October is National Estate Planning Awareness Month, so now is the perfect time to discuss the importance of having an estate plan. We get it. It’s something nobody wants to think about, especially your loved ones, who can’t imagine living without you. But estate planning is a necessary part of the financial planning process. Moreover, no financial plan is truly complete without an estate plan. Without an estate plan, your assets, whether that be money, real estate, possessions or even precious family heirlooms, could end up in the wrong hands.

Let’s go over some commonly asked questions to make the estate planning process more understandable and easier to approach.

What is an estate plan?

An estate plan is a detailed, documented plan for what will happen to your assets when you’re gone. It generally includes your last will and testament, which specifically lists and designates all of your assets to your beneficiaries and names an executor who is in charge of settling your final affairs and making sure the listed beneficiaries receive what they are entitled to. It can also contain trusts, health care directives or living wills, and powers of attorney, essentially creating a plan for the worst ^[1].

Why is it important for me to have one?

Without proper documentation, the best-case scenario could mean fair and equitable distribution of your assets by the courts—after paying probate costs. The worst-case scenario could mean all-out war inside your surviving family.

Additionally, proper estate planning helps ensure that the lowest amount of taxes possible are owed by heirs. Chances are, after how hard you’ve worked to accumulate your assets, you’d love to see that money in the hands of those you love rather than in the pockets of the IRS ^[2].

Aren’t estate plans only for the ultra-rich?

A common misconception is that estate plans are exclusively for those with multiple million-dollar estates, priceless artwork or valuable shares in major companies. But that just isn’t true. In fact, those with fewer assets may have an even greater need for tax-efficient estate planning so that their families are protected during a potentially financially devastating time.

But even the rich are often unprepared. The unfortunate truth is that 67% of Americans don’t have an estate plan ^[3], but anyone with a family or assets should plan for the future, whether you’re handing down the majority stake in a large corporation, a vacation home or the remaining balances of your retirement accounts.

Things will sort themselves out, even if I don’t have a plan, right?

Well, yes, but you’ve spent your entire life in the driver’s seat, making decisions that matter. If you pass away without an estate plan and legal documents, small decisions are left to your extremely emotional family, and major decisions are left to probate court in what is usually a very costly and lengthy process. You can simplify that process by organizing an estate plan while still alive and sound of mind.

How do I start the conversation?

In our experience, we’ve found that the earlier the conversation begins, the easier it is to have. It’s always simpler to plan out of luxury than necessity, and estate planning is no different. Communication is also key. Talk to your heirs and loved ones about what your desires are, and ask them about theirs. You may be surprised to find out that it’s the sentimental items they want rather than the expensive ones. Planning early can help prevent permanent family rifts and resentments later.

How can I get started with my estate plan?

It’s important to accept that you’ll need help to complete a legally-recognized estate plan.

Ideally, your financial professional and your estate attorney should work together. Your financial professional finds efficient ways to transfer wealth that an attorney may not know about or have access to, while the attorney brings the legal expertise, knowledge of state laws, and ability to generate all the needed legal documents. Remember that it’s equally important to revisit and review your estate plan periodically. Life continually evolves as you acquire new assets and your family grows and changes.