I don’t have an estate. Why would I need an estate plan?
Let me start off by saying that everybody has an estate. The size of your estate may not be grand, but you still have one. An estate is everything that you own – your personal items, your accounts, your property, and yes, even your children and pets. If it does not matter to you about where these assets go after your death or how they get to where they are going, then you do not need an estate plan. If you want a voice about who will receive what asset and you would like to avoid the courts involvement in dividing certain assets, then you would benefit from an estate plan. If you have children, the most important reason to have an estate plan is to name guardians. While you may not care who receives your toaster, you surely must care who will care for your children.
What is probate?
Probate is the process by which the court divides your estate after your death. The probate court ensures that your debts are paid and that the remainder of your estate is divided between legally entitled individuals. The probate process can take nine to eighteen months to complete (sometimes even longer!) and it costs a percentage of the estate. While it will not be exact, the costs may be in the neighborhood of 3% to 4% of the estate. If you die intestate (without a will) or if you have only a will (not a trust), your estate will go through probate. You can avoid probate by having a trust, having an estate under $100,000 or by holding assets titled in certain ways.
What documents are involved in an estate plan?
A complete estate plan will try to cover different types of situations and possibilities. The documents that are usually included are: a Will, Trust, Durable Power of Attorney, and Health Care Directive. A Will directs who should receive your estate at your death as well as it names guardians for your children. A Trust directs who will receive your assets at death and allows you to have more control over what exactly happens with your assets. A Trust, unlike a Will, does not go through probate. A Durable Power of Attorney names someone to make your financial decisions for you if you are incapable of making them yourself. A Health Care Directive names someone to make health care decisions (i.e. life support or no life support) for you if you cannot make them yourself.