Estate planning is for older people, isn’t it? Wrong. If you are 18 or older and your family is affluent, there are some basic principles that you should know as a potential beneficiary of a relative’s estate.
But that’s not the only reason, it is useful to understand how to help protect yourself medically and financially should you become incapacitated due to a medical emergency—estate planning is not just for older people.
A comprehensive estate plan helps ensure that your financial and medical decisions are made according to your preferences, even while you’re still alive.
What’s Included in a Basic Estate Plan?
An estate plan isn’t just one document – it’s a collection of important papers that help protect you and your family. At the very least, here are four documents you should consider having:
- Last Will and Testament
A will allows you to appoint an executor or personal representative who will administer your estate and ensure your wishes are carried out after your death. In this document, you also designate beneficiaries for your assets and name guardians and conservators to care for your minor children. A will is a flexible and amendable document, meaning it can be updated as your goals, circumstances, and objectives evolve over time. - Durable Power of Attorney (POA)
This document allows you to choose someone to make financial decisions on your behalf in the event of incapacity, absence, or any other reason that prevents you from managing your own affairs. The power of attorney can empower your agent to manage your investments, pay bills, buy and sell property, and file taxes. This power ceases if you are to pass away. - Health Care Power of Attorney
A health care power of attorney appoints someone to make medical decisions on your behalf if you become incapacitated and are unable to make such decisions yourself. This document is essential to ensure that your medical treatment aligns with your wishes when you cannot communicate them directly. - Living Will
Also known as an advance directive or health care directive, a living will allows you to specify your wishes for end-of-life care. This includes decisions about life-sustaining treatments, such as tube feeding, resuscitation, or assisted breathing. While many living will provisions are often incorporated into a health care power of attorney, this document can serve as a standalone declaration of your medical wishes.
What Happens If You Don’t Have an Estate Plan?
If you do not have an estate plan in place, the state will use default laws to determine who manages your estate, who will receive your assets, and who will make medical and financial decisions for you if you become incapacitated. For some, these default decisions may align with their wishes. However, for others, especially those who are not legally married, those without children, or those in blended families, the state’s decisions can lead to unintended consequences, such as family disputes or decisions that do not reflect the person’s true desires. For these reasons, and many others, it’s critically important to meet with an attorney to formally express your wishes through an estate plan.
How Often Should You Review Your Estate Plan?
An estate plan isn’t something you create and then forget about. Life changes all the time, and so should you plan. While you don’t need to review it every year, you should definitely check in if something major happens in your life, like:
- Birth or death in the family
- Major health issues (whether personal or affecting close family members)
- Changes in marital status (either your own or your beneficiaries’)
- Relocation to a new state
- Substantial changes in your financial situation
- Children or grandchildren reaching adulthood (or ages at which they may handle decision-making or inherit assets)
Even if none of these things happen, it can still be valuable to look over your plan every 3-5 years to make sure it’s up to date and that no new laws have changed anything. It’s always better to be safe and double-check, rather than risk something being missed.
Why Is Estate Planning Important for You, Even If You’re Young?
At first, estate planning might seem like something that only matters when you’re older. But the truth is, life is unpredictable, and it’s always smart to plan ahead. You never know when an accident or illness might occur, and having a plan in place helps give you and your loved ones peace of mind.
Estate planning isn’t just for “what happens after your die” – it’s also about how your life and decisions will be handled if you can’t make them yourself. It’s a way of showing that you care about the people around you, and that you want to make things easier on them during tough times.
Wells Fargo & Company and its Affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.