Make a will? There are probably a billion other things you’d rather do—like clean the gunk from a clogged drain or drive across town on game day.
It’s not just you. In one survey, nearly a third of respondents said they’d rather get a root canal than do their estate planning.
Despite the fact that 95 percent of Americans want their property to go to the people they choose, more than six in 10 continue to put off making a will. The result? Nearly half of the $3.2 trillion that will be passed down to the next generation is without direction—meaning it’s in the court’s hands. Even worse, three in four Americans with minors will leave guardianship of their children up to the court.
An estate plan protects both your loved ones and your property by allowing you to choose what will happen if anything happens to you. It also protects you if you become incapacitated during your life, since you’ll get to choose who will make decisions for you.
Ready to suck it up and start planning? Here are five things you need to know:
1. It’s not just for wealthy people.
Think estate planning is just for people with large fortunes to hand down? It’s a common mistake. Nearly one in five people assume they don’t have enough assets to justify the expense of creating a will. But estate plans are for everyone, regardless of how much or how little money you have.
“In reality, ‘estate’ is sort of an umbrella term to mean everything you own, whatever that may be. Estate planning is an umbrella term that really just means planning for incapacity during your lifetime and for the orderly distribution of property after your death,” says estate planning attorney Leanna Hamill. “These things are important no matter what the size of your estate is.”
2. It’s more than just a will.
For most people, estate planning means deciding who will inherit their property. But there’s much more to it than that. If you become incapacitated during your lifetime, for example, an estate plan lets you decide ahead of time who will manage your finances and make health care decisions for you. It also determines how your children will be cared for.
The foundation of an estate plan generally consists of four main documents:
- Medical information release form. This allows health care providers to share information with your family if you’re in the hospital.
- Health care proxy. This identifies who can make health care decisions for you if you’re not able to do so. It remains dormant until activated by your doctor.
- Durable power of attorney. If you need help with your finances, this identifies who can pay your bills, file your tax returns or sell your real estate.
- Will. This outlines how your property will be distributed. You can allocate your property in percentages or designate specific dollar amounts.
3. An estate plan makes things easier for your family.
If something were to happen to you, how would your family take care of your pet—or your children? Pay your mortgage? Cover your funeral expenses? An estate plan not only designates the person you want in charge of your affairs, but it empowers them to fulfill your financial obligations.
Without an estate plan, your family would need to:
- Go to court. When someone dies without a will, the estate goes into probate. The family needs a court order to access any of the funds.
- Pay probate costs. Probate court is expensive; an estate worth $1,000,000 can cost up to $46,000. Plus, the family might incur legal fees if they need to dispute the court’s ruling.
- Wait for months. It can take months or even years for the case to resolve. In the meantime, the family won’t get any funds to pay for funeral expenses or other obligations.
4. Your estate plan needs updating.
An estate plan isn’t something you “set and forget.” It’s a living document that should evolve as your life unfolds. Whenever a major life event occurs, it’s a good idea to review your plan and make sure everything is the way you want it. For example, you may want to make changes if:
- A new member is added to your family
- A family member gets married or divorced
- Your children grow up
- Your assets change in value
- There’s a death in the family
- Tax and estate laws change
5. Talking to your family is important.
Creating an estate plan is just the first step. Once you’ve made the important decisions, your family needs to know what to expect. It’s an uncomfortable subject for most people, which is why we’re often reluctant to talk about it. But it’s best if you communicate your wishes directly so your loved ones won’t face any unpleasant surprises.
Regardless of how wealthy you are, an estate plan helps ensure that “the people who are helping you, the decisions that are being made, and the way your property is handled are the way that you choose—not the way the courts decide or the way the default law provides for,” Hamill says.
“You have the ability to make these decisions for yourself now. Take advantage of that now to make sure your wishes will be honored, and legally binding, later.”