The term “estate planning” sometimes leads people to believe that it’s only about passing wealth down to the next generations. If you don’t have children, you may think that estate planning isn’t necessary.
However, neither is true. Your estate doesn’t mean “wealth.” It consists of everything you own: your home, car, bank accounts, investments, personal possessions, and so on. No matter the size of your estate, and regardless of whether you have kids or heirs, everyone can benefit from an estate plan.
Why You Need an Estate Plan
You may not have kids or grandchildren, but consider other family members, friends, or nonprofit organizations you’d like to leave something to when you pass on. If you pass on without an estate plan, your state’s laws usually determine where and to whom your property goes. That may not align with your wishes.
Let’s look at what your estate plan should include and how you can make important decisions when you don’t have children to keep in mind.
Wills and Trusts
Because you don’t have children who will act as natural heirs, you need a will that determines where you assets go when you pass on. Take an inventory of your property and possessions. Think about family members, friends, and charitable organizations that can benefit from your possessions. A will ensures that your property is distributed according to your wishes.
If you want to leave your assets to nonprofit organizations, a trust can be used to set that up. There are several ways to structure charitable donations, either for tax advantages or to avoid legal challenges. A financial advisor can help you set up a trust that benefits you and the organization.
Durable Power of Attorney
If you’re unable to make decisions, you need a durable power of attorney agent to act on your behalf. Without one, a court may decide what happens to your assets, which may not be what you want.
Many people choose their partner as their durable power of attorney agent. However, imagine if your partner is also incapacitated or unavailable to serve when the time comes. This might also be the case if you’re single or live alone. You may want a different family member, close friend, or trusted advisor to serve as your power of attorney agent.
When choosing an agent, think about their trustworthiness and if they’re responsible. If you pick your accountant or lawyer, consider if they’ll charge you a fee to act as your agent. And of course, speak to your potential agents to see if they’ll accept before you officially appoint them.
Healthcare Power of Attorney
Similar to a durable power of attorney agent, a healthcare power of attorney agent is an appointed individual who will make important healthcare decisions on your behalf, if you’re unable to.
A healthcare power of attorney agent should be a trusted partner, family member, or close friend who shares your views and has the ability to make tough decisions.
If you have a 401 (k) or life insurance policies, those assets will be determined by a beneficiary designation — not by your will. If you have both a designated beneficiary for an account and a will, the former will determine where your assets go when you pass.
Similar to your will, if a beneficiary is not named or if the beneficiary you choose is deceased or unavailable, a court may decide where your assets go. Make sure your beneficiary designation is kept up to date by naming your partner, a close friend or relative, or charity.
A Certified Financial Planner™ Can Help
Estate planning is more than deciding where your assets go when you pass on. There’s no time like the present to begin getting your affairs in order. When you’re ready to make those important decisions about your estate, a Certified Financial Planner™ at Guiding Wealth can help. Learn more about our financial planning services today.