When most people think of estate plans, what usually comes to mind are wealthy families with lineages littered with lots of old money. But you donâ€™t have to be wealthy or married with a house on the hill to have a need for an estate plan.
â€śEvery single person needs an estate plan,â€ť says Valerie Coleman Morris, former CNN business anchor and author of Mind Over Money Matters (Sterling & Ross). If you own a home, car, or anything considered an asset, an estate plan would detail how those things would be allotted and to whom. “The average person has more of value that they care about that they wonâ€™t know unless they take an accounting of it,” she says.
In particular, if youâ€™re a single parent, an estate plan can detail plans for your children in the case that something happens to you, whether itâ€™s where your children will live or what valuables of yourâ€™s will go to whom. If there are no provisions in place, these decisions are left up to the state where you live in accordance with intestate succession.
Here are the basics of setting up an estate plan:
Understand the components: It includes elements such as a will, which details how aspects of your estate will be handled upon your death; a living will, which details what actions should be taken for your health in case of an illness or incapacitation; a power of attorney assignment, which gives someone authorization to act on your behalf in a legal or business matter; and a health-care proxy (or medical power of attorney). Also a trust, which allows you to put conditions on how and when your assets will be distributed, may also be included.
Organize a list of your assets and detail plans for them upon your death: “Assets are more than just dollars and centsâ€¦ It could be a piece of jewelry that you have that was passed to you or a painting that has value to you,â€ť says Coleman Morris. Other assets include investments, retirement savings, insurance policies, and real estate or other business interests.
Gather and keep on file the proper documentation. These include documents listing power of attorney, health-care proxy, and life insurance policies. Also, some documents, such as your will, must be notarized.
Review your plan on a regular basis. Life changes such as marriage, divorce, income increase or decrease, or birth of a child can change your estate plan needs. Youâ€™ll need to adjust accordingly.
Get a professional to help. Estate planning attorneys have knowledge on elements of an estate plan such as taxes, trusts, and beneficiary designations. They can best help to properly guide you through the process.
Further Reading: To Save and Protect