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No one wants to think about how their loved ones will fare when they die, but it’s important to plan effectively to ensure a smooth transition of your wealth and worldly possessions, even if you’re young or feel like you don’t have much to leave. behind.
An estate plan is a legally binding collection of documents that ensures you are in control of what happens to you, your assets, and any dependents you may have if you become disabled or die. The plan may include a will, power of attorney forms, trusts and more.
“Having an estate plan is like carrying an umbrella for the inevitable rainy day,” said Mary Elizabeth Anderson, a partner at the law firm Wyatt, Tarrant & Combs LLP in Louisville, Kentucky.
The most well-known will is called a last will and testament, which is a written statement of who should receive a deceased person’s assets, Anderson said. It may also include who will take guardianship of dependents or pets.
Assets can include items as varied as real estate, cars, and family heirlooms.
In the US, the requirements for a will to be considered valid vary from state to state, and you should consult an attorney to ensure that your will is legally binding.
Without a will, state law governs who receives your assets and cannot carry out a person’s intentions, Anderson added. This could lead to a long and painful process for loved ones in court.
Paige Hardin-O’Brien, 32, created an estate plan three years ago, making sure to include some prized antique furniture in her will. She is an embryologist at the Kentucky Fertility Institute in Louisville and one of Anderson’s clients.
Hardin-O’Brien also made sure to include her medical wishes for end-of-life care, information that is normally included in a living will. Unlike a last will, this legal document outlines your plans for when you are still alive. Provides instructions on how he wants to be treated medically if he is unable to speak for himself in a life-threatening emergency and other serious medical situations.
As a registered organ donor, you also included a medical clause stating that you want your organs to be donated when you die.
While a living will establishes your medical preferences, health care power of attorney forms give permission for someone else to make decisions for you if you can’t, said Ray Prather, a partner at the law firm Prather Ebner LLP. In Chicago. .
Hardin-O’Brien appointed her mother to decide if or when to take her off life support, should a medical crisis arise.
“I’m married, but I didn’t give (my husband) permission to say yes or no because it would literally keep me alive forever,” she said.
Meanwhile, financial power of attorney forms designate someone to oversee your property, access your bank accounts and manage your finances in case you can’t do it yourself, Prather said.
Trusts are another important part of an estate plan. They are an agreement to hold assets for the benefit of someone else, Anderson said.
They can be especially useful for adults who want to transfer assets to children under the age of 18.
Victoria Fuller, 32, set up a trust after learning she was pregnant to ensure her assets were properly allocated in the event she and her husband died while their children were minors. She is an associate at Wyatt, Tarrant & Combs LLP and is also a client of Anderson.
Without a trust, your children would likely inherit all of the money at once, Fuller said.
However, minors generally cannot own assets such as real estate, so any relevant property must be held by an adult or a third-party institution until they can legally inherit it, Anderson said.
Fuller’s trust would give money to his children in smaller payments as needed to ensure it didn’t run out before they became adults. When her children turn 18, they will have more access to money, she explained.
Other parents prefer to wait until their child is more mature, in their 25s or 30s, for example, to allow them access to their assets, Anderson said.
There are also options other than trusts for adults to manage their assets with respect to minor children. Anderson recommended that parents or guardians speak with an attorney to determine the best option for you.
With all this legal jargon, it can be overwhelming to know exactly when and how to start the process.
Life events, such as turning 18 and going to college, getting married, changing careers or moving out of state, often trigger estate planning, Anderson said. Pregnancy is also a popular time to start the process, as in Fuller’s case.
Estate planning can be complicated, so it’s okay to seek help from trusted experts who can navigate through technical areas that could drastically change plan outcomes, Anderson said.
Prather recommended that anyone creating an estate plan work with a reputable attorney to make sure their documents are legally correct.
In addition to updating your plan after a major life change, he suggested that everyone meet with their attorney every three to five years, regardless of their circumstances, to review their plan.
“Just because nothing has changed in his life during those three to five years doesn’t mean the law hasn’t changed,” Prather said.
The price of writing an estate plan varies widely depending on the complexity of the plan, how much the attorney charges and what city it’s in, he said.
Prather’s firm charges by the hour, and his typical estate plan costs between $2,000 and $3,000. However, he is in Chicago, which could make the process more expensive than in smaller cities, he noted.
While the price may be high, it’s a sound investment because it ensures that everything you worked so hard for in life is properly cared for when you’re gone, Hardin-O’Brien said.
“You go to a job to buy all these things or put money into a house and then you die, and it’s all gone,” he said.
Hardin-O’Brien’s plan took only a couple of weeks to write and the process was very simple, he said.
It can be intimidating to get into planning because you think you already need a plan formulated, but the attorney works with you every step of the way, Fuller said.
Knowing that everything is in order for his children, Fuller’s estate plan gives him peace of mind.
“I want to make sure they are in good hands and that they will be well cared for and supported after I am gone,” he said.