Estate Planning - What do you really need?
Search on the internet for "estate planning" and you'll literally find millions of results telling you what you need. (855,000,000 when I searched on Bing!) Do you really need an "Indexed Universal annually-adjusting Life Insurance policy with a tertiary dependent rider?" (I made that up, BTW.) Maybe you do, but maybe you don't. What do you really need? What are the basics that you should consider and how much time and money will it take you to get those? Well...I'm here to answer that!
Regardless of whether you are single, married, and have kids or not, there are 2 basic estate planning documents you need and one optional planning document that you may or may not choose to use. When I say "need", I mean that there is a very real probability that you, or others you care about, will be in a much better position if you have them than if you don't. We'll cover that in a minute. In addition to the basic documents, there are other documents you might consider, but the desirability of those will vary depending on your particular situation.
The two basic documents that everyone needs are a Will and a HealthCare Directive. The optional document that you may or may not decide to have is a Power of Attorney.
Most everyone has some idea that they maybe should have a will, but in reality, only 45% of Americans actually have one. Some people feel that they don't have enough assets to invest in the time and effort to create a will. Others just shrug and assume that the government will figure it all out if something happens to them.
Here is the truth of the matter:
If you pass away without a will, everything you own, or the value of everything you own, will be totaled up and that total will be referred to as your "estate." All of your bills and debts will then be deducted from your estate, and anything left over will be distributed to your heirs. Let's say you have a 401K with no designated beneficiary, and you don't have a will. The entire amount of your 401K will be credited to your estate and your remaining bills and debts will be paid from that amount. If you have a will, or have designated a specific person as a beneficiary, then the value of that 401K would transfer directly to the beneficiary outside of your estate.
You can see that for the little time it takes to create a will, it can save hundreds, thousands, or even hundreds of thousands of dollars for your loved ones. Oh...don't forget the legal fees for figuring out who gets what out of your estate are also deducted from your estate before any beneficiary is paid. A close friend of mine's ex-husband passed away without a will recently. The legal fees alone for probate were close to $10,000, and he didn't have $10,000 of worth in his estate.
For most people without complicated estates, a will can be created for as little as $60 in about 20-30 minutes using an online will generator, and one is included with an Ironclad Family Vault subscription. (Shameless plug!)
A healthcare directive, sometimes called a "Living Will", is a legally binding instruction to medical practitioners that describe what you want done, or not done, if you are unable to communicate with them directly. Many healthcare directives include a "healthcare power of attorney", or they suggest that a separate healthcare power of attorney be created.
Like a will, creating a healthcare power of attorney only takes 20 to 30 minutes of your time. A health care directive should include information like whether or not you want to be resuscitated, or if you want blood transfusions, or if you want or don't want any certain drugs. Basically, anything that you would want a health care provider to know, assuming you can't tell them yourself, you can put into a health care directive. God forbid, you were in an accident and brought into an emergency room in an unconscious state, a health care directive will help the medical personnel know how you want to be treated.
A health care power of attorney allows another person to make health care decisions for you if you are unable to make them for yourself. Again, this is important if you are unconscious, or if something has happened to you where you are unable to either make, or communicate, your wishes known to health care providers. Many people empower their spouse or their siblings with a healthcare power of attorney. Without the healthcare power of attorney, medical personnel will need to follow government mandated procedures, even if those procedures are not something you might have wanted.
A power of attorney allows others to act as though they were you in legal matters. If for some reason you can't make decisions, either because you are physically unable to or not physically present, a power of attorney allows others to take your place.
There are two basic types of powers of attorney. There is a “general” or “durable” power of attorney, and an “limited” power of attorney. A general power of attorney allows a designated person to act in any way they wish on your behalf. Their powers are not limited to a single instance or a single event. A limited power of attorney allows others to act on your behalf in a specific instance. Many times, one might give a limited power of attorney to someone for a specific event, such as buying or selling a house or car, when they cannot be physically present to sign the documents.
Depending on your life situation you may or may not need or desire a power of attorney. You should know however, that a power of attorney is only in force while you are alive. The power that you give someone in a power of attorney ends immediately upon your death. This is why you need a will to cover what you want to have happen after that.
Wrapping it all up
You can put together all of the estate documents you need in less than an hour at a cost of less than $100. That is money and time that is well spent to protect the assets that you have and to make life easier and more enjoyable for those you love.
One of the next questions you need to answer is: where do I put these documents to ensure that others can get need them when they need them? Well…that is exactly why we created the Ironclad Family Vault and the Ironclad Family Emergency Wallet Card -- to ensure that your documents are available to those who need them, when they need them the most. You should checkout our Ironclad Family Vault: it comes with one year of free estate planning documents and with a free emergency wallet card. With the card in your wallet, and your will and healthcare directive stored securely in your vault, your affairs, and your medical wishes will be protected.