More than half of Americans, an estimated 56%, do not have an estate plan, making estate planning a critically overlooked component of financial wellness. This creates financial and other hardships that can be largely avoided with some advanced planning.
In 2008, the United States House of Representatives designated National Estate Planning Awareness Week the third week in October. The goal was to help the public understand what estate planning is and why it is a critical component of financial wellness.
Why is Estate Planning So Important?
Estate Planning is about planning for tomorrow – today. It encompasses the growth, conservation, and transfer of an individual’s wealth through creating and maintaining an “estate plan.” The purpose of estate planning is to develop a strategy that supports the financial security of individuals throughout their lifetime and ensures the intended transfer of their property and assets at death. The process needs to consider the family’s unique circumstances and the potential costs of different methods. An appropriate team of professionals may include, but is not limited to, an attorney, credentialed financial planner, accountant, insurance advisor, and trust officer, all working together to benefit their clients.
So why do so many people neglect to create a plan for their survivors?
For starters, nobody likes talking about their inevitable death. So, it’s an easy topic to avoid. But if you become incapacitated, somebody will need to make medical decisions for you. And when you’re gone, it will be somebody’s job to account for the things you leave behind. If nobody knows your wishes, caring for you and handling your assets can become a complicated, emotionally charged process for your loved ones. Not to mention expensive if your assets go into probate and the courts must decide.
Some people assume their assets are not large enough to warrant an estate plan or believe an estate plan is unnecessary if they are not married or have grown children. However, every adult needs some level of estate planning, regardless of wealth, age, or marital status.
What is Included in an Estate Plan?
Estate plans can be simple or complex, dependent on your needs. The three most highly recommended documents are a Will, a Durable Power of Attorney (POA), and a Healthcare Power of Attorney. In addition, an estate plan can include any of the following documents and directives:
- Living Trust
- Living Will
- Medical Directives
- Anatomical Donation Directives
- Pre- or Post- Nuptial Agreements
- Guidance on the care of children and other dependents
- Life Insurance
- Disability Insurance
- Charitable Gifting
Other Things to Know
The three most common reasons for not creating a Will include the following:
- We can’t agree on a guardian/executor
- None of my assets are taxable
- I don’t have enough assets to leave to anyone
Another area to consider is your digital footprint, ranging from your social media profiles to your online paid music subscription. Do they have value? What will happen to them? Read how digital assets fit into your estate plan and why you should include digital assets in your Will.
It’s critical to keep your estate plan up to date. As time passes, things change. Family members come and go, wealth changes and values may shift. It’s essential to keep all your documents updated to reflect your wishes accurately.