Why You Need an Estate Plan

An estate is so much more than the type of sprawling home and lands that you see on Downton Abbey. If you have any dependents or property or belongings, you have an estate.

You almost certainly have at least one thing on this list — if not more. And the best way to protect these people and things is to put together a plan that will protect them.

The type of estate plan that you need depends on where you are in your life and what makes up your estate. Find your life stage below and read more about what to consider when putting your estate plan together.

Single, no children

Having a plan in place is vital if you want to be in control over what happens to your finances, property and other assets. Without a will or trust, when you pass away the state dictates who receives your estate. In most states, that person would be your closest family member, usually a parent or sibling. The state generally doesn't take into consideration special circumstances either, because they don't know if you haven't seen or spoken to your brother for 14 years or if you wanted to split your possessions equally between your divorced parents. By putting a will or trust in place, you will ensure that the state knows who you do and do not want to receive your assets.

Estate plans aren't just about what happens after you're gone: they also dictate what should happen if you fall ill and/or become incapacitated. As a single person, you need to name someone who can make medical and financial decisions for you should you become incapacitated. Otherwise various family members could be left fighting over your wishes about things such as life support or other extreme measures.

Unmarried but in a relationship, no children

Even if you are in a decades-long relationship, keep in mind that the government does not recognize the relationship unless you have been civilly married. This means that if you are in a serious relationship and want to make sure your assets go to your partner, you will need to put together a will or trust. Otherwise the state will generally distribute your estate to your closest family members.

If you are not married and become incapacitated, your partner will only be seen as the authority for medical and financial decisions if you give him or her that power in estate planning documents known as "powers of attorney." These documents name who can act on your behalf in these areas and specifies how much authority they have over your medical and financial decisions.

Unmarried, with children

If you have children, you have multiple things to think about depending on the relationship of your partner to the children. If your partner is not the biological parent of your minor children but you want the children to go to your partner if something happened to you, you need to create a will or trust to make that happen. If your partner is the biological parent of your minor children, you will still want to put together a will or trust that details who would be your children's guardian if something happens to you and your partner.

Another thing to consider when creating an estate plan is who you would want assets to go to. If you die without a will, the state generally distributes them to closest family members – meaning your partner would not get anything if you aren't civilly married.

Finally, think about what would happen if you become incapacitated. When you are not married, your partner will only be seen as the authority for medical and financial decisions if you give him or her that power in estate planning documents known as "powers of attorney." These documents name who can act on your behalf in these areas and specifies how much authority they have over your medical and financial decisions.

Married, with or without children

Beyond a basic will that dictates who gets what and who would look after any minor children, many married couples use estate planning to minimize taxes. In addition, if your wishes aren't clearly laid out, your loved ones can rack up expensive legal fees and court costs trying to figure out what should be done with all your assets.

You might make the assumption as a married person that you don't need clear legal directions about who makes financial or medical decisions for you if you become incapacitated because your spouse is the default. However, no matter how close you and your spouse are, if you become incapacitated there is no guarantee that they will know what your wishes are for medical care. And if they do know, they might feel torn about enforcing some of those more challenging decisions without something in writing. Making medical care designations such as a health care power of attorney part of your plan ensures that your wishes will be carried out.

Separated, divorced and/or remarried

The more complex your family situation is, the more important it is for you to have an estate plan. You will want to make sure that you have documents in place that dictate who is in charge if you are incapacitated and how assets will be divided. Without these documents, the courts will be left to decide. For example, if you are separated from your spouse but not yet legally divorced when you die, unless your estate plans state otherwise, your spouse may still receive your assets.

If you remarry, you will need a plan to determine what you want to combine and what you want to keep separate, particularly if one or both of you have children. A detailed estate plan will also ensure that assets such as life insurance policies, bank accounts and retirement plans are passed on to the appropriate people.