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What is an estate plan?

And why you absolutely need one.

An estate plan is a collection of documents that set forth your wishes for how you want your property, your person, and your minor children to be treated when you are unable to do so either through death or incapacitation.  When executed properly, these documents carry legal authority and can be enforced by a court of law. 

A good estate plan is more than just a will and includes at least five documents:

  1. Will or Trust
  2. Healthcare Directive
  3. Life Insurance Policy
  4. Power of Attorney
  5. Guardianship Nominations

The will is not effective until you die.  All the other documents, even the life insurance, can be of benefit to you prior to your death.  The will is the document most are familiar with although the trust gives you the most protection.  (More on that in a later article.)  Nevertheless, a properly executed will is more protection and a better option than no plan at all. 

A legally enforceable will typically requires the following:

  1. It has to be in writing;
  2. It has to be signed by the person making it (the “testator”) or in their presence at their direction;
  3. The testator has to be over 18 years old and have the mental capacity to make decisions; and
  4. It has to be witnessed by two people, preferably before a notary or attorney.

Not having a will can create significant confusion and chaos for your loved ones.  It also can result in thousands of dollars unnecessarily spent on court costs, legal fees, and other expenses.  Without a will the state you live in will decide how your property is distributed.  These are called intestacy laws.  They apply whenever a person dies without a will or trust.  Typically, this means the state first looks to spouses then to children then to parents then to siblings and on down the line to give your stuff to.  It’s important to remember that states are only concerned with the legal status of your relationships, not the quality of those relationships. 

SAMPLE CASE STUDY: 

Melissa and her brother, Michael, were raised by their mom their whole lives.  Michael was 23 years old and had not seen his father since he was five years old.  Melissa and Michael’s mother passed away when they were 19 and 21, respectfully.  Two months after Michael’s 23rd birthday, he suffered serious physical injuries in a car accident.  Because it was the other driver’s fault, Michael filed a lawsuit and received a $150,00.00 settlement.  Michael put the money in his bank account.  A few months after he received the settlement, Michael passed away from complications due to his injuries.  He had no will.  Melissa filed papers with the county’s surrogate office to be named executor of Michael’s estate.  As part of the process, Melissa had to find and notify Michael’s father because, according to the state’s intestacy laws Michael’s father was the sole heir to Michael’s estate- including the $150,000.00 settlement money.  Melissa hoped Michael’s father would renounce his stake in Michael’s estate since the two had had no relationship for over 18 years.  Michael’s father, however, filed papers to have the $150,000.00 turned over to him as Michael’s sole heir.   

What do you think happened? 

What do you think “should have” happened?

What would you want to happen if you were Michael? 

No one likes to think about dying, especially in their twenties.  But the truth is everyone dies and no one knows when.  No one wants to “benefit” from someone’s death, but death is expensive.  Funeral services alone can cost almost $10,000.00.  Your loved ones can also end up losing the house or car they rely on for their survival because you didn’t leave a will protecting them.  Legally married persons who have been separated for twenty years (happens more than you think) are still entitled to inherit from their estranged spouse.  What happens to the people you love if the estranged spouse or family member in your life shows up and demands their full inheritance?  Or perhaps you’re like Michael and have no relationship with your father, but you have a beloved uncle who shows up for every ball game and treats you like a son?  That beloved uncle would be in line behind the father you barely knew should you die without a will.  Most families have that estranged sibling, child, or parent that never comes around or has very little to do with the family but then they show up and wreak havoc when someone dies because they are “entitled” to their share.

Creating a will also allows you to establish your wishes and ensure they are followed.  In your will you can determine who gets what and you can also determine who does NOT get anything.  Your will allows you to protect those you love whether or not the state would prioritize them.  You can be specific and designate specific items for specific people, or you can be general and leave “everything” to one person.  There are few limits to what you can do with your will.  It is important to note that your will can easily be changed or revoked by you at any time.  If you have more children or live longer than one of your beneficiaries, you can reflect those life changes simply by updating your will.  The important thing to remember is that it is up to you. 

This is why everyone over the age of 18 should at least have a will.  Not sure where to begin?  For more information and a free template for a simple will join me in my Legacy Wealth Planning Group at www.facebook.com/groups/legacywealthplanning. 

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