By Brian Fricke, CFP®
Estate planning can feel like that elusive task you know you should do in theory—but you’re not quite sure why or how to go about it in practice. Whether you keep putting it off because you’re still young, you think you don’t have enough money for it to make a difference, or it’s just inconvenient and confusing, the outcome is still the same. Failing to prepare an estate plan can have drastic consequences for you and your loved ones. If you’re thinking about it but still not convinced, consider these 3 reasons why every family needs a plan.
Most people think of estate plans as tools used by the ultra-wealthy to avoid taxes and pass on generational wealth. While that is certainly a big part of some estate plans, it is not the sole reason to have one. A commonly overlooked aspect of estate planning involves protecting yourself, physically and financially, in the event of a medical emergency or incapacitation. For instance, all basic estate plans should include the following documents:
- Medical directive: Outlines what type of life-saving intervention you would like and in what situations it should be used
- Healthcare proxy: Identifies a specific person who is authorized to make medical decisions on your behalf
- HIPAA authorization: Allows an authorized individual to receive your medical information in the event of an emergency
- Power of attorney: Allows an authorized individual to make financial and business decisions on your behalf
Even a basic estate plan goes a long way in protecting your medical and financial rights, alleviating unnecessary stress in otherwise extremely stressful situations, like medical emergencies, incapacitation, ongoing medical treatment, or even routine procedures.
Protect Your Assets
Another reason to have an estate plan is to ensure that the maximum amount of assets can be passed to your heirs. This is especially important for families that rely on two incomes to make ends meet. The most effective way to protect your assets is to limit the hassle and expense of probate.
Probate is the legal process of settling a person’s estate after death. It involves filing documents with the court, and it can be both expensive and time-consuming. When an estate goes through probate, it can cause major delays in the transfer of assets to your heirs.
To avoid probate, consider titling your assets as joint tenancy with rights of survivorship, making sure you have beneficiary designations on all retirement and investment accounts, and setting up a revocable trust.
Protect Your Family
An estate plan is also an important way to protect your family in case anything happens to you. All the documents mentioned above add protection by keeping your family informed and involved in medical and financial decisions, as well as ensuring that your assets pass to them in a timely and cost-effective way.
In addition to those documents, it is highly recommended that you include a will in your estate plan. A will spells out your final wishes and names a person or entity to handle your financial affairs upon death. It will detail your assets, which heir receives what, and any other final requests you may have.
Most importantly, a will is the document that will identify a legal guardian for your minor children should you pass away before they become legal adults. If you don’t specifically name a guardian, the choice will be made by the court with no input or consideration for your preferences.
How Do You Create an Estate Plan?
While you may be able to draft a will on your own using resources available online, it’s recommended that you obtain more customized and comprehensive estate planning. In addition to hiring an estate attorney, you should partner with a financial planner who can help you make sure all aspects of your financial situation are covered. At Financial Management Concepts, we can help you design a plan that works cohesively to achieve your goals. Take the first step by scheduling a free 20-minute discovery call today.
Brian Fricke, CFP® is the President and Founder of Financial Management Concepts, a Fee Only® retirement planning and investment management firm. Brian has over 30 years of experience in retirement planning and investment management.
Brian is also the author of Worry-Free Retirement and a book specifically for Lockheed Martin employees, Safe Landings: How Lockheed Martin Employees Can Avoid the Turbulence That Can Crash Retirement.
Using FMC’s 3-step Financial Roadmap® process, Brian helps his clients sleep better at night, relieved of the stress and worry of running out of money in retirement.
Brian serves as the Investment Committee Chair of the LCMS Foundation and is on the Board of Trustees of the New Smyrna Beach Firefighters pension fund. When he’s not working, he enjoys surfing, paddle boarding, and traveling with his wife, Annette, and he is the proud father of two grown sons, Adam and Justin (who is married to daughter-in-law Chelsea). Brian and his sons epitomize the “worry-free” lifestyle by traveling to different countries with friends on their annual father-son surf trips. To learn more about Brian, connect with him on LinkedIn.