Do you think you're not wealthy enough to need an estate plan? I often hear from parents who say "You know, I'm young, I've got a long time, I don't really need to do this now." Or, "I don't have a lot of money, what am I doing an estate plan for? Here are three reasons why you need a plan -- no matter what your finances are.
#1: What's Going to Happen to Your Kids?
First off, you've got to name guardians for the kids. If something were to happen to you, and you haven't identified someone you want to care for he kids in your place, then you're leaving it up to a judge. Think about that for a moment. This judge doesn't know you, doesn't know your kids, and is so busy that she will take no than a couple of minutes to decide who's going to take care of your kids until they reach adulthood. That's not something you want to leave in the hands of somebody who is a total stranger. So, a big part of your estate plan is identifying those loved ones who would be good guardians for your kids if something happens to you.
#2: Who Will Manage Assets for Your Kids?
You may not think you have a lot of assets now, but if you have life insurance, or retirement assets, or other money that you just don't have access to now. But, if something happens to you, your kids would likely end up with that money. And here's the problem. The law will not allow minors to receive an inheritance. So, if you haven't made arrangements for someone to manage an inheritance for the kids, a court will appoint someone to manage the money for the kids until they turn 18. And the person who the court appoints -- who, again, could be a total stranger -- would get paid for managing the kids money, out of the money you left for the kids! Clearly not an ideal situation and easily avoided with a plan.
#3: What Happens if you Become Disabled?
Finally, we worry about what happens when we die, but we also need to be prepared if we become disabled. The government wants to know that there is always someone who can act on our behalf to make financial and/or medical decisions. And if you haven't identified somebody who can step in and take care of those things while you're incapacitated, then you're going to be left alone. Or worse, your kids will be forced to take you to Court to be declared incompetent. A proper plan can avoid this, by identifying the right people to act for you when you can't.