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If you think that estate planning is for the rich, you are wrong. While people with many assets definitely need estate planning, so do people of moderate or few assets. Your estate is simply your net worth, or what you own minus what you owe. Estate planning is just a plan for what happens to your estate after you are gone. And, the most basic document in any estate plan is a will.

Your last will and testament

Wills are a good idea for anyone, regardless of your age and net worth.  However, a recent Gallop Poll says that the majority of people don’t have a will.  While you may not think a will is important because you will be gone, your surviving family members and heirs will be thankful if you do, because it means that the courts won’t be the ones to decide what to do with your stuff.

A will is a legal statement of what happens to everything you own and owe after you pass. It can be as complicated or as simple as you need it to be. A will can state what happens to your dependents, if you have any. It also names a person to be responsible for carrying out the instructions in the will (called an executor), and who the beneficiaries are (who gets your possessions).

To be a legal document in most states, a will must be in writing, signed by the testator (the person making the will) and witnessed in writing by two disinterested people that can verify that the testator is who they are, is of legal age, and is mentally competent. For a will to be executed, it must go through probate, where a court of law determines if it is legal or valid. Under the court’s supervision, the executor carries out the instructions in the will.

Things that can go outside of a will

There are a number of assets that can be distributed to heirs without the will. Anything jointly owned fits into this category, as well as bank and investment accounts, life insurance policies, and real estate.

Jointly owned assets. These all transfer to the surviving owner(s) upon the first owner’s death. No probate is necessary. If all owners die, then it goes to probate.

Beneficiary designation.  Individual retirement accounts, bank accounts and investment accounts let you name beneficiaries on the account itself. This designation is also called payable on death (POD) or transfer on death (TOD). When you go, your accounts automatically go the people you name as beneficiaries. If all beneficiaries die with you or before you, then again, it goes to probate.

Real estate.  Your home can be set up to pass onto your heirs without probate by changing the title or deed to joint tenancy with the right of survivorship. This action is performed where ever the real estate deed is recorded.

Other documents of estate planning

While a will is the cornerstone of estate planning, there are a few more documents that will make it easier for your loved ones to carry out your wishes.

Living will or advance directive. This document allows you to state your wishes for what happens to you if you become incapacitated and unable to make your own decisions due to illness or accident. It covers what type of medicinal intervention you desire to keep you alive. It needs to be signed by the person making the living will and in some states witnessed and/or notarized. It is also called a medical directive or a healthcare proxy.

Power of attorney. There are several types of power of attorney – but all allow someone else to legally handle your affairs. A medical power of attorney usually goes with a living will and a financial power of attorney allows someone to handle your personal and business affairs. A durable power of attorney goes into effect right away and a springing power of attorney only goes into effect when a specific event occurs (such as medical incapacitation). A power of attorney names a trusted person (your agent) to act legally on your behalf.

Life insurance. Life insurance is meant to provide your survivors with financial safety net when you are gone. It comes in term and whole versions. Term life insurance is good for a particular term, like the time period in which your children are minors, or the time you work for an employer. It is generally less expensive than whole life insurance. Whole life insurance is good for your entire life, and includes a cash value or investment component. Life insurance policies pay out cash money to the beneficiaries upon your death.

The takeaway

Estate planning inherently comes with many legal considerations that vary from state to state, and this information is in no way meant to replace legal and professional guidance (see disclaimer below). It is just to get you thinking about the need to have your wishes carried out when you go, and spare your surviving family and heirs problems carrying out your wishes. The simple takeaway is:

  • Get a will. It doesn’t have to be complicated. You can do it yourself with online pre-made forms or hire an attorney to draw up your will at an average cost of $375.
  • Get a living will/advance directive.
  • Assign a power of attorney and/or a medical power of attorney
  • Assign beneficiaries on your retirement accounts, investment accounts and bank accounts
  • Verify the beneficiaries named in your life insurance policies are up-to-date. Often ex-spouses or deceased parents are named as beneficiaries, which may be no longer be appropriate or desirable.
  • Create a master document and share it with the person you name executor in your will, or another trusted person. It should include the location of your will and other estate planning documents and a list of your financial accounts.
  • Finally, don’t procrastinate. Yes, contemplating your own mortality can be uncomfortable, but once you have taken these basic step in estate planning, you will likely feel relieved. Leaving it up to the courts to decide what to do with your estate can be costly and stressful for your survivors.


Disclaimer: White Sands FCU is not a law firm and is in no way giving out legal advice. That is what attorneys are for. Please contact an attorney if you need legal advice.