The first place to start is to take a look at your family situation. If it fits into one or more of the following personal “red flag” categories, then, regardless of your net worth, you need an estate plan:
- You have minor children. When it comes to minor children, there's no time like the present to start making your estate plan. There are two areas that need to be addressed when planning for your minor children in the event of an untimely death: Who will take care of the children until they become adults, and how their care and education will be paid for until they become adults. Without an estate plan, a judge will make these important decisions on your behalf.
- You have problem children or other beneficiaries. Are you concerned about a child or other beneficiary squandering their inheritance, or perhaps being unduly influenced by an overbearing spouse or partner after your death? Or how about a beneficiary losing their inheritance in an ugly divorce or lawsuit? These concerns can be addressed in your estate plan.
- You have a disabled child or other beneficiary. Regardless of the value of your estate, you must put an estate plan in place for a disabled child or other beneficiary. Otherwise, the beneficiary will lose their government benefits and your estate will be entirely depleted to pay for the beneficiary’s care.
- You don't have any children. This is a group that is can be difficult to plan for since often times they are not sure who they want to benefit from their estate. The bottom line is that without an estate plan, the intestacy laws of the state where you live and the state where you own real estate at the time of your death will make a plan for you, and in most cases it won't be the plan you would have chosen for yourself had you taken the time to make a plan.
- You're in a second (or later) marriage and/or have a blended family. If there is one group in desperate need of estate planning, it has to be couples involved in second marriages with blended families. There are all sorts of pitfalls and traps for these couples, ranging from failing to understand the state laws which prevent one spouse from disinheriting the other (called "elective share" or "community property" laws), to improperly titling assets so that one spouse’s children will inherit everything and the other spouse’s children will get nothing. Planning now will prevent resentment and costly lawsuits later.
- You're in a same sex relationship or an unwed committed relationship. If there is another group in desperate need of estate planning, it has to be same sex and unwed couples. Without the proper legal documents in place, if one partner becomes mentally incapacitated or dies, the other partner will be left out in the cold and instead the sick or deceased partner's family will take control. Planning now will insure that both partners will be protected in the event of an accident, illness or death.
- Your spouse has recently died. If you and your spouse had all of your assets jointly titled, and/or you were the beneficiary of your spouse’s life insurance and retirement accounts, then, fortunately for you, probate wasn't necessary. For your estate, however, this won't be the case since now all of those assets are yours and yours alone. Now is the time for you to sit down with an estate planning attorney to discuss your options for making the transfer of your assets to your heirs just as easy as it was for you.
- You've recently divorced. If you didn't have an estate plan before the divorce, then you should make one after to insure that your assets go where you want them to go and you and your former spouse have complied with all of the terms of your property settlement agreement. This includes updating the beneficiaries of your life insurance policies and retirement accounts, including IRAs and 401(k)s. In addition, now that you have assets titled in your sole name, you'll want to create an estate plan that addresses both the possibility of mental disability and certain death and allows your property to pass to your beneficiaries outside of probate.
If after reviewing these personal red flags you still believe that you don't need of an estate plan, then you should take a look at the financial red flags to see if you fit into one of those categories.