Protecting Your Assets in the Event Something Happens to You

Estate planning is the process of arranging how your assets will be managed and distributed after your death or incapacitation. It's important because it ensures your wishes are carried out, minimizes taxes and legal fees, prevents family disputes, and provides for your loved ones. Without proper estate planning, your assets may be distributed according to state laws rather than your preferences, and your family might face unnecessary financial and emotional stress.

Everyone should have at least four basic estate planning documents: (1) a Will that directs how your assets should be distributed; (2) a Durable Power of Attorney that appoints someone to handle your financial affairs if you become incapacitated; (3) a Healthcare Power of Attorney that designates someone to make medical decisions for you if you cannot; and (4) a Living Will or Advance Healthcare Directive that outlines your wishes for end-of-life care. Depending on your situation, you might also consider establishing a trust.

A will is a legal document that takes effect after your death and directs how your assets should be distributed. It goes through probate, which is a public court process. A trust, on the other hand, takes effect immediately upon creation and can manage assets during your lifetime and after death. Trusts avoid probate, offer privacy, and can provide more control over when and how beneficiaries receive assets. Many people use both documents as part of a comprehensive estate plan.

Several strategies can help protect your assets from creditors: (1) establishing certain types of trusts like an irrevocable trust; (2) maximizing contributions to protected retirement accounts like 401(k)s and IRAs, which generally have creditor protection under federal law; (3) owning property as tenants by the entirety with your spouse in states that allow it; (4) purchasing adequate liability insurance; and (5) in some states, using homestead exemptions to protect your primary residence. Consult with an estate planning attorney to determine the best approach for your situation.

While it's possible to create basic documents using online services, working with an experienced estate planning attorney is highly recommended. Estate laws vary by state and are complex. A lawyer can help you navigate these complexities, ensure your documents are legally valid, and create a plan tailored to your specific situation. DIY estate planning can lead to mistakes that might invalidate your documents or create unintended consequences for your heirs.

You should review your estate plan at least every 3-5 years and update it whenever you experience major life changes such as marriage, divorce, birth of children or grandchildren, significant changes in assets, moving to a different state, or changes in tax laws. Regular reviews ensure your plan continues to reflect your current wishes and circumstances. An outdated estate plan may not achieve your goals or could create complications for your loved ones.

Without proper planning, your digital assets (email accounts, social media, cryptocurrency, online financial accounts, etc.) may be inaccessible to your heirs or lost forever. To protect these assets: (1) create an inventory of all digital assets and their access information; (2) include specific provisions for digital assets in your will or trust; (3) use a password manager and ensure a trusted person can access it; and (4) consider using online tools provided by platforms like Google's Inactive Account Manager or Facebook's Legacy Contact feature.

For family members with special needs, consider establishing a Special Needs Trust (SNT). This type of trust allows you to provide financial support without disqualifying them from government benefits like Medicaid or Supplemental Security Income (SSI). The trust can pay for expenses not covered by government programs while preserving eligibility for those benefits. Work with an attorney who specializes in special needs planning to ensure the trust is properly structured.

Probate is the court-supervised process of validating a will, paying debts, and distributing assets after someone dies. It can be time-consuming, expensive, and public. Common strategies to avoid probate include: (1) creating a revocable living trust and transferring assets to it; (2) designating beneficiaries on accounts like life insurance, retirement accounts, and bank accounts; (3) owning property jointly with right of survivorship; and (4) in some states, using transfer-on-death deeds for real estate or registrations for vehicles.