Estate Planning Is Important Even If You're Not Rich - Here's Why

Those of you who aren't wealthy, generally think that estate planning is only for the rich. But on considering a few simple questions and seeing what can happen to your wealth, you might reconsider having no estate plan. This article gives a few simple examples of why estate planning is necessary for almost everyone.

So how much wealth should you have to consider making some sort of estate plan?

It really comes down to the issue of making sure whatever you do have goes to whoever you want and not needlessly wasted - not an amount of money.

If about a third up to all of whatever wealth you do have - no matter how small or great - were to go to the government or anyone else other than who you intend to get what you have unless you 'plan' otherwise, would you then assure a plan for its transfer?

Presented this way, I think more people may consider doing some planning. But what still needs to be stressed to get the remainder to plan is that many people simply aren't aware of:

* What situations will put their wealth in jeopardy to be lost, and

* How much of it will be lost.

Here are some situations to be aware of in this regard: Suppose...

1. You only have some precious jewelry that you want it to go to your youngest daughter

2. You own your house, but not much else. You want to give it to your kids as your legacy because they really need that kind of financial help

3. You own a house and have about $200,000 in various mutual funds. You want to make sure which kid get's what.

4. You've remarried and want to leave your house - which you own by yourself - to your own children from a previous marriage.

If any one of these situations describes you, your above 'wishes' for what you have can be easily nullified with inadequate planning. And here's how...

* Dying without a will can prevent your daughter from getting your jewelry. The older child can claim she was due the jewelry; who's to say differently?

* All of your assets in the second and third situations can be lost to Medicaid if you require long term care - unless you prepare early and effectively with gifts and trusts. Needing long term care is common as you become elderly - and can be quite expensive. Medicaid will pay but only after you first spend almost all your assets for long term care expenses. It will seek payments from you first.

* Your children from a previous marriage will not get your house unless you create a trust for it, since state laws may deny your 'will' in favor of giving your house to your present wife.

You can see that your 'wishes' are easily thwarted even for these common levels of wealth.

You can guarantee all your wishes by doing some planning - the earlier the better. Why earlier?...because some you never know when you'll die or when you'll need costly long term care. And some estate planning that protects your assets - such as from Medicaid - requires a lead time of up to 5 years.

So you can see virtually everyone needs to know about what's at jeopardy, so they can protect the disposition of their wealth - no matter how small or unimportant they think their estate is.