While it’s not always the most exciting topic, estate planning is certainly one of the key areas of financial planning. However, despite its importance, not everyone understands the value of estate planning or its relevance for people beyond just the ultra-wealthy. In this episode, we provide an introduction to estate planning. We cover the basics and key documents involved, explain why estate planning is important, outline the process of actually implementing an estate plan, discuss how estate planning changes over time and when to consider updating your estate plan, and finally wrap up by sharing what to expect when it comes to working with an estate attorney, both in terms of the experience and cost.
Outline of this episode
- The main documents involved in planning your estate [1:28]
- Why estate planning is important [4:31]
- Creating estate planning documents [9:00]
- Estate planning isn’t just a one-time event [11:29]
- What to expect when going through the process [15:03]
- The recap [18:14]
What is an estate plan and who is it for?
Estate planning begins with creating a plan and outlining your intentions. The key documents involved are a will (which lists guardians for any minor children and provides instructions as to how your assets will be divided), a revocable living trust (which is similar to a will but allows you to avoid probate), and powers of attorney for healthcare and financial decisions (which outline who can make key healthcare and financial decisions on your behalf if you become incapacitated).
Estate planning isn't just for the ultra wealthy. There are several reasons why you should have an estate plan. Naming a guardian for minor children, avoiding estate taxes, and being intentional with who inherits your estate (as well as the timing of when people have access to it) are just a few examples.
Implementing an estate plan
After understanding the basics of what an estate plan entails and why it's important, you should be aware of the two main steps involved with implementing an estate plan.
Step one is creating the key documents of your estate plan (such as a will, trust, and powers of attorney for healthcare and property). Step two is the process of titling your investment accounts, assets, and insurance policies to reflect the estate planning documents you created. In other words, implementing your estate plan.
It's common for people to address step one, but then never follow through with step two, which, fortunately, by having a will that serves as a catch-all document for any account asset or insurance policy that wasn't properly titled you have some protection, but it does result in more work for your heirs, going through the probate process, and greater potential for something to be missed.
What to expect when working with an estate attorney
When working with an estate attorney, it's helpful to gather some information ahead of your initial call. This consists of the financial aspects of your life, like your net worth, along with details about your unique situation, family dynamics, and intentions. In terms of cost, it will vary based on where you live and the size of the firm the attorney works at, but you can expect to pay anywhere between $2,500 to $10,000 for the estate planning package we outlined.
Even after creating and implementing your estate plan, you should understand this isn't a set and forget it planning area. There will still be times when you'll need to make adjustments to your plan based on changes in your family or life situation, a material change in wealth, or changes to legislation that impact estate planning over time.
Resources & People Mentioned
- Download our guide: The Toolkit for Optimizing Your Finances as an Employed Physician
- Download our guide: The Financial Checkup