When it comes to estate planning basics, there are three main options. Know the differences to decide which is right for you.
When it comes to estate planning basics, there are three main options: using a will, a living trust, or nothing. There are also three main factors that need to be considered: your health, wealth, and eventual passing. Let’s break these options and considerations down and compare what they mean for you and your family’s future.
Do I Need an Estate Plan?
Firstly, I can answer this question right off the bat: YES. You need something in writing. If you don’t have something in writing and something bad happens, it’s too late. And I’m not just talking about death here — I’m also referring to major life events.
Even if you’re completely healthy, there’s always the possibility of needing a health advocate. For instance, let’s say you’re in a car crash and need to have surgery. Most likely, you’ll go under anesthesia. While you’re out, you can’t answer any questions or dictate what happens should the need for a decision arise.
This leads us to the first factor to consider with estate planning basics: your health. It is crucial to make sure you have an advocate for yourself (your body) in the event you can’t advocate for yourself. Every estate plan should address this medical aspect.
Someone should be designated to answer questions for you in the event that you cannot. Let’s go back to our anesthesia example. When you go under, you’re putting your life in someone else’s hands and authorizing someone other than yourself to make decisions for you while you’re unconscious — but, without an estate plan, you haven’t picked that person.
Then, the first step in estate planning is to put in writing who gets to make those decisions for you. It could be a spouse, caregiver, sibling, child, parent, fiduciary, or some other third party — but it must be in writing. You also want to make sure you give this person access to the medical information they’ll need to make the best decisions for you.
Back to our anesthesia example: if something comes up while you’re having surgery, they’ll ask your spouse. It’s really easy when the person is a spouse. However, it’s far more complicated when the person is a partner, fiance, parent, child, third party, best friend, etc. Without doing this planning beforehand, anyone other than a spouse won’t be able to access the information they need.
If you’re unable to make decisions for yourself, you need someone appointed. Otherwise, the state will get involved. Trust me on this: you don’t want the state involved. It’s never a good solution.
Nowadays, people are living longer than ever before. Sometimes, our bodies are outliving our minds. I have personal experience with this one. I had a parent who could not make decisions on his own. Luckily, he’d already designated my mother to make those decisions for him.
The need for long-term care at the end of life is becoming more and more common. It’s critical to have someone appointed to make financial decisions for you because, when you get to a point where you can’t make your own decisions, it’s too late to designate someone else.
The final consideration in estate planning basics is: what happens when I pass? Like I mentioned earlier, there are three options here:
- Living trust
- Nothing (no estate plan)
A will documents how you’d like to distribute your assets. It goes through the court system. Having nothing in place (no estate plan) also requires your assets to go through the court system. Not having an estate plan is called “intestate” and it results in having your assets divided under the laws of the state in which you reside. Living trusts are the only option that does not require court supervision.
For me, it’s easy to decide what I’d rather have for my heirs. Do I want them going through a lengthy court process, dealing with a judge and lawyers? No, of course not. I want my heirs to avoid the court process entirely, save money by not paying for expensive probate, and get their inheritance much faster than the average probate, which lasts around 18 months.
Even if you’re someone who does not have a lot of financial assets, you’ll still need someone to answer questions on behalf of your health and wealth. For me, it’s a no-brainer. Trusts avoid the court process entirely, are faster to distribute, and avoid the expense of probate.
To rank the options:
- Best option: living trust
- 2nd best option: will with power of attorney for finances, power of attorney for medical, and HIPPA release
- Worst option: nothing (no estate plan)
When you’re ready to shore up your estate plan, contact us to take the next step with our knowledgeable and caring team of professional advisors at email@example.com or 800.706.4741.