The Basics of Estate Planning: Wills, Insurance and More

Estate planning is often thought of as something only the very wealthy do. But it's something every adult should be concerned with. Unless you want your assets or health decisions to wind up in the hands of a court, you need to draw up the required documents ahead of time.

It doesn't matter how old you are, either. Whether you're 21 or 91, it's important to have a plan in place.

What is an estate plan?

Briefly, it's a long-term strategy for managing your assets. More than just distributing your assets after death, a good estate plan can help you:

* Set aside funds for retirement
* Save up for long-term health care
* Maximize the value of your estate
* Make your own end-of-life health care decisions
* Provide for the care of a spouse or dependents
* Minimize the taxes placed on your estate

There are a variety of components to a good estate plan, but not everyone needs all of them. A reputable attorney or financial advisor can give you sound advice on what's most appropriate for you. Here are some major options for you to consider:

1. A will

For most people, this is the centerpiece of an effective estate plan. With it, you can name your heirs and state exactly what you wish to leave them. This is true whether it's financial assets or material belongings. Your will can be a simple handwritten document. But it's best to let an attorney help you draw one up. That way you can be sure it satisfies the courts.

2. A trust

Some people forgo a will to go this route instead. This generally makes sense if you have a large number of assets and want to preserve their value. With a trust, you give an individual or institution (the trustee) control over your assets. They oversee and distribute them according to your wishes. While you may be able to write up a will on your own, you definitely need professional help to create a trust.

3. Guardianships

If there are children or disabled adults in your household, you need to make plans for them as well. Should something happen, you'll want to know they are cared for. A guardianship is a legal arrangement that makes this possible. You can appoint anyone you like, but try to make it someone trustworthy with values similar to your own.

4. Advance directives

Also known as a living will, this document spells out your end-of-life health care wishes. It gives doctors and other caregivers written instructions on such matters as whether or not to:

* Resuscitate you
* Place you on life support
* Give you a feeding tube and IV fluids
* Keep you in the hospital or send you home
* Give you blood transfusions
* Perform other medical procedures

In many states you can write your own advance directive. But it's still worthwhile to consult an attorney. The issues are often complex and you'll want to make sure your bases are covered. You might want to talk to your doctor, too, to be sure you understand the choices you're making.

5. Life insurance

If you don't have a lot of assets, it might be a good idea to buy yourself a policy. Life insurance can come in handy should something unexpected happen. Among other things, your family members can use it for:

* Burial expenses
* College tuition
* Mortgage payments
* Other debts and expenses

Just remember, the more coverage you buy the more it will cost you. But if you can afford a generous policy, your loved ones will be appreciative in the end.

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