Estate planning doesn’t have to be scary. Here’s where to begin
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Proactively creating an estate plan is an act of love for yourself and others. It provides peace of mind while ensuring your wishes and legacy are honored. But if you feel creating an estate plan might be too difficult or costly, start by thinking through and answering these four foundational questions.
Who will inherit your money and personal possessions?
For some, this is an easy answer. Maybe it’s a spouse, kids, or parents. For others, it may be extended family members, close friends, or charitable organizations. You’re not limited to just one beneficiary. You can choose multiple people and non-profit organizations to receive portions of your estate.
For those who can’t (or don’t) decide and die without a valid last will and testament (the legal document providing direction for estate distribution), the state of residence chooses who will inherit assets through intestacy laws. For example, a resident of Indiana dying without a last will and testament will have assets distributed accordingly:
- If married with living parents – the spouse receives 75%, and the parents receive 25%
- If married with children – the spouse receives 50%, and the children receive 50%
- If married with no living parents or children – the spouse receives 100%
- If not married but have children – children receive 100%
- If not married and no children – parents receive 100%, then siblings (and their descendants), then grandparents, then aunts, uncles, and cousins
Who will manage your estate?
Selecting an executor (aka personal representative) is a crucial decision in the estate planning process. An executor is named in a last will and testament and is appointed, at death, to administer and oversee the distribution of an individual’s estate.
In addition to naming an executor, naming a successor executor (aka a backup) is important in case your first choice is unable or unwilling to serve. Many people name their spouse, parent, or adult child as executors. Others name close friends. Carefully considering who will be named as executor is important. A few questions to consider are:
- Do I trust this person to distribute my assets according to my wishes?
- Does this person have financial and/or legal experience or knowledge?
- Is this person willing and able to serve in this capacity?
Once an executor has agreed to the appointment, make sure they know where the last will and testament is located, and they can access financial information when the time comes.
Who will be named guardian if you have children (or pets!)?
Those with minor children or beloved pets have an even larger incentive to get an estate plan in place. Naming a guardian and successor guardian for minor children in a last will and testament in case of premature death is highly recommended. Designating a pet guardian is a possibility within a last will and testament, as well, if there is a specific person you would like to care for your animal(s). Before naming anyone, having a conversation with them and getting their approval is important. Confirming they’re willing to step into this role brings peace of mind to everyone involved.
Who will make decisions if you are incapacitated?
Sometimes, illness or injury makes a person unable to make decisions about their health, finances, or legal matters. That’s where incapacity documents come in. They allow individuals to designate trusted representatives to make critical decisions on their behalf if they cannot do so.
Incapacity documents include general power of attorney, health care power of attorney, and living will documents. Determining who you trust to make crucial decisions and advocate on your behalf is an important step in the estate planning process.
Summary
If you’ve taken the time to answer these questions, congratulations! You’ve just taken an important step forward in your estate planning journey. The next step? Bring these answers and a detailed list of your assets and liabilities to your meeting with an estate planning attorney to make the process organized and efficient.
Abby Presley, CFP, is a Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Abby at apresley@bedelfinancial.com.