I talk to people all the time who believe that because they do not have a lot of money, they do not need an estate plan. That they are not “worthy” of having an estate plan or that the investment in such a plan is not warranted. Some people, of course, are just procrastinators. This is unfortunate because everyone should have an estate plan, even people of modest means. The real question is: what does an “estate plan” mean?
First, let's debunk the myth that an estate plan needs to be both elaborate and expensive. At its core, an estate plan should consist of three relatively simple documents: 1) a Last Will and Testament; 2) a General Durable Power of Attorney; and 3) an Advance Medical Directive (or “Living Will”).
Last Will and Testament
We all know what a Last Will and Testament is and in New Jersey, unless you have a multi-million-dollar estate, fancy estate tax planning is unnecessary. New Jersey no longer has an estate tax and the federal gift and estate tax exemption is currently set at $11,580,000. Not a problem for the vast majority of people. New Jersey does have an inheritance tax, though that is assessed on distributions to certain classes of beneficiaries like distant relatives and friends. Estate tax planning is not an issue for most people. However, wills are important not only for directing what happens to your money and property when you die, but if you have young children, the will identifies who will care for your children (identifying guardians) and how their inheritance will be managed (identifying trustees).
General Durable Power of Attorney
It is important to have a General Durable Power of Attorney (POA) in place in case you become disabled and are unable to manage your own affairs. Without a POA, no one will have the legal authority to manage your financial and legal affairs when and if you are unable to do so on your own. Even a spouse does not have the inherent legal authority to act on your behalf. With no POA in place, your family may be forced to file for guardianship which can be costly and disruptive to the entire family.
Advance Medical Directive (or Living Wills)
Like a POA, it is important to have a Living Will in place that designates a person to make decisions for you in the event you are disabled and unable to do so on your own. The Living Will is also important for specifying the circumstances under which you would or would not want end-of-life medical treatment. Again, without a Living Will in place, the need for a guardianship becomes a real possibility.
These three documents will meet the requirements of most people, although in some cases additional planning may be necessary if there is a disabled child involved or there are particular assets like a family owned business or real estate that needs to be preserved in some fashion.
At Serra Law Group, our “Smart Law” online platform makes developing an estate plan easy, convenient and, best of all, reasonably priced. Smart People, Smart Lawyers, “SMART LAW”.