What is an Estate Plan and Why is it so Important?
With an increased awareness about the preciousness of life this year has brought, we have seen many clients and friends rush to update or build their estate plan. Despite this year bringing attention to the topic of estate planning, it is still a heavily neglected section of a proper financial plan. According to a recent study, only about 32% of adults have any sort of estate planning documents*. And in recent years, that number is only decreasing. So, even though numbers are staggeringly low, why is it such a talked about topic and why is it so important?
One of the most important factors in getting a complete estate plan in place is to reduce the burden and stress off loved ones you leave behind. Too often, spouses or children are left with a disaster of a situation following the death of a loved one simply because nothing was organized or properly in place. Sorry to be the bearer of bad news, but death is inevitable for all of us at some point. So, we encourage you to spend a small amount of time now to take a tremendous burden off the shoulders of those you love, especially if you are to pass unexpectedly.
Now, let me explain what is in a standard “estate plan”. Usually, the few official documents inside an estate plan can include a Last Will & Testament, a Living Will, a Durable Power of Attorney, and a Durable Power of Attorney for Healthcare. Some plans can include and setup a Living Trust; however, this is usually more expensive and not always necessary for basic situations.
A Last Will & Testament is arguably the most important document inside an estate planning package. This document designates who will have guardianship over young children and how all assets will be distributed following death. It is extremely important to have this document prepared so the parents can oversee who will watch and provide for their children versus leaving it up to the state court system. Then, special requests about how certain assets (bank accounts, jewelry, house, vehicles, etc) will be distributed can also be made inside of this document. Keep in mind, if you have life insurance policies or retirement accounts, the beneficiary that is listed on those accounts overrides what is listed in the Last Will & Testament.
Next, the durable power of attorneys. There is one listed specifically for healthcare and another listed for all other matters. These documents appoint a certain individual to make decisions on your behalf in the event of disability of incapacity. The healthcare power of attorney gives the appointed individual the power to make all medical decisions on your behalf. Depending on the options you select, the durable power of attorney allows your appointed individual to make all other decisions on your behalf (e.g. money, insurance, property, business, taxes). These are heavy documents to sign off on. So, spend time considering who you would like to appoint and have the discussion with them to make sure they are on board.
Lastly, the living will. This document is not actually necessary. However, if you know exactly how you want to be treated under certain circumstances, this document will rule. For example, you can make the decision now under your living will if you’d like life support, CPR, treatment for new conditions, etc. instead of relying on your healthcare power of attorney to make the decision for you. Or this document can be left out and you can leave these decisions up to your healthcare POA.
So, what does a typical plan like this cost? From our professional experience, a basic estate planning package for a married couple can generally cost anywhere from $1,000 to $2,500. Of course, this depends on the complexity of your situation. If trusts begin to get involved, that can certainly increase the cost of the package. But, a couple thousand dollars now can save not only time and money in the future, but also ensure that all your desires will be carried out to your liking. If you have additional questions or would like to make an appointment with one of our recommended attorneys, let us know and we are happy to walk through the process!
Please note, changes in estate planning laws may occur at any time and can vary from state to state. These changes could have a substantial impact upon each person’s situation. While we are familiar with the estate planning concepts presented here, as Financial Advisors of RJFS, we do not provide advice on legal matters. You should discuss your estate planning needs with an estate planning attorney.
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