Estate planning isn't just for people with significant financial assets. If you've been on the fence about estate planning because you don't have the financial assets necessary for an inheritance for your children, it's time to take another look at what a well-drafted, comprehensive estate plan can do.
Read on to learn how you can use estate planning to provide a legacy for your loved ones, even if you don't have any financial assets.
What is an estate?
For most people, the word "estate" conjures up images of financial wealth: for example, an abundance of stocks and bonds, and large real estate holdings. But the reality is, even without substantial financial assets, the majority of people do have an estate that's capable of forming a meaningful legacy for their loved ones.
"Don't let the 'estate' part of estate planning prevent you from protecting your family and property in the event of death or incapacitation," advises estate planning attorney Jennifer Jancosek of SoCal Legal Solutions. "Even though someone may not have assets, they still have the power to make choices for their property and family through estate planning documents."
Leaving a legacy for your children
A monetary inheritance is, of course, one of the most common ways to leave a legacy for your children. But even if you don't have substantial financial assets—or any financial assets at all—it's important to remember that you can still leave behind a legacy for your loved ones such as:
Your goals, values, and life advice
Money can certainly go a long way toward smoothing the journey of life for your children, but it can't replace the value of your continued guidance and wisdom. "I think of legacy as more than the passing of assets. It's also the passing of goals, values and advice for future generations," says attorney David Bross, a Certified Specialist in estate planning at Truepoint Wealth Counsel.
While you'll be communicating these various life lessons to your children throughout their lives, your estate plan can play a major role in sharing your guidance with your children even when you're no longer there to counsel them. For example, it's not uncommon for people to attach letters to their children in their wills. Bross has helped a number of clients with such letters. "These letters have included advice on the non-financial aspects of life, such as values, ethics, life lessons, faith or religion, and family traditions and stories," he says. "The letter acts as a reminder of how you have lived your life and your hopes and dreams for your children, in a medium that can be read over and over again."
Your personal property
It's important to remember that inheritances include more than financial assets. You likely own items that are meaningful and significant to you despite their lack of "value" on the marketplace. For example, it's difficult to place a dollar amount on family heirlooms such as photo albums, journals, mementos, and small collectibles of sentimental value, but each of these items can be a source of significant emotional value.
Jancosek notes that using a will as part of your estate plan will help to ensure that your items are preserved, and your legacy is carried on. "An estate plan ensures that your heirlooms go to the people that matter the most to you," she says.
"Without a plan, your belongings may simply be donated or tossed in the trash. You also risk having your family members fight over your heirlooms and family members you do not get along with may end up inheriting items that are important to you. With an estate plan, you have the power to control exactly how your property is disbursed, including providing for loved ones and excluding those you do not get along with," says Jancosek.
Other benefits of estate planning
In addition to leaving a legacy, your estate plan offers other benefits for your loved ones:
Guardians for minor children
Estate planning is particularly important if you have young children. A will and trust enables you to nominate a guardian for your children in the event of your death before they reach the age of majority. Bross notes that when parents fail to appoint a guardian as part of their estate plan, the decision regarding who will be their children's guardian will be left up to the courts. Even though the courts will make their decision based on the best interests of the children involved, most parents would agree that this is hardly an ideal situation.
Care of pets
Pets are often faithful companions who bring an abundance of joy to people's lives. Jancosek suggests using the estate planning process to provide for your beloved pets if anything happens to you; not only can you decide who should care for your pets in the event of your death, you can also leave a monetary amount in your will or trust for their future care and maintenance.
In the event of an emergency—for example, if you were to become incapacitated and no longer capable of making decisions—your estate plan can help your loved ones deal with the stresses of the situation. For example, by using a financial power of attorney or a health care power of attorney, you can appoint someone you trust to help you make important decisions in such situations. Bross points to the value of such documents in an estate plan; without a proper power of attorney in place, your loved ones would have to go through the time-consuming and expensive process of going through probate court to get someone appointed to make these important health or financial decisions.
Your legacy consists of more than financial assets, and estate planning can be invaluable even if you don't have valuable assets to leave as an inheritance for your beneficiaries. In addition to preserving family heirlooms with significant emotional value, estate planning can also help you ease the burden on your loved ones by dealing with important issues such as end-of-life decisions and guardianship matters.