The sooner you plan, the more prepared you'll be for life's unexpected twists and turns. You can start now, regardless of your net worth. You might still be paying off student loans or credit cards for the foreseeable future. Surprisingly, your net worth is not the deciding factor in getting your estate organized. Instead, ask yourself how prepared your loved ones and family would be if something happened to you tomorrow. Would they know what accounts you have? Where would they get your financial information? How would they know what your wishes are?
Financially dependent individuals — such as your children — deserve to be afforded as much of your estate as possible. If you don't have many assets, it may be even more important to plan to make sure what you do have makes it to the destination you think is most appropriate.
The objective is to have a plan in place so your loved ones can carry out your wishes — even if you are 35 years old and in perfect health. Have the what-if talk. Financial transfers tend to go much more smoothly when beneficiaries are aware of the plan beforehand. Discussing the distribution of your assets while you're still living gives you the opportunity to explain what items you left to whom and why. This will clue your loved ones in on the rationale behind your decisions before you begin drafting your estate plan, preventing additional emotional turmoil upon your death.
OK, now you see the usefulness of estate planning. What should you be looking for when you meet with an estate planning attorney — what questions should you be asking? You'll probably need to consider a number of tools to help you, and a professional can give the details:
- Life insurance can replace lost earnings, which is especially useful for younger people who may not have enough funds in savings or retirement accounts in the event of an untimely death. And when you're younger, you're eligible for reduced rates.
- A will details how you would like your assets to be assigned. Especially with your children in mind, you can designate guardians or financial account trustees.
- Perhaps you need a trust to help you hand your wealth to your heirs. You need a professional to help you decide which kind of trust is best.
- With a durable power of attorney or trustee, you'll have someone with the power to manage the distribution of assets and take care of such practical things as selling your home and accessing your bank account.
Ensuring your dependents' financial security, making sure you have a health care directive, a will and a designated power of attorney is prudent. If you become seriously injured or ill, you'll be happy to have an advance health care directive and power of attorney so that someone you trust to make important medical decisions is there if you are unable to make them for yourself.
By taking inventory now you can approach your affairs in a much better fashion, and consider different scenarios about what you'd want to happen if you were no longer around. It's about time you started.