All adult Americans need an estate plan.
Age 18 is an important year.
In many states, this is the age when you can first vote, join the military, and be recognized as an independent adult.
Although being an adult in the legal sense comes with many benefits, you also have greater responsibilities after hitting this milestone.
According to a recent Forbes article titled “Everyone Needs An Estate Plan: Here’s What You Need To Know,” adults need an estate plan to prepare for incapacity and death.
Estate planning is only necessary for the wealthy, right?
Although not everyone requires the same type of estate plan, you need an estate plan.
Estate planning does more than transfer assets to your heirs when you die.
It helps protect you, those you love, and what you own.
Consider what would happen if you were to get sick.
Your parents no longer have the legal authority to take care of you.
If you are in a committed relationship, your partner may not have the right to access your finances to pay bills or discuss your situation with your doctor.
Consequently, estate planning begins with incapacity planning.
This is a often overlooked reason why you need an estate plan.
You will need a general durable power of attorney to give someone authority to manage your finances if you are unable to do so yourself.
Similarly, you will need an advance health care directives and a HIPAA waiver to grant access to your medical records and designate someone to make decisions for you.
Without these in place, your loved ones will need to petition the courts to be granted these powers.
This process will be expensive and take time.
It will be a big hassle that could have been easily avoided, too.
You should also create a health care treatment directive to provide instructions regarding your end-of-life care and treatment.
If you are employed, you likely have an IRA, pension, or life insurance policy.
These assets are examples of those inherited through beneficiary designations.
When a beneficiary is listed on the account, then that account will be transferred to the new owner when you die.
It is important to review these regularly.
Failing to do so may result in these assets being inherited by an ex-spouse.
Another consideration is not all assets are treated equally by the IRS.
You need an estate plan to avoid a high tax bill for your estate and your heirs.
Knowing the rules can help provide direction on the most tax-efficient strategies to include in your estate plan.
Finally, having a legally valid last will and testament allows you to designate heirs, select a guardian for minor children, and choose an executor to manage your estate.
Without a last will and testament, the government will designate these individuals for you based on the laws of your state.
Because a last will and testament requires probate, you may want to consider having a revocable living trust as the foundation of your estate plan.
Now that you know why you need an estate plan, discuss your circumstances and goals with an experienced estate planning attorney.
Reference: Forbes (Feb. 26, 2021) “Everyone Needs An Estate Plan: Here’s What You Need To Know”