Yes, You Need an Estate Plan, Even If You Don’t Have an Estate


Last posted at

If you have assets, you have an “estate.” And you need a plan for it. Here’s why.

You may hear “estate” and think mansions and sprawling grounds, but you don’t have to be wealthy to need an estate plan. Everyone who wants to pass on assets after his or her death should consider establishing a formal plan. This important set of legal documents provides much-needed organization at a difficult time in your family’s life.

What is an estate plan?

An estate plan is a collection of documents that protects your assets and personal property (your “estate”) and details how you want to pass them down. It documents your wishes and specifies people who will guard those wishes and act on them in your stead.

Everyone who wants to pass on assets after his or her death should consider establishing a formal plan.

What does it include?

A will, which identifies:

  • Whom you want to receive each of your assets
  • Whom you want to be your children’s guardian
  • An executor to oversee that process

A power of attorney, who:

  • Makes financial decisions if you can’t
  • Pay your bills, manages investments, and makes legal or business decisions

A medical power of attorney, who:

  • Will make your medical decisions if you can’t

A living will, which:

  • Documents your end-of-life preferences

A trust, which:

  • Controls how and when your assets are distributed
  • Reduces or eliminates estate taxes

What are three critical functions of an estate plan?

  1. Protects your assets for your family (or other heirs)
    An estate plan provides a safety net that helps preserve the value of your assets, avoids lengthy wait times for disbursement, and helps ensure the legacy you envisioned is carried out.
  2. Gives you a say in who receives your belongings
    Through a will, you name:

    • Your assets
    • Your beneficiaries
    • The executor, or person who will carry out your wishes after your death
  3. Allows you to choose who will make your decisions An estate plan often contains two vital legal documents that ensure your plan will be carried out the way you want it to, including:
    • A durable power of attorney. This document appoints a trusted relative or friend to manage your legal and financial affairs should you become incapable.1
    • A health care proxy. This document gives someone permission to make health care decisions for you based on your wishes if you cannot.2

If you have a durable power of attorney and/or healthcare proxy, make sure to include that information on accounts such as IRAs, 401(k)s, and insurance policies.

How to get started

  1. Calculate your worth
    • Inventory financial assets, list all personal property, and document liabilities.
  2. Determine (or update) beneficiaries.
  3. Revisit the plan regularly.

How life insurance and annuities can help with estate planning:

Life insurance and annuities can play an essential role in estate planning. Life insurance can provide a source of income, tax-free, for surviving family members. Proceeds from life insurance typically can bypass the probate process (the distribution of an estate) so they can provide an immediate source of cash that survivors can use to pay off taxes or remaining debts, such as mortgages.

Annuities with a named beneficiary generally can avoid the probate process, potentially providing income directly to beneficiaries without delay.

Your financial advisor can provide more information on the importance of estate planning and partner with other professionals to help you develop an estate plan., What is a Durable Power of Attorney?

2 Health Care Proxies, Medical Interactive

Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.


Leave a Reply

Your email address will not be published. Required fields are marked *

Pin It on Pinterest