Estate planning is more than simply creating a will. It arranges your affairs and finances so things happen as you wish after you die — or even, in some cases, when you’re still alive.
Written By Janet Berry- Johnson
When you hear the word “estate,” you might think of mansions, huge stock portfolios, art and antiques, and other pricey possessions like cars, yachts, and fine jewelry. The things high-net-worth individuals, especially elderly ones, own and leave behind them after they die.
But estate planning isn’t just for the ultra-wealthy or the very old. Everyone, regardless of financial status or age, can benefit from having an estate plan — assuming you have assets to leave and people to leave them to.
What is estate planning?
Your estate is essentially everything you own, including your home or other property, car, bank accounts, investments, life insurance, furniture, and personal possessions.
An estate plan gives you a say in how those things are given to the people or organizations you care about. It arranges your affairs and leaves a written record of your wishes and intentions. It indicates how you want your property, belongings, cash, and financial assets distributed.
If you don’t make these decisions and designations while you’re alive and able, state law and probate courts will make them for you after you’re gone. And the results might not reflect your desires or suit your family’s needs.
Here are five major reasons why estate planning is important, and how it benefits you and your survivors.
1. Estate planning goes beyond a will
Many people think of a will and an estate plan as the same thing. They’re not.
Both will and estate plans provide instructions for how your goods and assets should be handled after your death, but estate planning encompasses much more. It can also include:
- Durable powers of attorney to appoint individuals to make medical and/or financial decisions on your behalf you’re unable to provide instructions yourself
- Medical directives to outline the kinds of medical treatment you want (or don’t want) if you become incapacitated
- Beneficiary designations to explain who should receive money from life insurance policies, annuities, retirement accounts, and other financial accounts
- One or more trusts to facilitate passing property to your heirs and potentially provide tax benefits for both you and your beneficiaries