The importance of estate planning

Key Insights

• Anyone who has assets they wish to pass on should consider estate planning.
• Estate planning ensures your wishes are known and eases the burden on loved ones.
• Estate planning is more than just a will: work with a lawyer to ensure all aspects of the estate are taken care of.
• Talk with your loved ones about your end-of-life wishes, and know theirs.

Some may hear “estate planning” and think it applies only to the very wealthy, but the truth is that estate planning is something everyone should consider. Even if you don’t own real estate, estate planning allows you to let your wishes be known after you pass or in case you are incapacitated.

Estate planning lets your wishes be known

Estate planning is the act of legally establishing how your financials and assets will be managed, sustained and distributed in the event of your death or incapacitation. This includes who will pay your debts and settle your taxes, who will be in charge of your assets, and who your beneficiaries are. At its core, an estate plan allows your loved ones to know your intentions when you can no longer speak for yourself, and provides them with a roadmap on how to handle what you’ve left behind. It may also help you save on taxes, pass along more wealth to your beneficiaries, protect your assets and privacy, and help avoid your estate going into probate.

Estate plans help prevent probate and save loved ones stress

Probate is a process in which your beneficiaries have to go to court to get approval to handle your estate, and it could be a lengthy and stressful process. If you own real estate individually and it doesn’t pass immediately to someone else when you die, your heirs would have to go through the probate process. With estate planning, there are ways to transfer your property to someone by establishing a joint tenancy, trust, life estate or death deed that will help clearly and legally lay out your beneficiaries and, importantly, avoid probate.

Completing your estate planning early (and updating it as needed) helps protect your friends and family in case anything unexpected should happen to you. For instance, it would help lay out what to do if you suddenly passed away when selling your house. Always consult with a lawyer to ensure your planning is complete and properly filed.

Estate planning is more than just a will

A will is one aspect of estate planning, but it isn’t all of it. Creating a robust estate plan also includes establishing a power of attorney for healthcare and finances, setting up trusts, creating a living will (which documents your end-of-life preferences) and determining if you should set up a life insurance policy or annuity. Generally, the estate planning process includes:

• Making an inventory of your assets: List out your property, valuables and bank accounts so you (and your loved ones) know all your possessions and what they’re worth.
• Planning for what your family will need: If you have minor children or pets, think about who you’d like to take care of them, and consider getting life insurance to help them live comfortably.
• Naming your beneficiaries: This includes family, friends and charities that you’d want to take care of after your death.
• Determining inheritance: Divide your assets among your beneficiaries and clearly state who gets what.
• Filing and storing all documentation: Work with a lawyer to ensure all paperwork is properly filed, and keep a copy of all documentation in a safe place like a fire-proof safe or safety deposit box. Make sure everyone who needs a copy receives one (your lawyer can help determine who), and that your loved ones know who to contact or where to retrieve your estate plan.
• Updating your plan regularly: Make it a point to check your estate plan regularly to ensure it's still meeting you and your family’s needs. Marriages, divorces, births, deaths, inheritances, moves and large purchases could all necessitate updates to your estate plan.

Take charge of your planning, and make sure others do too

No one wants to think about their death, or what will happen in the wake of their passing, but it’s important to start planning early in case of unforeseen circumstances. This becomes all the more crucial when minors and dependents get involved, and as you age.

If you’re someone with aging parents, check-in with them to make sure they have their estate planning well in hand. It also doesn’t hurt to take note of who their estate lawyer is or where they store their estate planning documentation, just in case. It can be an awkward subject to bring up, but understanding your parents' wishes and making sure all documentation is in order will be a big relief to you and them.

Move forward with estate planning

Whether you’re a longtime property owner who’s looking to downsize, or you’re expanding your family and your square footage, you should make a plan for your estate. Contact your agent or Edina Realty for help taking the next step in your homeownership journey.