plans aren’t just in case of death.

“Also, should a health emergency or accident happen, it’s important to plan for the assets you do have,” Hermann says. “Most of the time people have more than they think they have. This includes the value of a home and retirement plans, investment accounts, brokerage accounts and bank accounts.”

 

2.  It’s comprehensive

The most basic documents should include:

  • Property power of attorney: Someone you designate to have responsibility for your property if you're unable or unavailable to make decisions yourself. Also known as financial power of attorney, this governs what happens to your property prior to your passing and assures it’s handled in a manner designated by the power of attorney document.
  • Healthcare power of attorney: Someone you designate to make healthcare decisions for you if you're unable.
  • A will: Wills document how you want assets titled in your name to be distributed after you die. A will can also include information like who you’d want to care for your children. Assets passed according to the terms of a will are supervised by the probate process, a court supervised process that is public record.
  • Living will or advanced directive: Like a will, living wills include your wishes regarding end of life care if you are unable to communicate them. Living wills include directions like whether you want to have life-sustaining measures taken and other end of life care decisions.
  • Trusts: When it comes to your financial assets, a trust offers advantages over a will. A revocable trust preserves privacy not accomplished in the probate process and allows for the care of your assets during any time of disability prior to your death. This type of trust allows you to benefit from your assets during your lifetime and is often paired with a pour-over will, which assures that any assets not held in the trust are added to the trust after your death.

     

What you'll need to get started on your estate planning.

 

3.  It Identifies key players

Hermann advises clients to spend time thinking through their goals. Closely following that is appointing people to play key roles for “in the event of” scenarios. Here’s Hermann’s advice to consider and discuss with your attorney:

  • Healthcare and property powers of attorney: Hermann suggests asking yourself: “Who do I want making medical decisions and handling my financial affairs for me if I am unable?” This could be your spouse or someone else who understands your wishes and you can trust to follow them.
  • Guardian of your children (if you have any): Be sure to talk about this with your spouse or partner. “Spouses often have differing opinions about who they would want to be guardians,” says Hermann.
  • Trustee or executor: “People underestimate the responsibilities and the time-consuming nature of being a trustee,” Hermann says. She recommends you consider not only who you trust, but also who has the bandwidth. A corporate trustee acting along with a trusted individual trustee(s) often provides a great balance of responsibilities.  Trustee responsibilities include: 
    • Investing funds properly and in the best interests of all beneficiaries.
    • Filing tax returns on a timely basis.
    • Informing beneficiaries of anything that’s happened in the trust, including any investments and distributions that have been made.

4. It puts you in control

Not accounting for what happens to your assets can open you and your loved ones up to risk. “If you don't have a plan, the state that you live in has a plan for you,” Hermann says. “If you were to face an untimely death, the statutes of the state where you reside will dictate the terms of your default plan. The courts will appoint an administrator to settle your estate, which can be an expensive process, and one that you would obviously not have control over.”

Estate planning includes a large number of legal and financial documents. Consulting a financial professional who will look at your life holistically and work with your tax and legal advisors to account for finances, life situation and values can make the process feel more manageable.

Plus, a financial professional may make your trustee’s life easier by handling many administrative burdens that can sometimes be overwhelming. Regardless of your finances or age, talking with a professional about your estate plan can help ensure your loved ones are cared for if anything were to happen to you.

When it comes to getting started, “there’s no time like the present,” Hermann says.


Review important life milestones that could impact your estate planning and learn what to account for during each.

 

1 2020 Estate Planning and Wills Study. Caring.com.