How Wealthy Do You Need to be Before Setting Up an Estate Plan?
One of the most common reasons that people believe that they do not need to prepare an estate plan is because they are not wealthy. However, for most adults, it is important to have a Last Will and Testament or a Living Trust (used to avoid probate), Financial and Health Care Powers of Attorney, and Advanced Directive documents, regardless of your net worth. Let's look at just one of those important documents, a Last Will and Testament, to understand why it is important to have one:
1) A will is your opportunity to appoint a legal guardian for your minor children in case you are deceased. Without such, a judge will have to make a decision he or she believes is in the best interest of your kids, but that judge will almost certainly be a stranger to you and your family. Some of the most heartbreaking custody battles over children take place after the death of one or both parents. No child should have to go through that experience right after losing a parent. Luckily, every parent can exercise his or her right to nominate a guardian for minor children in a will. Doing so guides the court system and the family regarding the parent's wishes.
2) A will is also where you nominate your estate's "Personal Representative". This is the person who will be responsible for administering your final matters. After a death, family members cannot typically just start "taking care of things". Instead, a judge usually needs to order that a particular person has the authority to take care of final duties related to bills, finances, taxes, final arrangements, and making sure possessions are given to those who stand to inherit them. Many people are shocked to learn that if you have no will almost anyone with some interest in your affairs can ask the judge to become your estate's Personal Representative (even a person or business to whom you owe money!). The judge's decision of who to use as your Personal Representative is a matter of state law that can often lead to a court battle regarding who has priority, and who is most appropriate. Typically, all of that nonsense is avoided when someone leaves a will.
3) Your will is your opportunity to state what your wishes are for the distribution of anything you possess when you die. Even if you have very little, the little you do have must be dealt with. You may believe that you do not need a will because your family or friends will simply do what they believe is best, or knew to be your wishes. However, instead of your loved ones, state law and a county judge will determine who has priority to receive whatever assets you have left (even small personal property items). Imagine the heartache your loved ones may go through if they have to standby and watch as your affairs are administered in a way they know to be against your wishes, but are powerless to change because there was no will left to direct otherwise.
And remember, a Last Will and Testament is only one part of an estate plan. Power of Attorney documents, and Advanced Directives are tools that most people need in order to be sure their wishes will be carried out during a time of incapacity or after death - regardless of how much or little wealth a person has. And, if avoiding the court process after death (known as Probate) is a goal of yours, you might need a Living Trust too.
Using a competent attorney to craft a comprehensive estate plan is usually not as complicated or expensive as you might think. Some law firms, like ours, will even offer free consultations concerning wills, trusts and other estate planning topics. This is a simple task that is well worth your time to get accomplished sooner rather than later.
This has been presented as general information and not as legal advice. Do not engage in legal decision-making without the advice of a competent attorney after discussion of your specific circumstances.