Estate planning is not about how much stuff you have. It's just not. And yet, the sentiment "We don't have much" is a common response when the topic comes up. I want to take just a few paragraphs to let you know why you need an estate plan, whether you have millions or nothing more than a mortgage and a life insurance policy (or less).
It's about decisions, not stuff.
Consider these two clients of mine.
Client #1: It's a second marriage for both spouses. They are retired and in their early 70s. They have four children, but all of them are from previous marriages. They have a net worth of $20 million. They have a complicated mix of assets, including multiple real estate holdings.
Client #2: He is 22 years old and single. He has no children. He has just graduated college and has started a new job. He is renting an apartment and owns no real estate. He has just started contributing to a 401K, which makes up the entirety of his savings. He has student loans and a small life insurance policy.
What do they have in common? For both clients, decisions need to be made if either becomes disabled or when either dies. Someone has to step into a position to deal wisely and responsibly with medical decisions, financial decisions, and deal with a host of other matters.
To be sure, decisions regarding Client #1's estate are going to be more complicated - more assets, blended family, estate tax issues, etc. - and their estate plan is necessarily going to be quite complex. But even with Client #2, someone needs to make medical decisions if he can't make them for himself, someone needs to be in contact with student loan creditors to know how to discharge them, someone needs to access the 401K during disability, etc. His plan will not be nearly as complicated as Client #1, but he still needs one, even if it is relatively simple.
You should make the decisions, not the government.
Whether you think you have a lot or a little, your options still fall into one of two categories:
1) Either you make the decisions
2) Or government makes the decisions
That's it. Those are your only two options. Either you have provided ahead of time for how things should work if you can't be in control, or family and friends have to resort to guardianships, probates, etc. to make everything work.
An estate plan should grow and change with your life.
It's okay to start simple. The first version of your estate plan may only include a basic will, power of attorney, and guardianship designation for minor children, but you may be surprised how helpful these documents can be to your family if the worst should happen. The amount of stress and time you will save your spouse, parents, children, and/or friends is hard to quantify, not to mention the money that will be saved.
As life changes - and it will change - your estate plan changes with you. It can become more complex as your life becomes more complex. Or it can become simpler as your life becomes more simple.
The bottom line is this - because someone will have to make decisions for you when (not if) you can no longer make them for yourself, you need an estate plan.
The Basics: What's a "trust" and what does it do for me?