Estate Planning + What it Means for You
What is estate planning?
Estate planning is planning for your legacy, but more specifically your financial legacy. The point is to make sure all of your financial affairs are taken care of before you pass away. You don’t want your properties and money going just anywhere, right?
An "estate" is a person's net worth made up of all of their belongings in life. In your estate planning, you decide who your things will go to. Typically, we think of having a beneficiary for things like 401ks and insurance policies, but what about things like a home or land? Your cherished Pokémon card collection? Your Twilight movies?
A majority of people, including celebrities, don’t have a chance to get to estate planning before they pass away. This can create familial issues, cause tension, and just overall be a pain in the butt. Unfortunately, someone who did not get to estate planning was the late Prince. He didn't have any estate planning, and his heirs have been left in a tricky spot (the full story).
Okay, so what should you be thinking about when planning your estate? There are three main things.
1. A Will.
78% of millennials (age 26-36) do not have a will, and this number is even higher for Gen Z (15-25).
A will is a document that outlines your estate planning decisions.It identifies what gets passed down to who, and under what circumstances. Maybe you want your children to have a specific guardian if something were to happen to you, your cabin to be handed down to your younger cousin, or all of your funds to be donated to a specific charity – whatever your wishes may be, your will is the place to
write them down.
When someone passes away, whether they have a will or not, their heirs must go to probate with the state to settle the affairs. A will is the official document that delivers the decedent's last will and testament.
This document helps prevent many legal issues and family quarrels.
2. A Health Care Directive (Living Will).
This is another important document that a lot of people don’t even know about! This document says what you want to happen if something happens to your health and you can’t make your own health decisions. Who would you want to make those decisions for you?
Remember the Terri Schiavo case? She was permanently brain damaged with no hope of recovery. She did not have a living will and her family went through YEARS of turmoil. If she had a health care directive, that turmoil would have been avoided.
3. A Power of Attorney.
This document decides who gets to make financial decisions on your behalf while you’re still living. Again, super important! Things like Alzheimer's, vegetative states, or even long trips abroad could require a power of attorney. It’s similar to the health care directive, but differs in the fact that it is not for health care.
There are more advanced estate planning tips and tricks like setting up a trust, but typically those issues matter more and more as one's net worth increases.
Having a will, health care directive, and power of attorney are important documents for everyone to iron out in their estate planning – whether you're 61 or 16.