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By Dr. Anthony Patete
Faculty Member, School of Business, American Public University
You plan your day, your week, your work schedule and even your vacation, savings and retirement. But few of us consider how we will take care of our family once we’re gone. When it comes to estate planning, getting an early start is best.
Facts about Estate Planning
Older Americans are the most likely to have an estate plan. A total of 81% ages 72 or older have a will or a living trust.
But 78% of millennials (ages 18-36) have not done any estate planning. Nor have 64% of the Americans called Generation X (ages 37-52) and 40% of Baby Boomers (ages 53-71).
Estate planning determines what happens after your death, but it is not just for older Americans.
For example, let’s say that a family of four sets out on a road trip. During the trip, both parents die in an accident.
Who will be responsible for the children? How will the plans that the parents discussed for their children be carried out? What assets does the family have and what provisions have they made for their disposition?
One size fits all does not apply when it comes to estate planning. Each family is different and each family member has various ideas on how to care for their loved ones. Even married couples have different estate plans.
What Is Estate Planning?
Estate planning is the process of drafting and executing legally binding documents that indicate how you intend your assets should be distributed after your death. These documents not only address death, they involve caring for family members who are incapacitated as a result of Alzheimer’s or some other illness or incapacity. Some family members may require long-term care.
Estate planning also prevents government intervention in the disposition of your assets if you were to die without a will, a situation known as “intestate succession.” For instance, will the surviving children in the four-member family example automatically inherit their deceased parents’ estate? Contrary to popular belief, the answer is no.
Most intestate succession statutes pass the deceased’s assets to the closest living relative of the last survivor. That person could be a parent or a sibling, but not necessarily the children.
Estate planning makes sure that your intentions are clear and in writing.
What Are the Elements of an Estate Plan?
An estate plan typically has several elements including:
- A will — A will outlines your final wishes with regard to your assets and appoints a person to carry out your wishes. This document takes effect upon your death.
- A trust — This document authorizes a trusted person to hold your assets on your behalf or on behalf of loved ones. It can take effect after your death or even during your life.
- A power of attorney — This document authorizes another person to make legal or financial decisions during your life or during an incapacity. It takes effect once it is signed.
- A healthcare proxy — More commonly known as a “living will,” this document allows you to select specific persons who will make healthcare decisions for you if you cannot make them for yourself.
- One or more beneficiaries — Beneficiaries can be your loved ones or a charity that you name to receive the assets of your estate. If no beneficiary is named, a probate court will make that determination on your behalf.
Factors to Consider in Your Estate Planning
Estate plans are important. Think about what you want to accomplish.
Even though you may not think you need an estate plan, you should consult a professional, such as an attorney who specializes in elder care. Even if you have an estate plan, when was the last time you reviewed it?
Over time, situations change. For example, your children could get married and provide you with grandchildren. Now, there’s a need to alter your plan to include your grandchildren among your heirs.
Ask yourself the following questions as you’re planning your estate:
- Do you have minor children or a child who is disabled?
- Do you own assets that you promised to a specific person? These assets could be a home, car, business, bank account, investment account, retirement plans, life insurance, personal property or jewelry.
- Do you want a trusted person to manage your affairs if you are incapacitated or dead?
If you answered yes to any of these questions, you need an estate plan. But before preparing the legal documents, there are other questions you should consider:
- What are my assets and what is their approximate value?
- What people or organizations do I want to have these assets? Do I wish to give them away during my lifetime or after my death?
- Who should manage these assets during my lifetime if I become unable to do so, or after my death if management is needed?
- Who should be responsible for taking care of any minor or dependent children if I am unable to do so?
- Who should make decisions about my medical care and finances if I cannot make them?
- After I die, do I want my remains to be donated, cremated, scattered or buried?
- Where are my assets located?
- Do my beneficiaries know where to find them?
- Are passwords required to access information and locate assets?
As part of the estate planning process, you should prepare a list of all assets, their locations and their passwords.
Start with an Idea about Your Estate Plan and Act on It
Start with a general idea about your estate plan and take steps to plan for and take care of your loved ones. After all, if you don’t do so during your lifetime, you cannot take care of your loved ones once you’re gone.
About the Author
Anthony Patete is a faculty member at American Public University and other universities. He has taught law and business for more than 15 years and has been an administrator in post-secondary education. “Dr. P”, as his students affectionately call him, provides his students with seasoned instruction and career guidance.