Let’s face it—not everyone is going to reach the end of their lives with a mansion, a garage full of cars and a bottomless well of cash. Whether it be circumstantial or not, there are plenty of people who are content to live simply, many of whom never end up owning a home or building significant savings. Those that fit this description may balk at the idea of estate planning because they don’t believe they actually have an estate to plan for. Guess what? They do.
Don’t think you need an estate plan? You’re probably overlooking something. First, let’s take a closer look at what an estate plan actually does.
The Role of an Estate Plan
Estate planning may bring to mind golden-gated properties with sprawling lawns, but it’s really quite a bit less glamorous than that. In essence, an estate plan functions in four crucial ways. First, it protects any and all assets that you have for your family members or any heirs you choose. This includes your personal property and belongings, investments that you’ve made (including retirement plans), bank accounts, business interests, any life insurance proceeds paid out and more.
Second, an estate plan gives you a say in who actually receives these belongings. Your will allows you to name your assets, beneficiaries and an executor, the latter of which will be the person responsible for carrying out your wishes after you’ve passed. Without an estate plan in place, the distribution of your belongings is determined by the state. The end result may well not be what you’re hoping for.
Third, if you have a family, especially if you are a single-parent, you have other things to consider that need to be included in your estate plan. For example, who will be the guardian of your children if you pass away? Do you have life insurance? If not, should you get some to make sure your family is adequately provided for?
Finally, two important legal documents involved in an estate plan will help to ensure your wishes are carried out properly—durable power of attorney and an advance health care directive. The durable power of attorney is for appointing someone you trust—typically a friend or relative—to manage any legal/financial situations in the event that you become unable to do so yourself. An advance health care directive is similar, yet differs in that it outlines your medical wishes should you become incapacitated.
“What If I Don’t Own a Home or Have a Savings?”
The bottom line is that you still need an estate plan in place even if you spend your entire life renting and never accumulate any savings. Those may be two of the major assets that people associate with estate planning, but they don’t take into consideration your personal belongings, any debts you have, life insurance policies that are active and many other elements that can fall through the cracks. Many people are surprised to discover once they spend time figuring out what is actually theirs that they really do need an estate plan, even if they don’t have what they would consider an “estate”.
So, what can you do to get started? Spend a weekend afternoon taking inventory of your personal and financial assets. You’ll likely find you have more of an estate than you realised.