Learn more about estate planning basics, the estate planning questions you need to ask and get started on your estate planning goals.
In a recent survey, it was discovered that only 42 percent of American adults have a will, with 81 percent of those being over the age of 72. When people were asked why they didn’t have an estate plan or a will in place, most said it was because it’s too uncomfortable to think about their death, or they think the process will be arduous and expensive so they’ve procrastinated doing it. Today, one of our Divorce Squad experts, Monique M. Sadarangani, Esq., will cover some of the estate planning basics you need to know to begin your own process.
Let’s hear from Monique directly.
Estate planning doesn’t have to be scary or complicated and it’s vital to have a plan in place that protects your family and your assets. We’ll address some basic questions many people have when they first begin the estate planning process and how an experienced attorney can help ease and streamline the whole procedure.
1. Do you need a lawyer for estate planning?
Technically, anyone can make a living trust without a lawyer, but it’s highly recommended you hire one who can draft up all necessary documents and ensure that the correct assets are transferred into the trust. A trust-and-estate lawyer drafts estate planning documents such as wills, trusts, powers of attorneys, and advanced medical directives. Besides estate planning, they are involved in the estate administration of a decedent and can also help navigate complicated situations involving several trusts and multiple heirs. People often avoid hiring lawyers because they think they’re intimidating or too expensive. However, your estate lawyer is someone you will probably speak to or meet multiple times in your life to amend your estate plan. Hopefully, you’ll work with them for years to come, just like you would a financial advisor. You want to make sure you’re working with someone you communicate well with. Ask them to walk you through the process and don’t be afraid to ask questions if you don’t understand the legal jargon.
2. What assets should your estate plan include?
People may assume they don’t need an estate plan because they don’t have substantial assets. However, you likely have more than you think and what you have should go to the beneficiaries of your choosing. Items to consider when taking an inventory:
· Checking and savings accounts and certificates of deposit
· Stocks, bonds, and mutual funds
· Life insurance policies
· Retirement plans such as 401(k) plans or a Roth IRA.
· Ownership in a business
· Homes, land, or other real estate
· Cars, motorcycles, RVs, or boats
· Jewelry or safe deposit box contents
· Collectibles such as coins, art, antiques, or trading cards
You may also want to include sentimental items that may not be of any cash value such as family photo albums. In addition to the assets you have, you’ll also have to disclose any debts.
3. What documents do you need?
Your attorney can draft up the following documents for you or revise them if you need to make changes to current ones.
Wills and Trusts
A will or trust is one of the main components of an estate plan, even if you don’t have significant assets. Wills ensure property is distributed according to an individuals wishes and some trusts help limit estate taxes or legal challenges.
Durable Power of Attorney
A durable power of attorney (POA) is an agent or a person you assign who will act on your behalf when you cannot do so yourself. This may be a spouse, adult offspring, or even a trusted friend of the family. If you don’t have one, a court may decide what happens to your assets.
Many of your possessions can pass to your heirs without being listed in the will, such as 401(k) plan assets, so it’s important to always maintain a beneficiary on an account like this.
Letter of Intent
A letter of intent outlines what you want done with a particular asset after your death and is left to your executor or a beneficiary. Sometimes, they offer funeral details or other special requests.
Healthcare Power of Attorney
A HCPA designates someone, typically a spouse or family member, to make important healthcare decisions on your behalf if you’re incapacitated. You may want to list a second option in case your initial pick is unavailable or unable to act at the time of need.
If you have minor children or are considering having kids, you should pick a guardian that will care for your children on your behalf in a worst-case scenario. Without one, a court could rule that your children live with a family member you wouldn’t have chosen or your children could become wards of the state in extreme cases.
4. How and when should you make adjustments to your estate plan?
It’s important to keep things as up to date as possible as you’ll likely have changing circumstances every so often in your life that should be considered in your plan. You may need accommodations made for a family member with special needs or you opened an additional savings account that needs to be accounted for. Perhaps you invested in a new property or there’s a new baby in the family. You will likely want to discuss these changes with your attorney as they’ll affect the total value of your assets and how they’re distributed. Even if you don’t want to make any changes, your estate plan should still be reviewed every 3 to 5 years, or whenever there’s a major life event, to confirm it complies with the latest laws or tax changes. Your attorney will ensure that any new documents properly supersede the previous set. Some attorneys will offer an annual review of the estate to keep it up to date for a small fee.
5. How much will working with an attorney on an estate plan cost?
Many estate-planning attorneys charge flat fees, instead of billing by the hour. Some do both; charging a fixed rate for standard services like establishing a trust, then charging an hourly rate for special tasks. Creating a will typically costs a few hundred dollars but may be more depending on the complexity of your situation. You will probably spend around $1,000 to set up a trust. These costs may seem high but they could save your loved ones from a costly situation where someone contests your will in probate.
It’s a small price to pay to ensure everything is legally sound and that you’ll have peace of mind for the rest of your life.
Estate planning allows you to prepare for what happens to your money, property, and other belongings when you pass away. Just as importantly, an estate plan also defines the kind of care you want should you become incapacitated, who will handle your affairs, and any wishes you want to include regarding your funeral. Although it can be unsettling to think about, it’s an important thing to plan for no matter how much you own.
Thanks, Monique – that was such helpful information! If you would like assistance with your own estate planning basics, contact Monique M. Sadarangani, Esq. today and get on her schedule to get started!