Do people with lower incomes need estate planning?

The term "estate planning" may bring images of grandeur to your mind: families with mansions, gleaming cars and assets galore. Estate planning can certainly make sense for these families, but it can also be important if you earn $50,000 a year or even less.

One or the most crucial reason for this is children. After all, you want to ensure that your children are taken care of properly should something happen to you. An estate plan allows you freedom from the fears of what may happen to your children should something happen to you.

Guardianships

One of the most important decisions parents of minor children make when estate planning is who will serve as guardian. Skip this step, and you risk your children going to a relative or person you do not approve of. Considerations to keep in mind for a potential guardian include:

  • Parenting skills
  • Age
  • Living situation and where the guardian lives
  • Marital status
  • Religious, moral, political and cultural beliefs
  • Willingness to serve

Of course, many of the above factors can change over time. For example, the guardian you chose may have moved across the country away from the rest of the family or married someone with values you do not like. It is a good idea to revisit your choices every once in a while.

Financial arrangements

Another major consideration is finances. If you become incapacitated or die and your children go to live with someone else, how will that person afford to support them? In normal circumstances, it is unfair to ask someone to shoulder the responsibility entirely or even partly. In fact, you increase the chances of a potential guardian saying yes if you have financial arrangements at the ready.

Estate planning helps you explore your options. Might life insurance make sense? Could a trust? Planning in this vein might seem like overkill when you make $50,000 or less, but it is possible to set up adequate financial provisions and make sure to provide for your children even in the case of unexpected tragedy.