There is no easy way to put it; this is about death and what happens after you die- so this post will be very blunt. WE ARE TALKING ABOUT YOUR DEATH and how to plan for it.
Strictly speaking an estate is the property and assets that are left over when a person dies. And an estate plan is just that-a plan-for what to do with this property after the death of a person.
In the State of California, there are rules in place about what happens when you die without a plan with these assets (I will write more about this in a later blog), but there is a way to come up with a plan and have this plan go dictate what happens to your material possessions after you die. This plan can take many different aspects into account such as tax consequences of certain decisions and can help plan for taxes. The documents that provide for this plan are the basis of what is called an estate plan. Additionally, an estate plan can include other documents that provide a plan for making health care and/or financial decisions should you be unable to do so during your life (maybe you are in a comma and cannot make the decision about what type of care you would like or maybe you are traveling the world and need someone to take care of your financial affairs at home.) And an estate plan can also provide some documents regarding the care of your underage children.
Throughout my writings, I will discuss different aspects of creating an estate plan starting with very basic questions about what it is, who needs it, and why is it important.
Questions that an estate plan can answer:
- What happens if you are in the hospital without being able to make health care decisions on your own?
- What should happen to your body after you die?
- What if you need somebody else to handle your finances during your life?
- In what situations do you want to give power over your health and finances to another person ?
- What person do you trust to make these decisions?
- What assets do you currently own?
- What will happen to these assets if you pass away without a plan?
- If you do not like the default rules, what are your wishes regarding your assets?
- Who do you trust to take care of your children if you (and the other parent) are unable to take care of them?
I realize that these are completely morbid questions that nobody wants to ponder, but lets face it- the only things certain in life are death and taxes*. Meaning we all die. And while we live, we accumulate things; small things like the shirt on your back, your bed, cups, plates, or bigger things like a car or a house, and money in bank accounts. And even if we do not have things (unlikely) we still have to answer the question, if you are in a hospital and cannot make decisions for yourself, who do you want to make the decisions about your health? And, what happens to your kids if you or their other parent are unable to care for them?
Creating an estate plan helps you answer these questions for yourself, write it down, and create a way for your wishes to be followed. And while this may not seem particularly fun, it will help provide your loved ones with a plan, so that they are not left making decisions blindly. In a sense, giving them direction makes the process of winding down your affairs less stressful and helps with the grieving process.
*I am not a tax attorney and cannot give information regarding taxes. But this is what the saying says, but, just to make sure, ask your accountant regarding the certainty of taxes.
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