Despite the importance of estate planning, many people neglect to create this type of plan. According to Gallup, less than half of Americans have a will that explains how they want their estate and finances to be handled at the end of their life. For adults under age 30, only 20% have a written will.
Fortunately, you can create an estate plan at any point during your life, and you don’t necessarily need to hire a professional. The earlier you start, the easier it is. But keep in mind that it’s also important to keep your estate updated, as life circumstances can change quickly.
So, what is the purpose of making an estate plan? Ultimately, an estate plan gives your loved ones specific direction about what to do with your physical and financial assets if you become incapacitated or pass away.
Having an estate plan means that your final wishes will be carried out exactly as you desire. It also prevents your next of kin from making those decisions on your behalf after your death (or saves them the trouble and confusion). Plus, they do not have to track down important estate documents, like your life insurance policy.
Estate planning is a multi-step process, and creating a living estate is often time consuming. You need to create or gather the right estate planning documents, which requires decisions about your end-of-life wishes. The more information you include in your estate, the better.
To help you get started with your estate plan, we put together a comprehensive estate planning guide that will walk you through the process. Here are some estate planning basics that you should know.
1. Create an inventory
Start by creating an inventory of your personal belongings and assets. This should include any items that you wish to pass down to your next of kin, such as a house, vehicle, collections, antiques, or valuable items, like jewelry or art.
2. Keep a record of your debts
Another important aspect of an estate plan is your debt. Because certain debts do not get forgiven when you pass away, it’s important that your loved ones know what debt you have, as they could become responsible for the payments. If you have a mortgage, auto loan, credit card debt, medical bills, or any other outstanding debt, include those documents in your estate.
3. Decide on final wishes
It can be difficult to think about what you want to happen at the end of your life, but it’s an essential part of planning an estate. It prevents your family members from making decisions for you when you are no longer living. As part of your estate, you should decide if you want to be buried or cremated, how you want your assets divided, and even what type of funeral you want.
4. Get your legal documents in order
The next step in family estate planning is to gather your legal documents. Your estate planning documents checklist should include the following:
5. Choose an estate executor
Next, you’ll want to appoint an estate executor who will be responsible for handling your end-of-life wishes. When you pass away, the estate executor ensures that your final wishes are fulfilled as outlined in the estate plan. You should also take this opportunity to make sure your beneficiaries are updated and select a power of attorney.
6. Communicate and protect your estate plan
An estate plan is only valuable when the people involved know what it entails. Once you have made your estate plan, you should notify your loved ones, especially those who are beneficiaries on your life insurance policy. Also, make sure your documents are safe. You might consider keeping a digital and hard copy at home, and storing a second copy outside your home in case of a fire or other damage.
If you don’t already have a life insurance policy, you might consider buying coverage while you are estate planning. Even if you have considerable savings, having life insurance is valuable. When it comes to life Insurance or savings, having both is best.
You can get online term life insurance and whole life insurance through Ethos, which never requires a medical exam (just answer a few health questions). The online application takes about 10 minutes to complete, and most people can get coverage instantly.
Learn more about how Ethos works by visiting our website, and check out our life Insurance basics resource to see what policies are available, how much it costs, and how much coverage is right for you.
Disclaimer: This article is not intended to provide legal, tax or financial advice. You should discuss any such plans with your professional advisors.