- October 13, 2021
- Posted by: Virg Cristobal
- Category: Time of Life
You’ve been at your dream job for several years now. You handled the life insurance, the kids are set with school, and now you’re starting to consider estate planning. What is estate planning and why should you be thinking about it in your 30s or 40s? Estate planning is a valuable and imperative part of life and understanding the components, the steps and why it’s important is critical to maintaining a legacy for decades. Let’s talk about the importance of estate planning, what it is, and why it’s important.
What is estate planning?
Estate planning is making a plan in advance and naming people, family members, or organizations you want to receive the assets you own after you pass. Think of it similar to a will but they’re slightly different, often going hand-in-hand. An estate plan is a comprehensive plan that includes documents that are not only effective during your lifetime but other documents that take effect after your death. It’s an all-in-one system.
Do young families need an estate plan?
If both parents of young children pass away, those parents will want their assets to be used to care for the children and this is where an estate plan is so important. Some of these assets can transfer automatically to the surviving spouse but if both parents pass on, there needs to be a plan in place for what happens to the assets and how they are used to take care of the surviving children.
Five components of a great estate plan.
Last Will and Testament.
The will is probably the first and main document you think of when it comes to estate planning. This is the document that will map out who will take responsibility of your assets when you pass on. This person or entity will distribute property and assets when the time comes. If you have younger children, you’ll need to state who would take them and serve as their guardian in the event that you and your spouse become incapacitated.
Power of Attorney.
A power of attorney will allow you to designate someone to step in and manage finances and legal matters if you are unable to perform them yourself. This document is especially important for those that may not have spouses or significant others as there may not be someone to step into the role immediately. If there is no power of attorney, a court will decide who serves as a power of attorney so it’s important to designate this ahead of time.
A trust is a legal arrangement that will hold assets on behalf of the beneficiary or beneficiaries depending on how it is set up. There are different types of trusts and the individual setting up the trust will specify how and when beneficiaries receive the assets. For instance, if you pass on and leave underage children, a trust can be set up to care for them and then distribute money or assets at certain ages.
Health Care Directives.
This is similar to a power of attorney but a healthcare directive handles medical decisions not financial ones. A living will is a written statement that provides instructions to the healthcare and a healthcare proxy will designate a person who can make those medical decisions on your behalf. This is extremely important if you have family members that disagree on your care.
This designation is for retirement accounts and life insurance policies. They will dictate who will receive the benefits when you pass. These also supersede what is in a will making it important that you review these designations on a regular basis as they can change.
The bottom line for estate planning, it’s more than simply a will. Even healthy young adults can be taken suddenly by accident or illness so it’s important to have these planning procedures in place.
- Designating an executor of the estate and a trustee for any trusts
- Designating any guardians for minor children
- Providing instructions for the distribution of assets and property
- Designating trust distribution or someone to manage your beneficiary’s inheritance
- Review insurance needs
- Plan for disability
Nobody likes the idea of the worst possible scenario but it’s also wise to plan for the ‘just in case’. Estate planning is protection for your family and your beneficiaries. If you’d like more information on estate planning contact our office at any time. We could set up a consultation, offer different options and variations to estate planning, and make sure that you are set both financially now and in the future.
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