There is an old saying that people spend more time planning for a vacation than they do for retirement. You can imagine that most people spend even less time with estate planning. Planning for death or incapacity might not be on your bucket list, but it must be considered, especially when it relates to your overall financial planning strategy.
When you die, your assets will go somewhere
Whether or not you have your estate planning documents in good order, your assets will go somewhere. They just might not go where you want them to go if you don’t have your estate planning documents together.
For example, if you do not have your documents titled or registered in the correct way, have out-of-date beneficiaries on your contracts, or die intestate—without a will—the person or persons who might be relying on those assets after you die could suffer. They may face a financial burden because they don’t receive those assets, or they may receive them only after a significant delay.
Minimize taxes and fighting between heirs
Having a properly drawn will or trust in place prior to your death may help minimize certain tax consequences. It also discourages conflicts between your heirs. If you have minor children, it is especially important to list a primary caregiver and an alternate because you likely do not want the courts deciding who will take care of your children.
Make your wishes known now, while you are competent
Nobody ever plans on becoming ill or being involved in an incapacitating accident. But if you are unable to communicate or make rational decisions, especially regarding your health and money, it could leave both you and those who might have to take care of you in a bind.
Pay now or run the risk of paying more later
What about the cost? Could it be painful on your pocketbook to have an attorney draw up your plan? Sure, but it could cost your heirs a lot more if something happens and you don’t have correct documentation in place. Because of the rapidly changing nature of federal and state laws, you should consider meeting with a licensed attorney who is in good standing with his or her state’s bar association and who specializes in estate planning.
No matter how much money you may or may not have, it is important to have your estate planning documents in place. Not doing so can bring about much pain and misery for the people who have to take care of you, your family, or your estate.
Steve Repak is a CERTIFIED FINANCIAL PLANNER™ professional, CFP® Board Ambassador, and financial literacy speaker. He is also an Army veteran and the author of Dollars & Uncommon Sense: Basic Training For Your Money. Follow him on Twitter: @SteveRepak