Financial Education

Why Estate Planning Matters More Than You Might Think

Estate planning is one of those tasks that’s easy to put off. If you’re healthy, working, raising a family, or simply focused on everything happening today, thinking about what happens to your assets or who will make decisions for you later may not feel urgent. Yet waiting can leave important decisions in someone else’s hands.

A good estate plan isn’t only about deciding who receives your property after you die. It can also address who manages your finances if you become unable to do so, who makes healthcare decisions on your behalf, and how your loved ones can navigate the administration of your estate. Taking the time to plan now can make difficult circumstances more manageable later.

Why So Many People Put Off Estate Planning

Many people recognize that estate planning is important but still don’t take the next step. There may be a misconception that estate planning is only necessary for wealthy individuals or older adults. In reality, adults at many stages of life can benefit from having basic documents in place.

According to Trust & Will, 83% of Americans understand the importance of estate planning, yet only 31% have created a will. The gap between recognizing the value of planning and actually creating a will illustrates just how easy it can be to keep putting the process off.

Life changes can also create new reasons to revisit an estate plan. Getting married, having children, purchasing a home, starting a business, receiving an inheritance, or experiencing a divorce can all affect what a person wants their plan to accomplish.

Even someone without substantial assets may have important decisions to make. A parent may want to identify who should care for minor children if something happens to both parents. An adult may want to designate someone they trust to handle financial matters if they become incapacitated.

The important point is that there isn’t necessarily a perfect time to start. Waiting for a major life event can mean waiting until after an important decision needs to be made. Creating a basic plan and updating it as circumstances change can be a more practical approach.

What Should an Estate Plan Include?

A will is often the document people associate most closely with estate planning. It can identify beneficiaries, designate an executor, and explain how certain assets should be distributed after death. Depending on the circumstances, a will can also address guardianship for minor children.

However, a will is only one part of a comprehensive estate plan. According to TIAA, a comprehensive estate plan should include at least three key documents: a will, a power of attorney, and an advance healthcare directive.

A power of attorney can authorize another person to make financial or legal decisions on someone’s behalf under specified circumstances. This can become especially important if an individual becomes unable to manage financial matters independently.

An advance healthcare directive addresses another type of decision. It can communicate a person’s healthcare wishes and designate someone to make medical decisions when the individual cannot communicate or make those decisions themselves. The specific documents and terminology used can vary by state.

Together, these documents can address different circumstances. A will primarily deals with matters after death, while powers of attorney and healthcare directives can address situations that occur during a person’s lifetime.

Estate planning may also involve other tools depending on a person’s circumstances. Trusts, beneficiary designations, business succession arrangements, and other documents can sometimes play important roles. The appropriate approach depends on factors such as the person’s assets, family structure, goals, and applicable state law.

Why Planning Can Make a Difference

The consequences of estate planning decisions often extend beyond the person creating the plan. When someone dies without appropriate planning, family members may have to navigate court proceedings, identify assets, address debts, resolve disputes, and determine how property should be distributed under applicable law.

Even when someone has created a will, settling an estate can take time. According to the Circuit Court of Illinois, settling an estate can take anywhere from six months to a year or longer. The actual timeline depends on factors such as the complexity of the estate, the assets involved, outstanding debts, tax matters, disputes, and court requirements.

This is one reason planning can be valuable even when a person doesn’t anticipate having a complicated estate. Clear instructions and properly prepared documents can give family members a better understanding of the person’s wishes and may help reduce uncertainty during an already difficult period.

Keeping documents current matters, too. A plan created before a marriage, divorce, birth, death, or major financial change may no longer accomplish what the person intended. Periodic reviews can help account for these changes and identify documents or beneficiary designations that may need to be updated.

Estate planning may not be the most exciting item on a to-do list, but it can be one of the most useful. Creating a will and other important documents allows you to make decisions about your property, finances, and healthcare rather than leaving those questions unanswered. More importantly, planning can give your loved ones clearer direction when they may need it most.