I’ll be honest. I’m not even sure what “estate planning” is. Do I have an estate? I don’t think so, unless my estate is comprised of my bed, computer and the multiple sparkly outfits that make up the majority of my wardrobe. I don’t own a house or car, have a family of my own, or any significant amount of money in the bank.
And with all the talk of international financial crises, Occupy Wall Street and a double dip recessions, its easy to forget about one the most important part of your finances: YOU. Rachel Emma Silverman, author of The Wall Street Journal Complete Estate Planning Guidebook, has some very helpful ideas for managing your estate, even if you’re like me and you don’t think you have one. She arranges them by age group, making it easy to see where you fit in right now and in the future.
Here are some of her must-dos:
If You Are:
Over 18- Since incapacity can strike at anytime, all adults should have a power of attorney for finances and health care and an advance medical directive specifying your wishes if you become critically ill. (Powers of attorney allow other people to make health care or financial decisions for you if you’re unable to do so.) Also make sure to fill out beneficiary forms on your retirement accounts, since these assets pass directly to heirs without a will.
Young and single- In addition to the documents named above, you should write a will so that any wealth or material possessions you leave behind will go to whomever you choose (such a your parents, your significant other, siblings, relatives, friends or charity) rather than as designated by state law. (Typically state law would designate your parents, then siblings, then “next of kin.” This website allows you to see state “intestate” laws in your state:http://www.mystatewill.com/.)
Part of an unmarried couple- If you are committed to a partner but not legally married, you need a will if you want your property to pass to your partner at your death. (Without a will, your partner may get nothing.) If you share valuable property, such as a house, consider owning the property jointly with “rights of survivorship,” which means that if one of you dies, the jointly-held property will automatically pass to the surviving partner.
Married- Because you’re legally married, your estate can pass to your spouse estate-tax free (though the surviving spouse may still have a taxable estate.) Also consider buying life insurance so your spouse is provided for financially in case you die prematurely.
Married with children- You and your spouse should each have your own will, naming guardians for your minor children, in case both of you were to die while they are minors. (If you fail to name a guardian, a court will name someone who may not be the person you would prefer: It really varies who courts name from parents to siblings to siblings-in-law.) You may also want to create a trust to manage your children’s assets if you and your spouse die while they are young. You should also buy life insurance to provide for your family.
Wealthy- If you are worried you may have a taxable estate, talk to an estate- planning lawyer who can advise you on smart tax strategies, such as making annual gifts to family members or directly paying relatives’ tuition or medical expenses, to reduce the size of your estate.
A senior citizen or are ill- Make sure to update your will, powers of attorney and health care directives. Also consider a revocable living trust, naming a trustee who can manage your assets if you are unable to. Talk to your family about your wishes and make sure they have copies of your important estate- planning and financial documents.”
While it may not be the most exciting topic, and can certainly seem morbid at times, estate planning is essential for protecting yourself and your family. By taking some of these beginning steps, you can create a healthy and stress-free life for yourself now and in the future.
Do you take any of these steps already? Is there anything else you would like to know about estate planning?
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