Estate planning is the process by which you make arrangements for your assets that you would like to be carried out upon your death. It can be difficult to plan for the time when you will not be here, but it is necessary to protect the property you have accumulated over a lifetime. Estate planning is also important because it ensures that your family and other loved ones will not suffer avoidable financial hardship because you failed to plan.
Your estate refers to the property that you own, including all of your total assets and liabilities. Your property includes your home, car, accounts (i.e. bank, retirement, and brokerage), jewelry, insurance policies and so forth. In short, property is defined, as its name suggests, as all of those things, both real and personal, that belong to you.
If you do not work with an attorney or tax advisor (or on your own) to accomplish your estate planning you run the risk of dying intestate. Dying intestate means that you died without completing the important tasks of creating a will or trust. Your estate is then vulnerable to the whims of state and legal complications as your wishes are unknown.
There are no guarantees in life about when we can expect to check out. Most of us expect to be here at least until 80, but sometimes it just isn’t in the cards. That’s why it is important to give some thought to how we want our assets distributed if we die unexpectedly. Now you may be thinking, “I’m just out of college and have no real assets to speak of,” maybe so, but surely you own something.
When you take all of your assets together you may be surprised to learn that your net worth is far more than you imagined. Even if you are not wealthy, it is still important to consider estate planning. Probate fees generally run around 10% of the total value of the estate. For example, if your estate is worth $300,000 probate costs could run to $30,000. It is almost certain that you would prefer to see that money go to your heirs.
Even if it is not yet necessary to rush out and hire a high powered attorney, it is important that you record your wishes in writing. Write down all of your assets and those things, like the book collection that are important to you. Next, write down how you want these things to be distributed. Of course, if you have children you will also want to leave instructions about who should care for them and any wishes you have regarding education and financial arrangements, etc. You should also write down your wishes in the event of incapacitation. This is particularly important if you are not married but want to have your partner be your advocate if you become unable to advocate for yourself.
It can be easy to ignore the need to plan beyond your death, especially when you are very young and only just beginning to live. You don’t have to invest a great deal of time or money in the plan, but you should give some thought and a few pen strokes just in case.