Estate Planning Isn’t Just For The Wealthy: Here’s Why Every Family Needs A Plan

When people hear the term estate planning, visions of the wealthy family with huge assets or investments and a complicated financial arrangement come to mind. However, estate planning is not just about who to leave your money or other major assets to. This means having information on important decisions you, your family members know exactly what you want if not able to express it or handle financial and other matters at some point in time.

Just because a family has a house, some savings and retirement accounts, vehicles, personal belongings or life insurance does not mean that careful planning is not warranted. Estate planning not only deals with the aspects of wealth, it also leads to questions about who should manage finances or make a particular call if one is incapacitated.

What Exactly Is Estate Planning?

What Is Estate Planning? Estate planning is the method of preparing directives for a person’s property and certain personal or financial affairs after death. The specific documents needed depend on the individual’s situation, family dynamics and state law.

The estate consists of a home, bank accounts, investments, retirement accounts and funds (IRA or 401(k)), cars and trucks, personal property (clothing and furniture), life insurance proceeds (if not passed outside probate), business interests. Planning may also include wills, trusts, powers of attorney (POA), healthcare documents, and preferences for guardianship.

Not building a complex legal structure is the objective. It is simply a question of making good, because it is just getting through places.

You Do Not Have To Be Rich For Will

Will – You probably know your will – it’s the most common estate-planning document. It can specify how some property is to be distributed and who is to receive it at death. Depending on applicable law, it might also name an executor or personal representative to manage the administration of your estate.

If you have young kids, a will can also be a vital place to express wishes regarding custody of your children. It is important to note that a court will ultimately decide the guardianship, but indicating what the parent wanted can be helpful.

Most importantly, a will does not mean an estate avoids probate. In most cases, a will must first go through the probate process to validate its instructions.

Four Ways Estate Planning Can Protect Families With Children

Parents often dutifully provide for their children with planning in mind as long as they are both alive and able to make decisions but what happens if both parents pass away or become unable?

If you have minor children, you might want to consider who would care for your children should you die and how property designated for the children is to be distributed. Such choices can be especially consequential when the children are not yet mature enough to handle property on their own.

Also keep in mind that as kids are getting older, plans might have to be rescheduled. A document drawn up when children were babies may offer little indication of what a family situation was like years down the line.

Planning Is Also About Incapacity

By Peter Walsh of Ashby & GeddesNext month is when prime estate planning takes place, correct? Certain documents are created to help manage things while a person is alive but unable to make those decisions for themselves.

Depending on the provisions of the document itself and applicable law, a financial power of attorney can allow another individual to be able to manage specified matters relating to your finances. Healthcare planning documents can convey wishes or appoint someone to make healthcare decisions where appropriate.

These documents are not a will. While a will generally addresses matters after death, powers of attorney and health care documents are used to cover situations that may arise during one’s lifetime.

What Happens Without a Plan?

If a person dies without a valid will, they are typically dead intestate. Instead of having the deceased person’s written instructions govern the distribution of certain property, state law will control.

That can leave families at odds, especially when ownership of the home is more complex, relatives aren’t on the same page, or a person’s wishes were never written down. Depending on the specific assets and circumstances, probate or other legal actions might be needed.

States have very different rules regarding intestate succession. When researching these laws, it is important to rely on information relevant to the specific state involved. An estate planning lawyer can also provide guidance on how Texas estate planning and inheritance rules may apply to a particular situation. 

Trusts Are Customarily Only Suitable for Very Wealthy Families

Trusts may be viewed in association with the ultra-wealthy household but a trust can serve other functions besides just holding wealth.

A trust may be established to manage property for the benefit of your beneficiaries, provide directions when or how certain assets should pass, or be created to fill a specific need for the family. For some parents such as myself, they would think it necessary to manage their property if their beneficiaries are still not at the right age.

That does not suggest every family should have trust. Estate-planning tools need to be chosen based on the family’s situation rather than the assumption that more complex planning is better.

Don’t Overlook Beneficiary Designations

Estate planning also includes reviewing accounts and policies that allow the account or policy owner to designate beneficiaries. Some life insurance policies and various retirement or financial accounts also have a beneficiary designation to set forth who will get the asset upon the owner’s death.

In a lot of cases, these designations can function independently from a will. This makes it essential to periodically review them, especially since major life events (marriage, divorce, the birth of a child or death of a named beneficiary) can alter circumstances dramatically.

For example, maintaining up-to-date information about beneficiaries can avoid any issues from an outdated designation that conflicts with a person’s current intentions.

Planning Can Reduce Family Confusion

An estate plan cannot prevent family disagreements. Clear instructions help less ambiguous the question of what anything does or does not want.

Otherwise, you may leave families hunting for key paperwork, figuring out who can handle property management, searching for financial accounts or beneficiaries, or deciding what to do with personal belongings.

These questions can be addressed more easily if in-depth plans are organized. It can also provide families with a better sense of which documents exist and where they might be located.

When to Review an Estate Plan

That estate planning should not be a one-time event. Marriages, divorces, births or adoptions of children need to reconsider it; The death of any beneficiaries; Major changes in your finances; A significant change in property (purchase or sale); Moving from state-to-state.

Even when there is nothing significant that you can point to, simply keeping an eye on your documents and beneficiaries periodically makes sure that what you have still meets your wishes.

A Simple Place to Start

Families do not have to figure out every estate-planning question at once. This is a great place to start, by identifying key assets and accounts, searching for legal documents that may already exist, checking beneficiary designations and thinking about who will make financial or healthcare decisions if required.

Parents also have the option of putting their preferences regarding the care and custody of their minor children onto paper. Organizing your important documents and ensuring trusted family members know where to find them can help in making a tough situation easier.

In the end, estate planning is far less about how wealthy a family is, and much more about considering actions before those decisions become an urgency. It is a good idea to plan if you own your home, have some cash savings, personal possessions, dependent children or even plans for health care and finances.

For families, the basic goal is simple: that important decisions are communicated plainly and that relatives are prepared for situations that will leave them unsure what to do.