I’m a woman in her late 30s who is in pretty good health and who has never had a health scare. Two months ago though, I contacted a lawyer’s office to develop a plan for my estate with all the necessary financial and medical directives.
What motivated me to develop an estate plan at this point in my life? Two reasons. First, with the COVID-19 pandemic looming over all of our lives this last year (and I being in the high-risk category due to moderate asthma), I was confronted even more with the fact that every day is not promised and that my affairs should be in order. Secondly, I have been saving and investing diligently in the last 10 years or so and realized in tracking my financial growth that I had accumulated a decent size estate. Since I don’t have a spouse or kids, It’s not entirely clear who would be the beneficiary for all my assets. It was also really important to me to leave a portion of my estate to charitable organizations to support important work in advancing civil rights, political action, and culture awareness.
Estate plans aren’t just for the elderly. It’s also not just for the rich (I’m certainly not!). There are many reasons to consider looking into a drawing up an estate plan with a firm that specializes in strategies to maximize and protect the size of your estate. Read on to find out why you should initiate this process sooner rather than later.
What is an estate plan and what is typically included?
An estate plan is simply a plan that lays our who will receive your assets and handle your financial and medical responsibility upon your death or incapacitation. Once you have identified a law professional, the average time to develop a plan is somewhere between 30 to 60 days, depending on the timing of your scheduled planning sessions; my law firm planned out 5 sessions (4 over Zoom, 1 signing session in-person) over the course of about 30 days. During these sessions, I was asked questions about my current concerns regarding the future of my estate and what financial and medical areas were most important to me. From there, they recommended what documents I should have in place.
Some of the basic legal directives included in an estate plan are:
Power of attorney (Financial, Healthcare): This allows you to name someone (an “agent”) who will be responsible to handle financial and healthcare decisions like hospital bills and long-term care or like medical preferences upon incapacitation due to injury or illness.
Medical care directive: A directive that spells out to your agent your exact wishes for your medical care and treatment.
Living revocable trust: A very effective tool for managing your assets (eg, insurance policies, bank accounts, retirement accounts, investments, property) that works to designate and to transfer portions of your estate. Living revocable trusts are so named because you are able to amend them at any time during your life; whatever you designate from your estate is held in trust. Upon death, they are locked and can no longer be amended and are maintained by your named “trustee”.
Will: A document stating what you want to happen to your property after you die and provides a legal basis for your wishes in case there is a dispute among heirs. It also can assign guardianship for minor children. One big reason to create a will in addition to a living trust is because a trust only covers what is transferable and has been transferred into it (eg, family heirlooms or personal items are not transferable into trusts but can be covered by the will; if you purchase property but it wasn’t transferred into the trust, it’ll be covered by the will)
7 benefits of an estate plan
Provides a clear and detailed roadmap for inheritances
How to divide your estate percentage wise is one of the key tasks you need to think through. In addition, an estate plan takes into consideration every scenario in terms of succession of inheritance – if one or more of you beneficiaries pass away before you do, how will their inheritances be divided and who does it go to? These are important questions to think about now to avoid internal family strife.
Ensures that your beneficiaries avoid probate and related estate fees
Without a trust, a deceased person’s will goes into probate, the process of validating the will and placing a value on assets, paying their final bills and taxes, and distributing the rest to their beneficiaries. Probate is often costly to beneficiaries due to associated court fees and state and/or federal taxes, which is taken out of the estate. Avoiding probate is probably the primary reason people develop an estate plan with a trust. If an asset has a named beneficiary, it avoids probate; in the case of things that don’t typically carry with it a beneficiary, like property, the trust would be named the beneficiary.
Entrusts the most responsible with managing your estate and your financial privacy
When you develop your estate plan, you are tasked with naming an executor who has the sole responsibility to make sure your directives are carried out. Determining who that would be now guarantees that someone you trust and deem responsible takes on this duty; leaving it to chance can have dire consequences to how your estate is managed.
In addition, the probate process is often public which means anyone can go to the courts and look up paperwork to find out the value of your estate. So, an estranged family member could easily find this information or even a “lesser” beneficiary can use it to determine what percentage of your estate they actually inherited. Since you avoid probate with an estate plan, these details remain private.
Secures your medical directives in any and all scenarios.
Developing an estate plan forces you to think about the depth and breadth of medical scenarios and how you would want them handled. Though this can be a daunting thing to think about , it is also empowering to know you are taking part in this decision-making process.
Avoids disrupting federal program benefits for elderly beneficiaries
As mentioned, I don’t have a spouse or children so no dependents. The bulk of my estate is therefore currently to be inherited by my mother and aunt, both of whom are elderly. One major thing I learned during the estate planning process is that if there is no strategy in place for financial distributions, financial assistance from federal programs may be disrupted or halted for your elderly beneficiaries (eg, to be eligible for Medicare/Medicaid in the States, a person cannot make over a certain income threshold; a lump sum inheritance could affect their eligibility). An estate plan addresses these considerations.
Provides for beneficiaries that may not be otherwise taken care of
There are situations, like adoption or blended families, where the adoptive or step-children are not automatically recognized as beneficiaries like biological children would be. This is yet another benefit of estate planning; you dedicate who is recognized and how they are viewed in terms of your estate.
Directs not only how much you leave to beneficiaries but how they can use it
For instance, if one of your named beneficiaries is someone who is bad at managing money or someone who is debt to creditors, you can develop an estate plan that will protect the beneficiary and in a way protect how your assets are used. You can create an individualized plan stipulating that certain beneficiaries can only use their inheritances as specified (four stipulations: healthcare, education, housing, maintenance). In addition, creditors would not be able to reach into your trust to access any money for debt collection.
Why you should consider estate planning early
Once it’s done, it’s done (at the very least the basics). Firms recommend reviewing your estate plan every 3-5 years but only if there is a life changing event (eg, marriage, children, buying property) or if you want to make additional changes to beneficiaries, does the trust need to be amended.
By developing an estate plan for your assets, you provide a clear, detailed plan your family and loved ones to ease their burden and maximize their inheritances. No need to wait until you are older or have a family of your own; estate planning early can give you invaluable perspective on important life decisions and empower you in your financial life.
Hey there! I’m Shala, a Black American in her late 30s who currently resides in Atlanta, Georgia and who longs to live aboard one day, preferable in the UK. By day, as an oncology PhD, I am a director of oncology scientific communications for an agency that services the pharmaceutical industry; by night, I blog as a creative outlet and to promote knowledge of self and the world around us. My blog – curating stories – is the intersection of relationships (love of self, of friends/family, of a partner), culture (art in all its forms and the influences of people of color around the world), and activism (promotion of civil/human rights and science/health literacy).