Is an estate plan just for the rich? I used to think that was the case but it is not. It might not be as fun as planning a vacation or buying your dream house, but without it you can’t choose who gets everything you worked so hard for. If you have dependents then you need to set up your estate plan. If you don’t make these decisions and designations while you’re alive and able, state law and probate courts will make them for you after you’re gone (and who wants that?!).
We just finished the process so I wanted to go through what we decide to set up and why so you can start your estate planning journey.
Will vs. Trust
I knew I wanted more than just a will. A trust helps avoid probate court which is exactly what I wanted. Probate court takes time and money. Especially since we have two kids, I did not want my kids or my family to have to deal with court.
Yes, setting up a trust is more expensive but to me it was worth it. A one time fee and it is set up for life. You might have to make minor adjustments along the way but usually your lawyer will make small changes for free or a very small fee.
A trust gives you more control over the distribution of your estate and your beneficiaries can receive assets when you’re still alive. A will is only effective after you die. We still have a will. It is part of our estate plan. It designates who will be the guardian of our kids and comes secondary to our trust.
If you have my course Babies & Budgets, in the bonus section there is an hour long session with an estate attorney that covers all of this in detail 🙂
Estate Plan Timeline
- Found a lawyer in our are and reached out
- Met with lawyer and went over what would be best for our situation and started drafting our estate plan
- Got term life insurance for both of us
- Reviewed estate planning documents and then signed
The Estate Planning Documents
- Living Trust (revocable)
- Last Will and Testament
- Durable POA
- Healthcare POA
- Deed for home (we put our house in the trust)
We chose a living or revocable trust because this allows us to change the beneficiaries and assets as long as we are alive and physically/mentally able to. We are both the trustees and then if we are unable to manage the trust, it will go to the secondary trustee.
An irrevocable trust is permanent once they are signed. This was not something we were comfortable with and according to our lawyer is less common. It could help reduce your estate taxes but we were not worried about that (we don’t have millions haha).
The total cost was $3,594 for all of the documents above (which is honestly not bad at all). $94 was paid to the county to update our house deed. Yes we had to save for it but I knew this was important especially with having kids. You can get a will for a lot cheaper but a well-rounded estate plan is better overall. You do need an estate attorney to draw it up for you and you need to find someone who is licensed in your state.
Click here to get your FREE estate planning workbook.
Technically you do not need life insurance to create your estate plan but it was important to us that we each had term life insurance. I wanted to make sure that if one of us dies, the other person could pay off the farm and never have to worry about a mortgage. I wanted to make sure our boys could stay in their house.
It would be terrible to lose a parent (or both parents) and have to switch schools and move. We spoke to the boys’ guardian and she also knows we want the boys to stay in the house. If we both die, she would have enough to pay off the farm plus money to raise them (kids can be expensive!). She would also get our savings and retirement accounts. Both boys also have UGMA/UTMA accounts which are technically their accounts since they are custodial.
We did a 30-year term life insurance policy. I also added a child rider (although this is not necessary). Yes this can be used for funeral and other expenses if your child dies but the reason I did it was because when your child reaches the age limit of the rider, they have the option to convert it to their own life insurance policy. This may help them lock in a lower premium and they will not require a medical exam. It only added a few dollars a month to our policy and can be used for any future children without changing the policy.
They would still be able to convert this to their own life insurance policy even if they have a medical disorder that might disqualify them from life insurance. It does not take into consideration their current health status. It is not a need at all but for a few dollars a month I felt like it was worth it.
The process was pretty easy. We did have to do a medical exam but the nurse came to our house and it took like 15 minutes. Joe doesn’t really have any medical history at all so he got approved right away (thankfully he is very healthy haha). I have had 2 back-to-back kids and so they wanted to review my medical records.
At first they wanted me to sign a document giving them permission to reach out to any doctor I’ve seen in 10 years and keep records for 2 years which I was not comfortable with. I asked if I could obtain the medical records myself from my doctor (which is just my OBGYN) and send it to them and they agreed. Once I got them the medical records I was approved within a week.
Things to Remember:
- A will is part of your estate plan but, in my opinion, isn’t enough. If you cannot afford to set up a trust right now then make sure you at least have a will.
- Once your trust is set up, you will need to make the secondary beneficiary for all of your accounts your trust (think 401k, Roth IRA, life insurance, bank accounts, etc.).
- Discuss this ASAP with your partner (if you haven’t already). You need to be on the same page with who will be the guardian of your kids as well as who will manage your trust if you are both dead. You can each choose someone different for your secondary agent for your healthcare POA and durable POA.
- You don’t need whole life insurance (even if. an insurance agent tells you that you do). Just get term life insurance. Also the sooner you get it, the cheaper it will be.
- Keep track of your accounts and documents. You need to keep a list of all of your bank account information so people know what accounts to access once you die.
- If you move states, you need to have your estate planning documents updated to make sure it meets any requirements of your new state.
- Get a fire box or something to keep the documents once you get them. You should get PDFs as well but it is important to keep the original documents somewhere safe.
Having a well-rounded estate plan will help make sure your assets and wishes are carried out exactly as you wish.
Don’t forget to download your free estate planning workbook.
Have questions? Leave them in the comments and I will answer them!