Next Level Adulting Part Two: Estate Planning
This one is all about estate planning, once again, in a very introductory way. Hopefully this post will give you a place to start as you think about what you’d like to happen to your things (and more!) after you die. This post will talk a lot about death, so please brace yourself to think quite a bit about your own mortality for the next few minutes.
Estate planning is simply preparing for what you’d like to happen if you should die or become incapacitated. Today we’re going to focus on the dying part, and part three of this series will be dedicated to the “become incapacitated” part. The main things that fall into this category are: a will, a trust (and power of attorney and advanced directives, which we will cover next week). We’re going to break this into three broad categories for today: what happens to your assets, what happens to your possessions, what happens to your family.
First, let’s answer the question: why do this if you’re not rich? If you don’t have a lot of property, or cash, or people to leave things to, creating an estate plan might seem like a pointless exercise. But here’s the thing, you already have an estate plan: it’s whatever the laws are of the place where you are living when you die. If you’re okay with those laws, then you’re correct, there’s no need to make an estate plan. On the other hand, if you have any kind of specific wishes that you’d like executed upon your death, you should put it in writing. This includes charitable donations, who will get custody of your pets, who will get custody of your children, details about your funeral services and what you’d like done with your body.
We’ve actually covered some of the basics of estate planning in the intro post of this series, when you designated your beneficiaries and make your asset inventory. [You already did this, right?] Honestly speaking, if you’re young, single, childless, with nobody depending on you financially, it might be fine to have just this as your estate plan… for now. However, here’s the thing about estate planning: if you write your wishes down and make them clear, your grieving family members will not also be arguing about what you would have wanted, because they’d have the record of it to refer to.
Okay, let’s get to the actual things…
What happens to your assets: If you have beneficiaries set up on your accounts, the value of those accounts go to the beneficiaries on your death. Make sure that someone, somewhere knows this. It could be as impersonal as the HR office at your employer, or as personal as a parent or sibling. For things that don’t have beneficiaries, like a car, expensive jewelry/art/etc or a home, you can designate in your will (a document dictating and detailing your last wishes) who you’d like to inherit it, or the proceeds if you’d like the asset to be sold.
You can also create a trust which owns your assets, and then have your loved ones be beneficiaries of the trust. This helps avoid some of the expensive court proceedings that can arise with a will. For example, Jane Doe creates the Doe Family Trust, which owns her home, her private jet, and her vacation property. The people who receive these assets through her trust might be designated by name, or as her descendants, or both. A trust is particularly helpful if you have young children, who wouldn’t be able to manage a house or ten million dollars while trying to get through middle school. This vehicle would help them have training wheels on their money as they come of age.
What happens to your possessions: Your will can also detail what you’d like to happen to your possessions. Maybe you want your art collection to go to a local school, or you’d like each of your children to have a specific piece of jewelry, or you want to donate your nicest clothes to a favorite charity. You can write this down, which helps make your desires clear, and helps your loved ones by not making them have to figure out what to do with your stuff when you are gone.
What happens to your family: This one is super important. If you have children, you need to have a will. Your will is the place where you can appoint the legal guardian for your children. In many locales, it’s the only place where you can officially, legally do this. If this is not in place, the courts will decide who is next of kin and should have custody of your children, and you will not be around to dispute this. That person is also likely (not always though) to be responsible for any assets that you leave to your children as their legal guardian. If you have a specific person in mind to serve as legal guardian for your children should you die or become incapacitate, put that in writing (and make sure that they know the full extent of what this would mean).
Similarly, if you have a pet (or pets) and you’d like a specific person to care for them, also write this down. This avoids any confusion once you are gone or unable to care for your beloved companion(s).
Make sure that anyone you plan to give custody to knows this at the time that you create these documents, and they agree. It should not be a surprise to them if you suddenly pass away.
Okay, you made it to the end! Take a deep breath. This stuff is difficult to think and talk about, but so important to do. Hopefully this has given you somewhere to start the conversation, and start taking action.
