“Chadwick Boseman’s estate was worth nearly $4M and his family lost $900k of it to lawyers fees for probate court just because he did not have a will and other estate planning documents done.”
Almost 25% gone. Why?
Because he did not get his estate planning done. You can argue with me about the numbers all day, but I did not make this quote up. It was all over social media this week. The point of this is that getting your estate planning documents done is crucial.
In the world of finance, estate planning is one of the most overlooked areas. Whether you’ve put it off because you think it’s boring, expensive, or because you don’t have enough assets, this blog post will help you understand why you need it, common terms, & how to get it done
So what is an estate plan and what needs to get done?
Your estate is everything you own. It ranges from your business, to your house, to your money, and any other personal belongings. Even if you don’t own a lot of stuff, you still need a plan for where all of these things will go. However, your estate plan is more than just a map of where all your possessions will go. It also helps dictate where you kids will go, who will take care of you if you are unable to, who will handle all your affairs if you can’t, who will take your loved pets, etc. It’s a combination of how to pass down assets, to how the end of your life will be managed, and who will handle everything in between.
So what Documents are Included In An Estate Plan?
Everyone’s estate plan is slightly different, but there are a few specific documents that most have.
1. A Last Will
This lays out your wishes for who will receive what after you pass away. You will also select someone as a guardian for your children
2. A Living Trust
This is similar to a will. The key difference is that these assets are placed in there while you are still alive. Once you pass away, these assets will be moved without needing probate
3. A Living Will
This is a document that is part of the advance directive which allows someone to make decisions for your health if you cannot make them yourself
4. Power Of Attorney
This is a document that names someone to make the financial decisions for you if you are unable to.
So What Actually Happens To An Estate After You Die?
Most people have no idea what the process is like after someone passes away. Those that do, totally understand why these documents are so important. Let’s dive into this so you get a real life understanding of the process.
Everything you own at the time of your death is part of your estate. Your estate then goes through probate. Probate is the process where the court decides what happens to your assets now that you are gone. This is where having estate planning documents becomes so helpful. If you have a will, the court uses this as their guide to splitting up your estate. If for some reason you don’t have one, you are considered to have died intestate & the court uses local laws to decide who gets your assets. Let’s be real, you don’t want them deciding this stuff for you!
The best way to avoid probate is by naming beneficiaries on all your important accounts like life insurance, retirement accounts, and transfer on death accounts.
Who Handles Your Estate?
When you create your will, you get to name someone as the executor of your estate. This person manages your estate through the probate process. They handle unpaid bills, taxes, debt, and anything else that relates to your estate. They also help distribute your estate to all the right people. Typically, people pick their kids, spouse, or siblings to do this for them as it is not a quick and easy job. You definitely want someone you trust to be your executor. If you do not name someone before you die, the judge will choose someone as your administrator, again something you do not want.
How Do You Get Started On Getting Your Estate Planning Done?
Here are the steps after that:
Step 1: List everything you own
This is not a fun step, but it is crucial. You need to figure out and take inventory of all the assets you have. This will help save your family a ton of time after you pass away.
Step 2: Think Through Where You Want Everything To Go & Who You Want To Handle Your Affairs
This is a really big step and one that should not be rushed through. You need to figure out how your assets will be split, what will go to each person, and who will handle it all.
You also have to decide who will take your kids/pets, who will make decisions for you if you can’t, who will be your executor, etc. You want to make sure you get this right and pick someone who is organized and can handle this well. It is not an easy job at all. Some even give a little extra pay to the person who has to handle it all since it’s a huge job.
Step 3: Implement The Plan
Whether you decide to use Trust and Will or a personal attorney near you, this is the time to actually put pen to paper and get this plan implemented. You will need to sign some documents, get it notarized, and notify everyone of what their role will be so there are no surprises.
Step 4: Update Your Plan As Your Life Changes
Many people get their estate plan done then they have more kids, buy more properties, start another business, etc. When these things happen, you have to go back and update your estate plan to reflect your current life. Many people forget to do this or just get lazy and refuse to update their plan. Don’t be one of these people! Every so often, go back and make the needed changes. You won’t regret it.
I hope this helps you understand the importance of an estate plan, the main parts you need to get done, and how to go about it. My biggest piece of advice is to stop putting this off! It is so helpful for your family.
Disclaimer: none of this is advice, it is just for informational purposes. Talk with your financial planner before implementing any of these strategies.