You may not think you have an estate, but you probably do. Everything you own is part of your estate. This includes your house, car and furniture. In addition, an estate usually includes your life insurance policies, retirement funds and savings accounts. Creating an estate plan lets you decide who should get your house, car and money when you die. You decide how your debts should be handled. And you decide who should make decisions about your finances or health care if you become unable to make those decisions for yourself. When people don't plan their estates, the state steps in and makes these decisions according to state law. 

It's easy to put off doing estate planning. Some people feel that if they plan for death, they've given up on life. This is not true. Instead, estate planning can give you peace of mind that your wishes will be followed-and that your family won't be left to make difficult decisions on their own. 

What estate planning documents do I need?

Planning your estate does not have to be complicated or expensive. At a minimum, you need a will. Other documents to consider are a durable power of attorney and a health-care proxy. You might also want a living will.

• Will. Everyone should have a will. Your will directs who will receive your money and possessions, and how you want your heirs to receive those assets. If you have young children, your will should be used to name a guardian for them. If you haven't written a will, try to do it very soon. Remember that if you die without a will, the state will decide who will get your assets and who will be the guardian of your children. It is a good idea to have a qualified estate attorney help you write your will.
   
• Durable power of attorney. This document allows you to name a person who will handle your finances if you are unable to handle them yourself. This may mean paying your bills and/or signing your name on financial transactions on your behalf.
   
• Health-care proxy. A health-care proxy allows you to name a person who will make
  decisions about your health care if you are unable to make them yourself. Give a copy of the proxy to the person you name as well as to your doctor. 
   
• Living will. A living will allows you to specify ahead of time what types of medical treatment you would or would not want if you were unable to communicate those choices. Give copies of your living will to your family, as well as to your doctor, hospital and anyone else who is caring for you, including the person you named in your health-care proxy. 

Remember that you can always change or rescind any of these documents. The important thing is to get them in place.

Finding Help

What if I can't afford a lawyer?

If your finances are uncomplicated, a lawyer who works for a legal aid clinic or other nonprofit group can draft documents for you. Call your local chapter of the Arthritis Foundation for the names of organizations that can help you. Or, call the law school at a university near you or the local bar association. Explain that you need the help of a pro bono lawyer-a lawyer who will donate his or her services for free. 

Special Considerations

I may want to plan my funeral. What should I keep in mind?

Let your loved ones know if you have special wishes for your funeral or memorial service. If you decide to pay in advance for your funeral, choose a plan that allows you to change funeral homes or facilities. You may move to another city, or you may want to change funeral homes for another reason. Also, look for a plan that lets you withdraw your money if you need to. 

Will I lose my government disability benefits if I receive an inheritance?

Social Security Disability Insurance (SSDI) benefits are not affected by an inheritance. However, if you are receiving Supplemental Security Income (SSI) or Medicaid, an outright inheritance could reduce your benefits. An outright inheritance includes money or assets left to you in someone's will; it also includes life insurance proceeds or retirement accounts that name you as the beneficiary. If you receive an outright inheritance while on SSI, your benefits will stop if your assets exceed $2,000 (single) or $3,000 (couple). When your assets fall below the limits, SSI benefits may start again, as long as you are otherwise eligible, but you will need to reapply for benefits. Coverage may be made retroactive to three months before your application date.

With planning, your loved ones may be able to leave you an inheritance that will supplement the public assistance you receive, not replace it. A "special needs" trust could be set up to provide funds for items that are not considered maintenance. For example, the trust could specify that the money can be used only for "quality-of-life" items, such as vacations, a computer or therapy not covered elsewhere. 

Setting up a trust requires careful planning and should be handled by a lawyer who is knowledgeable about estate planning and the rules governing any assistance programs you may qualify for now or in the future.

©2001. National Endowment for Financial Education. All rights reserved.

Note: Certain content areas in this material are current as of the publishing, but legislative and regulatory changes as well as new developments may date this material over time. This content is meant to provide general financial information; it is not meant to be a substitute for or to supersede specific professional or legal advice.