While few like to entertain thoughts of death, making a will while you’re healthy is a smart financial move. People who die without a plan for their estate leave their assets and property subject to rules of state law, which could mean giving everything to a spouse or dividing it among a spouse, parents, children, and even distant relatives. In cases where the deceased had more than one marriage, laws applying to the division of assets can get messy and cause family tensions.
Estate planning is the only way to ensure that your wishes will be carried out. Estate planning will leave your family in a better financial position, and it also could eliminate any fees associated with state dispersal of your assets. If you have not made plans for your assets in the case of your death, consider taking this important step.
Estate Planning Trends
Caring.com, a website that connects service providers with clients, surveys American adults each year to determine the average level of engagement with estate planning. The 2020 survey found that the number of adults who have a will or other estate planning document has decreased by almost 25 percent since 2017. The survey also showed that in comparison to 2019, 20 percent fewer older adults and 25 percent fewer middle-aged adults have wills or an estate planning document.
The survey asked respondents why they did not have a will, and a majority said it was because they didn’t know how to get one or couldn’t afford it. Around 60 percent responded that estate planning was “very” or “somewhat” important, yet the number of people who hadn’t considered whether a will or living trust was important rose by 12 percent over 2019.
Some of the reasons why people don’t think about estate planning vary. Some don’t like to consider death or believe it only happens to older people. Others don’t believe they have enough assets to warrant making a will, while others think the process is too complicated.
Basic Estate Planning Documents
Here are the three primary types of estate planning documents you’ll want to consider.
While you’ve likely heard of a will, perhaps you aren’t exactly sure what it is. In its most basic form, a will is a legal estate planning document that articulates how your assets will be distributed. Wills typically also stipulate:
- An executor who will make sure the will’s instructions are carried out
- Which people or entities, also called beneficiaries, will inherit the assets and deal with debts
- Directions as to when and how the assets will be distributed to the beneficiaries
- Who will serve as guardians for any minor children
Generally, you work with an attorney to prepare your will.
A trust is somewhat more complex and costly than a will. People establish trusts primarily when they anticipate a dispute among their beneficiaries over their assets. Trusts typically benefit people who have large estates, own a lot of property, or expect to have a disability or become debilitated before they die. Unlike a will, a trust can take effect while someone is still alive—it is then called a living trust.
The main benefit of a trust is that it allows large estates to avoid the costly and long probate process while ensuring that all assets are properly distributed and all of the decedent’s wishes are carried out. Also, wills that go into probate become public record, but a living trust remains private upon death, allowing it to be managed out of the public eye.
Like a living trust, an advance directive takes effect while you are still alive. It outlines your wishes for your life if you become incapacitated mentally or can no longer communicate. This important document can determine, for example, if you wish to receive CPR in an emergency.
In an age when modern medical care can provide many measures to sustain life, without an advance directive, your family can be left to make difficult decisions about your care. Estate planners recommend that all estate planning documents include an advance healthcare directive so that your loved ones can make decisions in line with your wishes.
How Can I Get Started?
While it’s possible to plan your estate using online advice, software, and forms, professionals do not recommend this route. Estate planning is an important step, and financial and legal professionals provide sound guidance through the process. They will get to know you and your wishes for your estate and can offer advice based on years of knowledge and experience. Professionals will also take into account state laws and any personal, tax, or legal issues that could impact your estate. You can make the estate process more streamlined by getting your documents in order and thinking through your feelings about end-of-life decisions and how you’d like your assets to be divided.