WHO NEEDS AN ESTATE PLAN? (SPOILER ALERT: IT’S EVERYONE!)
The importance of having an estate plan cannot be understated. The common misconception that estate planning is just for the ultra-wealthy or elderly severely underestimates the value of having a plan in place to ensure individuals’ wishes are met upon their incapacitation or passing, regardless of income level or age. Estate planning accomplishes several different purposes, all of which are incredibly crucial, and which many people don’t think about until it is too late. It is highly recommended that every adult create an estate plan.
One advantage of creating an estate plan is that it provides information and direction for managing your medical care and assets if you become incapacitated and are unable to make medical or financial decisions. These directions are included in a financial power of attorney, medical power of attorney, and living will documents. One instance where an individual needs an estate plan is when a student or young adult begins college, travels, studies out of the country, or is deployed. College students and young adults should have powers of attorney and living will documents in place so that their parents can access and manage their financial accounts and medical information as needed, or in the event they become incapacitated.
Another benefit of an estate plan is that it allows you to name legal guardians for any minor children you have or dependents you provide support to in the event you no longer can support them. Guardianship designations are one type of provision that is included in a will. If parents fail to create a will and name a guardian for their children in it, the court will then step in to determine who will take care of their children. The court’s determination may be contrary to the parents’ wishes, which is why it is crucial to execute an estate plan and ensure the parents’ preferences regarding the care of their children are met.
Additionally, parents of minor children often have life insurance policies. Without an estate plan in place, if both parents happen to pass away simultaneously, a court would have to appoint a conservator for the children in order to manage the benefits from the life insurance policy. Conservators must file annual reports and have hearings with the court each year, which can be difficult and expensive. Also, a conservatorship ends when the children reach legal age, regardless of whether they have the capability to handle the money. The better solution for parents is to create a will that establishes a trust, which avoids annual court reports and hearings, and provides for the money to be held in trust until the children reach an age where they are financially responsible. Therefore, parents of minor children are one of the most important groups of people who require an estate plan.
In any case, one of the main goals of an estate plan is to establish which people or organizations receive the assets from your estate after you have passed away. This information is documented in a will, which specifies how your assets should be administered, to whom, and under what circumstances. Specific life events may cause the recipients of your assets to change, and, accordingly, it is imperative for individuals to either create or update their wills and estate plans. Such events include marriage, divorce, death of a spouse, death of a beneficiary, birth of grandchildren, new home or property ownership, new or changed interest in a business entity, and significant changes to your financial situation. If an individual fails to create a will, the court will then step in and allocate the assets as deemed by state statute, with very limited exceptions.
Proper estate planning can also help navigate the complicated world of Medicaid and protect an individual’s assets from Medicaid recovery. Individuals who may need or are planning to live in a nursing home or want to take advantage of their Medicaid benefits can ensure their ability to do so by having an estate plan in place. In these kinds of situations, having an estate plan can also ease the burden from an individual’s loved ones, so they won’t have to worry about the individual’s living expenses or medical care.
As demonstrated, adults of all ages can greatly benefit from having an estate plan in place. For individuals in every stage of life, estate planning can provide peace of mind and certainty for the future.