“Make sure you have your estate plan in order.” It is solid advice that you’ve likely heard a time or two over the years, but—if you’re like so many people—there’s often something else more pressing to deal with, and the work of estate planning gets pushed aside for another day. Part of the delay is that many people have misunderstandings about the process or even about what, exactly, it means. You may even find yourself asking what is an estate plan, and do I really need one?
The answer to that question is almost certainly yes, and once you take a closer look at what an estate plan does, you’ll probably agree.
What Is an Estate Plan?
There can be a misconception that estate planning is only for the exceedingly wealthy. After all, the word “estate” calls to mind rolling plains of acreage with a mansion in the center. While someone with those assets will most certainly want an estate plan, this kind of important documentation is not limited to the rich. In fact—whether you know it or not—you already have an estate. We all do.
An “estate” is simply the legal term for the sum of all assets an individual has accrued over their life. An estate plan, then, is the documentation that outlines what should happen to these assets in the event that you become incapacitated or pass away.
What Is Part of My Estate?
Your estate may contain a wide range of assets, and it is deeply individual. No two estates are going to look exactly alike because they are reflections of the choices and investments people have made throughout their lives. In a way, your estate is a kind of story of your life, and looking at it that way can help you understand its true value.
The following are typical elements of an estate:
- Land and real estate holdings including commercial and residential properties
- Possessions including antiques, jewelry, and any other items of value
- Stocks and bonds
- Bank account totals and investments
- Retirement and life insurance funds
- Debts (both those owed to the individual and those that the individual owes)
What Else Goes Into Estate Planning?
Understanding these financial assets is one major component of thorough estate planning, but the term “estate plan” often refers to additional considerations. What is an estate plan, then? It typically consists of the following decisions:
- How financial assets and debts will be managed in the event of incapacitation
- How financial assets and debts will be passed on in the event of death
- Custody arrangements for minor children and special-needs dependents in the event of incapacitation or death
- Power of attorney arrangements to allow for medical and financial decisions in the event of incapacitation
The most important function of estate planning is to ensure that your wishes are carried out when you are unable to state them yourself. Whether you are temporarily incapacitated or have passed away, an estate plan provides your loved ones the opportunity to carry out your preferences with clarity.
What Is an Estate Plan Going to Do to Protect Me?
First and foremost, an estate plan provides something invaluable: peace of mind. Knowing that you have provided clear instructions for how to handle your estate in the unfortunate event that you are unable to do so yourself can alleviate anxieties about how your medical and financial decisions will be made while you recover from an injury or illness. In addition, knowing that your estate plan is in place allows you to head off potential conflicts between family members, providing stability in a time that is difficult for many families.
There are additional elements of protection in an estate plan that go beyond the personal. In Texas, anyone who dies without a will is considered intestate. In this circumstance, the law in Texas determines how your estate will be distributed, and it goes to your heirs based on blood relations. This means that a significant other, friends, or unadopted stepchildren will not be considered in the deliberations. In addition, heirs in this legal sense include any children from past relationships regardless of the current state of your relationship.
Those who die intestate often leave behind lengthy and complicated legal battles for their loved ones in probate court. The court will need to go through all of your assets to determine their status and how they will be divided up. This process is expensive, and the fees for that work come out of the estate, leaving less behind to distribute to your family.
The need for an estate plan can feel abstract and distant, making it a hurdle that’s easy to ignore. However, a little time and energy put into setting things up now will ensure that you prevent much more complicated problems later. Setting up an estate plan does not have to be cumbersome or difficult. Reach out to an experienced estate planning attorney today to get started with a free consultation.