At the most basic level, estate planning is about having the power to decide what happens to assets after you pass away. There are many people for whom this is not a major concern, perhaps because they have a small family with good relationships or perhaps because they don’t believe that they have enough wealth to justify creating an estate plan. However, when you take a closer look it is easy to see that even people in these types of situations have reasons to create an estate plan, one of which is to make life easier for friends and family.
Beyond worrying about whether children will be happy with what they are given by a will or a trust, when these documents are properly executed they create certainty. Estate planning documents also provide helpful information that friends and family may not know about finances, such as what sorts of debts you hold and whether or not there is still a mortgage on your home.
Leaving behind information about debts and obligations is equally as important as leaving behind firm plans for how to deal with assets. For example, family members who are not aware of a second mortgage or a car loan may not be able to find the correct information in time to stop a repossession or foreclosure, therefore unnecessarily forfeiting an asset or at least losing time and money to the legal process to retain it. Creating a detailed plan so that necessary information is available is relevant for people in many different financial situations.
Source:New York Times, “The Talk You Didn’t Have With Your Parents Could Cost You,” Tara Seigel Bernard, May 24, 2013.