Thinking about the end of your life isn't something that most adults want to do. This is really evident when you consider the fact that only around 40 percent of Americans who are 18 or older have taken the time to create an estate plan. While many adults do make one eventually, it is best to take the time to think about what your family might have to deal with if you pass away before one is made.
Creating an estate plan doesn't have to be complicated. Some individuals, such as those with a high net worth, might have to do a little more work. The important thing to remember is that the estate plan you write is fully customized so it reflects your wishes.
Age is a factor
One thing that is evident is that people tend to think about estate plans as they get older. Here's a look at some of the statistics based on age groups:
- 18 to 36 years old: 78 percent don't have a will
- 37 to 52 years old: 64 percent don't have a will
- 53 to 71 years old: 42 percent don't have a will
- 72 years and older: 19 percent don't have a will
While this is a good thing, considering that older people are more likely to pass away than younger people, there are some instances in which younger adults might pass away. Young parents should make sure that they have a plan set in case something happens to them, even if they don't have a lot of assets.
Important components of an estate plan
At a minimum, the estate plan needs to contain a will. This outlines who will get what assets when a person passes away. Some assets, such as bank accounts and life insurance policies, don't need to be included in the will because these are distributed according to the payable on death instruction.
Some estate plans will involve trusts. These can help to distribute assets without having to go through the probate process. There are many different types, so review the possibilities to determine which ones are appropriate for your wishes and circumstances.
Setting up powers of attorney designation is also a good idea. These come into effect if you are unable to make decisions on your own. You can set up powers of attorney for health care and one for finances. These individuals will make decisions on your behalf if you are unable to do so on your own.
The living will and advance medical directives provide instructions for your medical care. You can outline your wishes for things like being placed on life support or being resuscitated. If you don't want any resuscitation efforts made, be sure to include a Do Not Resuscitate directive.
If you have minor children, you need to get guardianship documents together. These create a plan for who will raise your children if something happens to you and their other parent.
It is best to get your estate plan set early in adulthood. You can usually update the plan as your circumstances change.