Estate planning 101
FinancesHaving a smart estate plan is essential for everyone—regardless of assets, age, or income. Here's what you need to know to build yours.
You might think estate planning is something you can put off until your later years, or that it's just for the super wealthy, or both. But setting up a clear path for what happens to your property and your family after your passing can make life for your heirs much easier in a time of stress and grief. That's where an estate plan comes in.
"It's your chance to really take control of how your property is going to pass upon your death," says Kelley Bentley, a Houston-area attorney with Roberts Markel Weinberg Butler Hailey PC.
Here's what you need as part of a solid estate plan, no matter your assets, age, or income.
Will
This basic legal document will set up who will get what—without having the state step in and make those decisions, which is often a headache for your heirs and can cost them more money in the long run.
A will is especially important if you have minor children and are a single parent, says Bentley. If you don't do any planning for your children, they have to go into a guardianship, which can be traumatic, while the legal system sorts out who your children will be living with in the future. Plus, a judge may decide on a guardian you'd never have chosen yourself. By having a will in place that states who your children's guardians will be in case something happens to you, you can ensure that they will be raised by whomever you see fit.
Trust
A trust can do a couple of important things. First, it means your estate will not go through probate, a process that can delay assets being passed on to your heirs. This is especially helpful if you hold properties in more than one state, says Bentley, as your estate would be subject to separate probates in each state.
A trust can also be set up for special needs or minor children. It will determine how the assets they inherit will be used to support them, who will make those decisions, and when the children can take over that fund themselves, if ever.
Powers of Attorney
If something happens to you and you can't make decisions for yourself, who will be in charge? Who will make sure that your bills are paid and that medical decisions are made with your best interests and wishes in mind? Bentley says that your estate should determine who holds your medical and financial powers of attorney. Keep in mind that those roles may be held by two different people.
