“We had the busiest year we’ve ever had in 2020, because of the pandemic,” says Lori Anne Douglass, cofounder of trust and estates law firm Douglass-Rademacher LLP. “Suddenly, people were just dying out of nowhere, of all ages.” Douglass said 2020 was a wake-up call for many to start the estate planning process. “The basic estate plan includes not only documents for when you die, but documents for if you become disabled; your medical and financial directives. A will is just one little piece of it,” says Douglass. If you don’t know where to start with the process, or what you should do, the important thing to know is that there are plenty of resources and people out there to help you navigate estate planning. For BIPOC communities, the opportunities that estate planning provides for wealth accumulation and building generational wealth make it even more important to look into. If you don’t decide what you want to happen to your wealth, the courts will. “Truly, if you really want to create generational wealth, you’re not going to get that unless you’re setting out your plan for the wealth that you want to transfer,” says Jala Eaton, a licensed attorney in California and a certified trust and financial advisor. “If you don’t, there are default rules.” Here’s what you need to know about estate planning—and why it’s a critical part of your future. Attorney Art Steele says individuals with lower incomes need estate planning even more than those who are wealthy. There are laws in each state that give high-income individuals money to use until they figure out estate plans for a family member who has died—but those with lesser means have to do it on their own, and the process can be confusing if there is no plan in place. “A lot of times, a lot of money will get used up or a lot of money will never get tapped into because nobody knows how to do it,” says Steele. “We need it more.” Estate planning encompasses everything from where you want your money to go, to who you want in charge of it, to appointing a legal guardian for any minor children you have. “A will is the only legal document where you can nominate guardians for your minor children,” says Douglass. While it is rare for parents of young children to die in common accidents, “it is not so rare in a pandemic for parents of minor children to die in close proximity of each other,” says Douglass. “You’re always estate planning,” says Douglass. For example, when you open a bank account and don’t have a beneficiary or a power of attorney, a family member would have to go to court to get approval so they can make financial decisions on your behalf, should something happen to you. If you are single, estate planning is even more important. There are laws in place if you’re married or have kids—in most states, your spouse usually gets everything. “When you’re married, the law will dictate what your spouse gets,” says Steele. If you’re unmarried and don’t have any kids, everything will go to your parents. “With default rules, it assumes that everybody in your life is good with money,” says Eaton. “And that everybody is going to carry out your wishes, and that you’re happy with your family. A lot of things that aren’t normally the case.” Eaton recommends revisiting your plan at least once a year, and updating anytime a big life event happens like marriage, children, or buying a house. Steele says it is most important for single people to complete a power of attorney document—this way, you can choose who has access to your finances and act on your behalf if you are not able to. A living will gives you the opportunity to say what you would want to happen in case you become incapacitated in some way so your family members don’t have to carry the burden of that decision. If you’re in the hospital for a long time and can’t access your money, it’s helpful to have someone you have chosen ahead of time to do it for you. “You want somebody to have the authority to be able to go to the bank, access your 401k, maybe you need money for medical expenses,” says Douglass. Fill out a healthcare proxy, which is a document that lets you choose someone who can make medical decisions for you if you are unable to. Steele says if there is one thing you should lawyer up for, it’s estate planning. “This court system, the procedural process that you have to go through, all of it can be avoided if you hire a lawyer ahead of time.” If you can’t afford the fees for a lawyer right now, plan ahead and budget for it like you would anything else. You could also find a lawyer that offers payment plans. “It is so worth it for minorities especially to hire a lawyer to draft their wills to say exactly what they want. Because if they try to navigate the system, they are going to meet so many obstacles,” says Steele. Transferring your wealth through charity, education, or leaving money to someone in your community are ways to pass down assets and create generational wealth. “It doesn’t take that much money to have a $300 to $400,000 or even $1 million life insurance policy,” says Steele. “Leaving your children a life insurance policy is a huge leg up.” And if you don’t have kids, consider leaving it to a niece or a nephew, or a friend’s child. “It’s so important for us minorities to start getting smarter about how we leave money.”
