Why You Need an Estate Plan (Even If You Don’t Feel Like You Have an Estate)
Hey there. We realize putting up a blog post about estate planning might seem a little out of left field. But here’s the scoop: We recently lost Heather’s grandma, and for the last several weeks we’ve been up to our (red and puffy) eyeballs in paperwork and legal things.
Grandma had actually done an incredible job of putting things in order—but it’s still been a tricky process to navigate. Since we know you want to save your loved ones from a huge ordeal when you’re gone, we thought we’d offer a high-level overview of what estate planning even means.
When we say we’ll be your “advisor for life,” we truly mean it. Whether you need help buying or selling a home, choosing the best burrito place for a first date, or thinking through how to care for your family after you’re gone, we’re here for you.
So let’s dive right in...
We all have plenty of reasons to avoid estate planning. Like, “I don’t own an ‘estate.’” (You don’t have to.) Or, “I’m too young.” Or, “That seems like a lotta heckin’ work.”
But most of us avoid estate planning because… well… denial, really. It’s uncomfortable thinking about death—especially our own. So unless we have a good reason to think about it—a serious illness, an accident, a family member’s death—we typically just don’t.
The problem is, we can not think about it for too long, leaving our loved ones behind to experience not just grief, but also stress and overwhelm.
Fortunately, putting together an estate plan isn’t as complicated as you might think.
Seriously though, I don’t own an estate.
You don’t have to live in a mansion with horse stables and guests’ quarters to need an estate plan.
Estate is just a word used to describe your assets, both tangible and intangible. We’re talking about your home, vehicles, bank accounts, ownership of a business, your stamp collection, that super comfy chair everyone fights over... You get the idea.
The point is, if you have any kind of stuff, you need an estate plan. But a good estate plan actually goes beyond material goods. We’ll get there in a sec.
Estate Plan Basics
Some people use estate plan and will interchangeably. But a will is just part of an estate plan. In fact, an estate plan isn’t one document. It’s more like a collection of documents and resources.
#1 Will
A will describes who gets what after you die. It also dictates who should take care of your children if both you and their other parent are gone. Without a will, the state decides where all your stuff goes—including your kids. That process is called probate.
At the time we’re writing this, any estate in Colorado worth more than $64,000 will move through probate. But as long as your will is set up correctly, the probate process is just a rubber stamp. If your will is unclear, or if there are disputes over it, it’ll go through a more complex probate process.
Working with a professional to make sure your will is set up clearly and correctly—including guardianship provisions—can save your loved ones a lot of unnecessary heartache.
A word on inheritance taxes: Although Colorado doesn’t have any estate, inheritance, or gift taxes, such things may be subject to federal taxes.
#2 Trust
In certain situations, it’s good to establish a trust in addition to a will.
A trust is a legal entity that can own your assets and control them based on guidelines you create—and they can go into effect while you’re still alive. For example, a trust could deliver funds to your child at certain intervals (which you decide), and it can dictate how those funds are used. (Yes, college. No, Coachella.)
A trust isn’t necessary for everyone, but it’s useful if you’re concerned about the oversight of your assets after you die.
#3 Beneficiary Designations
Some assets can transfer to your heirs without being included in your will—like life insurance benefits and retirement plans. In fact, beneficiary designations on these assets override what you have in your will. So if you want your brother to receive your 401k proceeds, you need to make sure he’s listed as the beneficiary with your 401k provider, not just in your will.
#4 Advance Health Care Directive
An Advance Health Care Directive is made up of two parts—a Medical Power of Attorney and a Medical Care Directive, also called a living will.
Assigning someone as your Medical Power of Attorney lets them make decisions about your care if you’re incapacitated. You’ll want to have serious conversations with this person before anything happens to make sure they know what you’d want. These conversations can be tough, but you don’t want to leave them guessing when your life is in their hands.
A Medical Care Directive is a legal document that states how you want to deal with things like life support, resuscitation, and more.
#5 Power of Attorney
A Power of Attorney is someone who can make financial and legal decisions on your behalf. A Durable Power of Attorney can do so even if you become incapacitated.
Some people prefer to assign different Durable and Medical Powers of Attorney to ensure all decisions are made for the right reasons. It also spreads out the responsibilities so one person doesn’t have to shoulder it all.
#6 Letter of Intent
Letters of intent aren’t legally binding, but they’re incredibly helpful to family members. In a letter of intent, you could describe how you’d prefer to be memorialized, spell out details you want included in your obituary, and so on.
Even if you’ve had those conversations (good for you), it’s still helpful to put everything in writing. Your family will thank you.
#7 Important Documents
Even your spouse may have trouble remembering all of your assets, so prepare a list of your life insurance plans, bank accounts, retirement accounts, and annuities. Also, put together a folder with your birth or adoption certificate, marriage certificate, divorce decree, deeds, and titles. If you administer any assets online, include web addresses and passwords.
Is setting up an estate plan expensive?
The cost of your estate plan depends on how complex it is. If you’re a young couple with a child, you might just need the basics—a will and guardianship instructions for your little one.
If your situation is more complex—say you own a business, have children with multiple partners, and own real estate overseas—you’ll pay more.
Although you can find relatively inexpensive estate planning tools online, we recommend working personally with an estate planning attorney. They’ll adjust their fees based on your needs, and you can be sure all your bases are covered.
Time to dot the i’s and cross the t’s.
Once you have your estate plan drafted, it’s a good idea to review and refresh it any time you go through a major life event. (Like a wedding, divorce, birth of a child, or winning the lottery.)
You’ll also want to review your beneficiaries from time to time. For example, you might have a former partner still listed as a beneficiary, or you might want to include a new grandchild among your heirs.
As you create your estate plan, have conversations with the people who are a part of it so any disagreements can be worked out ahead of time. It’ll be much easier to work out problems with you present, rather than during a much more stressful time when tensions are likely high.
Finally, don’t forget about your social media accounts. Facebook allows you to assign someone else to take over your account upon your death. You can also indicate if you want your account changed to a memorial page or deleted altogether. Go to Settings & Privacy to learn more.
I’ll do it tomorrow. Or next year. Maybe.
Listen, we get it. No one wants to think about this. But it’s really super important.
Think of estate planning as a gift to your loved ones. If you’re struggling to get started, maybe set a goal to have it done by a significant date—your next birthday or next vacation.
It’s a big project, but you can take it one step at a time. A simple way to start is by contacting an estate planning attorney. No matter what, don’t keep putting it off until you run out of tomorrows. Your family will thank you later.
