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Why You Need an Estate Plan

You've been planning your retirement strategy and saving for years. But have you considered what happens to your savings after you’re gone? What about how you and your family will handle your health care needs?

An estate plan is essentially a plan for making sure your wishes are carried out — on a variety of subjects. An estate plan may include a will, health care power of attorney, durable power of attorney, and a living will. It may also include a trust or other documentation for more complex estates.

Estate plans aren't just for wealthy, older adults. Unexpected situations can happen at any age, so it's important for all adults to prepare. Here are five reasons why everyone should consider creating an estate plan.

  1. You want to be in control. Even if you have limited means, if something should happen to you, you’ll likely want to be the one to make decisions about how your assets are distributed, rather than the courts.
  2. You want to be sure that your assets are distributed according to your wishes. Be sure to review and update your beneficiary designations regularly, and coordinate them with your will and/or trust. In the case of retirement accounts, pensions, or other life insurance accounts, the beneficiary designation may override your will.
  3. You aren't an expert on different state laws. Every state has different laws about how your assets can be distributed and on the guardianship of minors, etc. Consulting an estate planning lawyer who practices in your state can help ensure that you and your family understand and plan according to the rules.
  4. You want to name someone to make medical decisions for you, if necessary. Your estate plan may include a health care power of attorney (HPOA) and/or living will. A HPOA will help you identify someone who can make medical decisions for you in the event that you’re unable to make decisions yourself. The living will or "advance directive" can help you specify your preferences if you’re terminally ill, seriously injured, or otherwise incapacitated.
  5. You have minor children or children with special needs. Without a plan for how your minor children or children with disabilities will be cared for, a court may make decisions for you. A child with special needs could also be at risk of losing Medicaid or SSI benefits if there isn’t a plan in place, like a Special Needs Trust, which specifically deals with this scenario.

While thinking about how you want things handled when you’re no longer here may be uncomfortable, it's critical to create a plan. Once you have your estate plan in place, you may feel comforted knowing that your wishes will be carried out. Some people consult an attorney to create an estate plan, while others use online tools and resources. Use the method that best meets your needs.

What an estate plan includes

An estate plan can help you think through your goals and wishes, as well as the steps to take care of your loved ones and protect what you’ve saved. For example, an estate plan might include:

  • A will, which determines how your assets will be distributed to your loved ones in the event of your death (remember to designate beneficiaries on accounts in which it takes priority over a will, like retirement accounts).
  • Durable power of attorney, allows you to name someone who can make financial and legal decisions if you aren't able to do so.
  • Living will, which allows you to give specific direction on medical treatments in the case of a terminal illness or accident.
  • A health care directive lays out who is authorized to make medical decisions for you, if you cannot communicate what you want.