Estate Plan Basics: What Everyone Needs To Know, Even If You Don’t Have Much
By: Robyn Hill, CFP®
I don’t know how many times I have heard someone say, “I don’t need a Will; I don’t really have all that much.”
My response is always that estate planning is so much more than just a Will. And yes, even those who do not have a lot of assets need a plan. Let me break down what an estate plan includes and why everyone should consider setting one up.
An Estate Plan Is More Than Just A Will
Your estate plan includes every document that directs what will happen when you die.
When done well, an estate plan includes instructions for managing things on your behalf if you are not able to do so at some point during your life, including:
- A Will
- Advance Medical Directive (AMD)
- A General Durable Power of Attorney (POA)
- The beneficiary designations on your accounts
- Instructions to set up trusts or custodial accounts for children or others who you want to take care of but who are not able to manage assets on their own.
An Advance Medical Directive Lays Out Your Wishes For Your Healthcare
An Advanced Medical Directive (AMD) lays out your values and wishes about your healthcare and provides enormous peace of mind for your loved ones.
It helps them make difficult decisions that tend to come up toward the end of life, such as:
- Should we apply life support?
- What about moving to a care facility?
- Are there things that would violate your faith or personal values?
The AMD also names the person who should have the final say about those things, which can prevent the family from being paralyzed by disagreement.
As you can see already, a well-thought-out estate plan is important for anyone, even if you don’t have a lot of assets.
Your Power Of Attorney Is The Person You Arrange To Manage Your Money & Assets
Arranging a Power of Attorney (POA) prevents significant waste of whatever assets you do have. The person you appoint can file claims for insurance benefits or other amounts you are entitled to. They will also ensure your insurance is kept in force, so you (or your family) don’t end up paying out-of-pocket due to a lapse in coverage. They can pay the rent, mortgage, taxes and utility bills to protect your assets. And if you need funds, they can determine how best to raise the money.
The Will & Beneficiary Designations Direct Where Your Assets Go When You Die
Even if you don’t have a lot of assets, the Will ensures specific items go to the people who will most treasure them. And if your assets change, having a Will in place ensures that your wishes are known, even if that change occurs when you can’t act on it (such as an inheritance or settlement that comes to you when you are incapacitated). If you don’t need a trust during your lifetime, the Will can also set up a trust that will come into being only at your death and only if it is needed.
REMEMBER: If you name beneficiaries on an account, that designation, not your Will, controls those assets. Be sure to review those designations any time you update your Will.
A Trust Protects Your Collective Property, Assets & Loved Ones
A trust, whether set up during your lifetime or at your death through your Will, allows assets to be used for certain needs while shielding them from things like bankruptcy and divorce. It can direct the assets to be distributed over time or at certain points in life so the beneficiary can “grow into” managing the assets.
A trust can be used to manage collective property such as a vacation home that will be shared by several family members. It can oversee a pool of assets you want to be used first to take care of several people, with only whatever is left distributed among them.
The Bottom Line: You Don’t Have To Be Rich To Set Up An Estate Plan
It’s about giving your family clarity on your wishes and peace of mind, so they know exactly what you want when tough decisions arise.
Schedule A Free Consultation To Get Started On Estate Planning
The advisors at Hess Financial have decades of experience helping clients determine which documents are important and what key elements to include. We are happy to answer any questions and help you navigate starting your estate plan. Schedule a free consultation to learn more.
Disclaimer: This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
