Estate Planning Essentials for Women
A friend of mine was recently divorced. After her divorce was finalized, she asked me whether a will or trust was necessary for her. My friend is a mother of two young children with a successful business of her own. She is fairly young, and does not own a home and does not have a lot wealth accumulated, so she felt that estate planning was not necessary. In response, I explained that everyone needs some type of estate plan. However, women who have recently experienced a major life change such as a divorce, or the death of a spouse, are especially susceptible without a plan that reflects their current life situation. In the case of my friend, without an estate plan she could not direct how her money was distributed to her children in the event of her death, or who would manage her assets for her and her children in case of an unexpected disability.
Women today take on more roles in the household and more financial responsibilities than ever before. Moreover, women tend to live longer than men so the chances of outliving a spouse and being directly impacted by an estate plan (or lack thereof) are greater than for our male counterparts. With that in mind, it is crucial for women to take an active role in estate planning. Every woman should understand the essential elements of estate planning and have a plan in place that addresses what happens in the event of an unexpected death or disability. Perhaps more importantly, women need to ensure that these documents are updated when life changes.
Whether you have accumulated a large amount of wealth, or only have few assets, everyone has an "estate." By understanding a few key elements, you can help protect yourself and your loved ones from unnecessary complications.
What is Estate Planning?
Essentially, estate planning enables you to be in control of what happens to your property upon your death or incapacity. Estate planning is also the process by which you appoint who you want to be responsible for carrying out your wishes for your assets, family and health care decisions. At a minimum, your estate plan should include the following elements:
A Will and/or Revocable Living Trust: These are formal documents that describe how and when to divide and distribute your assets upon your death. Whether you need a simple will or a more complex, revocable living trust depends on your specific situation. Discuss your situation with an estate planning attorney to determine which makes sense for you and your family.
Durable Power of Attorney for Financial Decisions: A durable power of attorney for finances allows you to appoint another individual to make financial decisions on your behalf in the event you are unable to make these decisions yourself due to incapacity or disability.
Durable Power of Attorney for Heath Care Decisions: A durable power of attorney for healthcare allows you to appoint another individual to make medical decisions on your behalf including decisions regarding medical consents and life support issues in the event you are unable to make these decisions yourself.
Beneficiary Designations and Payable on Death Designations: If you list an individual as a beneficiary of a financial asset, that individual becomes the legal owner, immediately upon your death without the need for probate.
Aside from understanding the basics, there are a couple of issues that are critical for women to address.
First, Take Care of Yourself!
A woman often prioritizes caring for her children and family over herself, but making sure that you have appointed a power of attorney both for financial and health care decisions is vital both for you and your family. One of the most overlooked issues in estate planning is how to manage your estate in the event of an incapacity or disability. Planning ahead with durable powers of attorney for financial and heath care decisions allow you to be in control of your life. These documents allow your life to carry on during a disability; your bills will be paid and your care will be provided for by the person you choose. Moreover, powers of attorney provide your family with the peace of mind that they are carrying out your wishes, instead of being left to question what you would have wanted them to do.
Take Care of Your Children
If you have children, especially if they are minor children, it is essential to plan ahead. If your children are minors, make sure that you nominate a guardian. This is one of the most important estate planning decisions, so take the time to think it through. Have conversations with your spouse and family members about who would raise your children in a manner most like you. Think about issues such as age, education, lifestyle, religious preferences, geographic location and parenting style.
In addition to determining who would care for your children, think about who would manage the finances for your children if you are unable to do so. For younger children, consider setting up a trust for their inheritance. With a trust for minor children a trustee of your choosing will mange funds for your children. The trustee will distribute funds for their general care until they reach the age of majority, or until such age or life event that you deem appropriate. The trustee could be a friend or relative, or even a financial institution; anyone whom you feel can be responsible with money and respectful of your wishes for your children’s future.
Designate Beneficiaries & Keep the Designations Updated
Perhaps one of the easiest and most important things you can do to take control of your estate plan is to make sure that you have designated beneficiaries for all of your financial assets and keep these beneficiaries updated. Keep a list of all of your financial assets, including life insurance policies, retirement accounts, investment accounts, stocks, bonds, and bank accounts, along with the specific beneficiary for each account.
If you experience any major life change, such as a divorce, death, or major change in assets, review this list and make the appropriate changes. After a divorce or death of a spouse, updating your beneficiaries is especially important. The the last thing you want your family to have to deal is removing an ex-spouse or other unintended beneficiary after you are gone. Work with your financial planner, or check with your specific financial institution on how to make and update beneficiary changes.
Whether you are a working mother or a retired widow, keeping up with a busy life can be a challenge. When a major life change occurs, such as a death or divorce, it can be very overwhelming. Take a bit of time now to prepare yourself and your family for the unexpected so that you control these important decisions. Your family will thank you.
For more information on estate planning and family law, contact the attorneys at Measure Law in Kalispell at 406-752-6373.
Measure Law attorneys provide expert legal advice with regard to Estate & Probate Law along with Family Law to help protect you during major life changes. See our Practice Areas page for more details.