When you hear the term “estate plan,” you may think that only wealthy people need one. After all, they have a lot of assets and money that all need to be distributed appropriately.
You, on the other hand, do not have a lot of assets – and you don’t consider yourself overly wealthy. So why would you need an estate plan?
While asset division is part of an estate plan, it is just one part. There are a few other parts that everyone should have in place, regardless of wealth.
Also called a living will or advanced health care directive, this form communicates how you wish to be treated health-wise, if you cannot communicate those wishes yourself due to illness or incapacity.
Without this form, should you become incapacitated, a court-appointed guardian may be appointed to make those decisions. Wouldn’t you rather have a trusted friend or relative making those decisions for you?
And remember, you may never need to use this form, but it is important to have it in place should the need arise.
Durable Power of Attorney
This works much like the health care directive, but deals with your finances rather than your health. If – and only if – you become mentally incompetent, the durable power of attorney will go into effect.
If that happens, an agent – appointed by you – will be able to make financial decisions on your behalf. The agent can be family member, friend, or even an attorney.
Do you have an insurance policy? Maybe a 401(k) or an IRA? This form specifies who will be the beneficiaries of those items.
Payable on Death Form
Just about everybody has a checking account. This form specifies who will receive the funds from your checking and/or savings account.
Transfer on Death Form
Do you have a brokerage account? If so, this form specifies who will receive the funds in that account.
Transfer-On-Death Deed Form
If you own a home or other property, this form specifies who the deed should be transferred to.
Last Will and Testament
And now we come back to the original topic – asset division. You may want your grandson to have the ’57 Chevy that you restored. Maybe your daughter would really love to have Mom’s fine china.
These are all things you can put in your will. And the more things you include in your will, the less chance there is of family disagreements when you are gone.
As you can see, all of these small pieces add up to create an estate plan. Regardless of your level of wealth, having all these pieces in place upon your passing will make a difficult time just a little bit easier for your family.