8 Reasons You Should Have an Estate Plan

Lots of people don’t think they need a will or estate plan. They may think they are too young or don't have enough money for it to matter. But as the following list makes clear, estate planning is a good idea for everyone, regardless of age or net worth. (For more information, see the Estate Planning section of my website.)

1. Loss of capacity. What if something happens to you and you can’t manage your own affairs? If you don’t have an estate plan, the courts will select the person to manage your financial affairs and make medical decisions for you. I find this can be especially important for single people – who will the court choose if you don’t have a partner? With proper planning, you pick that person.

2. Without a will, default rules apply. Who will inherit your assets? Without a plan, your assets pass to your heirs according to Minnesota’s intestacy laws. Certain family members will inherit regardless of your intentions or wishes. If you have a will, you know and decide who gets your assets.

3. Minor children. Who will raise your children if you die? How will your assets be managed on their behalf? When and how will the assets be given to your children? Without a plan, a court will make those decisions. If you have an estate plan, you can nominate a guardian and/or trustee that you prefer and choose a distribution structure that fits your family and goals.

4. The default rules don’t manage blended families well. What if you’ve been married more than once? If you don’t have a plan, Minnesota law may not distribute your assets the way you would prefer. If you have an estate plan, you decide what goes to your current spouse and how to distribute funds to your children.

5. Children with special needs can lose government services. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. An appropriate estate plan can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.

6. Retirement account beneficiaries. Do you have a 401(k), IRA, or other retirement account? Without an estate plan, there may be expensive tax consequences for your beneficiaries. Leaving these funds to minor children complicates matters since minors cannot inherit. If you have a plan, these accounts can be coordinated with other assets to achieve your goals.

7. Business interests. Do you own a business? Failure to plan means that your family or partners could lose control of the business or engage in costly litigation over its control or value. An estate plan can help you select who will own and control the business after you are gone.

8. Financial security if you can’t be there. Could your family survive financially without your income? Proper life insurance planning can mean financial security for your family. Sensible planning does not have to be expensive and can make all the difference if something happens to you.