An estate plan ensures that you and your loved ones will be cared for in case of death or incapacity and that your assets will be distributed in accordance with your wishes. It may include a will, power of attorney, as well as other key documents.
Everyone needs an estate plan, no matter the size of the estate. In fact, planning may be more important for smaller and midsize estates because a misstep could have a greater impact on heirs. Not only does an estate plan allow for your wishes to be carried out after your passing, it benefits you while you’re living. A good estate plan includes a plan to manage your financial affairs and health care decisions in the event that you are unable to do so. It can prove invaluable in easing the administrative burden for your family and friends during a time of emotional distress. An estate plan benefits you, your family, and friends by allowing you to do the following:
- Quickly settle issues related to your estate, therefore minimizing expenses
- Provide financial support for your friends or family members, such as a relative with special needs
- Arrange for the care of minor children
- Avoid possible disruption of your business during the time of transition
- Direct money to your favorite charity or religious organization
- Reduce taxes owed after your death
Estate planning does not have to be complicated or expensive, but we do suggest consulting with a qualified attorney about your specific situation and unique goals.
Elements of an Estate Plan
An estate plan is comprised of multiple elements. Let’s take a look at the key elements:
- Last will and testament – This serves as a blueprint that directs who will receive your property upon your death and the specific circumstances in which they will receive it. Your will only governs property that flows through probate. For example, financial assets with beneficiaries other than your estate, jointly owned property with rights of survivorship, or assets in a trust funded during life are not distributed under the terms of your will. Click here for more information about designating beneficiaries. If you have minor children, your will also enables you to arrange for their care in case of your death.
- Durable power of attorney (POA) – This authorizes someone, often called an agent, to handle your financial affairs if you were to become incapacitated.
- Advance Medical Directives
- Living will declaration – This details the medical treatment that you would want under various scenarios if you are incapacitated and unable to communicate your wishes.
- Durable power of attorney for healthcare – This authorizes someone, often called an agent, to handle medical decisions for you if a medical emergency leaves you unconscious or otherwise unable to make choices about your care.
- Trust – This is a legal arrangement that enables a trustee of your choice to distribute assets to your beneficiaries at the time that you direct in the trust document. Not everybody needs trusts as part of their estate plan, but they can be useful in some cases to guard inheritances for younger beneficiaries, protect assets from creditors and other parties, minimize taxes, and allow a degree of control over the assets after death.
How Much Will Estate Planning Cost?
It depends. Costs will vary from state to state, from one attorney to the next, and by the complexity of your estate plan. One step you can take yourself, without an attorney, is to add beneficiaries to your financial accounts. But for legal documents, such as a will, durable POA, advance directive, healthcare POA, and trust documents, we’d recommend working with an attorney as opposed to opting for the free resources that may be available, including most low cost, templated online options.
It’s always in your best interest to discuss your situation and goals with a knowledgeable estate attorney. Ask about fees and the cost of an estate plan in your first meeting. Many attorneys charge a flat fee for simple estate plans. When the estate is significant and tax planning is required, it is common for an attorney to charge hourly.
If this is the case, remember that you can save a significant amount by organizing your documents, creating a net worth statement, and thinking ahead of time about your goals and potential heirs.