A majority of Americans don't have a will, according to Gallup.1 Why? Perhaps for some it's the complexity of the process, the confusion of goals and objectives, the cost, or the fact that life just gets in the way. Whatever the reason, nobody relishes the thought of the world without them in it.
But the fact is, estate planning is an essential part of life, whether you're getting ready to retire or you have a growing family. To help get you started, we've put together four basic components that should be included in every estate plan and that can apply to just about everyone.
1. Life insurance
If you have dependents who rely on your income in order to pay the bills, keep a roof over their heads, and put food on the table, you need to have life insurance. First, determine how much money your loved ones will need each year to replace your income and pay off debts when you die. Then multiply that by the number of years they need it. For example, you may want to have enough life insurance just until your children are on their own.
2. A master information document for your survivors
Although it has no legal effect, a master document can be an important tool for the person responsible for cleaning up your estate after you pass away. It's basically a document that explains what and where all your assets and debts are and how to handle your accounts, including information on what needs to be done to close them out and get your assets to the people who should have them. It may sound simplistic, but it can help ensure that none of your assets are overlooked after your death.
3. A will
A will distributes property to your heirs after your death. If you don't have one, disbursements will be made according to state law, which may contradict your personal wishes. Two other equally important purposes of the will include naming the person who will manage and settle your estate, and naming a legal guardian for your minor children or dependents with special needs. If you don't name these individuals when creating a will, the state will decide for you.
4. A living trust
A primary function of a living trust is to avoid probate. Depending on the size of your estate, probate can be a complex, expensive, and lengthy process that could delay property distributions to your heirs. Additionally, probated documents typically become public record for everyone to see, while trust documents generally do not.
Everyone's estate planning situation is different. See which of these four considerations may benefit you, and consult with your attorney when putting together your individual plan.