Part of planning for the future is deciding about what will happen to your estate after your death. Another issue is deciding what should happen should you become incapacitated and unable to act for yourself. These issues fall into the broad category called estate planning.
Estate planning isn't just for the wealthy. Depending on your age, family situation, and assets, your need for estate planning may be simple or complex.
What is your estate? It consists of all the property—real and personal—that you own at the time of your death. The property may include real estate, bank accounts, stock and other securities, life insurance policies, personal property such as automobiles, jewelry, artwork, and other collections.
Estate planning allows you to:
- Identify who should receive your property after your death.
- Ensure that your property will be transferred to the identified persons quickly and with as few legal steps as possible.
- Define the kinds of medical care you wish to receive should you be unable to decide for yourself.
- Describe the funeral arrangements you desire and how related expenses should be paid.
The result of estate planning should be some combination of these documents:
- Health care directives
- Financial power of attorney
- Description of final arrangements
At a minimum you should have a will and healthcare directives. Descriptions and resources for these and other estate planning options are provided in the following sections.
Estate planning is not a task that you do once then forget it. You should review your plan periodically—every 3 to 5 years is a good time frame—to make sure that it reflects your current situation. Here are several reasons to update your plan:
- You marry, divorce, or remarry.
- You have a child or a grandchild.
- You move to another state.
- The value of your assets change significantly.
- The executor of your will or the administrator of your trust dies or becomes incapacitated, or your relationship with that person changes significantly.
- One of your heirs dies or has a permanent change in health.
- You decide to change your beneficiaries.
- The laws affecting your estate changes.
Information Needed for Planning
In order to plan your estate, you need to have the following information. Use the Estate Planning Checklist to help you.
- Any real estate you own (such as your home) and its approximate value.
- Savings – bank account, money market accounts, CDs – amounts and the financial institutions where they are deposited.
- Investments – stocks, bonds, mutual funds – identify the investments, amounts, and where the accounts are located.
- Retirement accounts – 401(k), IRA, pension, Keogh accounts, government benefits, profit sharing plans – identify the accounts, amounts, and where the accounts are located.
- Life insurance policies and annuities – account balances, issuer, owner, beneficiaries, and any amounts borrowed against the policies.
- Motor vehicles – cars, boats, motorcycles, planes, etc.
- List the co-owner for any jointly owned property.
- List the amounts and sources of your income, including interest, dividends, and other household income (such as your spouse's salary).
- List the amounts and sources of all your debts, including mortgages, credit cards, loans, leases, and business debts.
- List the value of any jewelry, collections, heirlooms, furniture, and any other personal property.
- List the names, addresses, and birth dates of your spouse, children, and any other relatives whom you might include in your will. If they have any disabilities or special needs list them too.
- If you have young children, list the names, addresses, and phone numbers of possible guardians.
- List the names, addresses, and phone numbers of executors or trustees.
- Gather together any documents that might affect your estate plan – prenuptial agreements, marriage certificates, divorce decrees, recent tax returns, existing wills and trusts, property deeds.
General Resources on Estate Planning
These resources give an overview of the many aspects of estate planning; they also address specific topics such as wills, living trusts, and powers of attorney. They can help you begin to assess your needs and goals.
Wills, Trusts and Probate from Nolo.com, the self-help legal site, offers an excellent place to start. The site's many articles are arranged in logical topics and provide sound, easy-to-understand information.
Estate Planning FAQ's from the American Bar Association provides a quick estate planning overview in a Q&A format.
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