What do comes to mind when you hear the words estate planning? If you think of old people with many assets, you are not alone. It is a common misconception that estate planning is only something done by people who are old or rich, or both. Estate planning is actually for everyone, and the earlier in life you start planning for your future, the better.
In addition to thinking that estate planning is only for people in their later years, younger people often put off creating their estate plans because they aren't thinking about the end of their lives or simply don't want to think about death. This is entirely understandable since when we are young old age and death seem so far away. However, the COVID pandemic has reminded us that death can come at any age. Creating and implementing a thoughtful estate plan will give you peace of mind and assurance that you have a plan in place in case you are unable to provide for yourself or your family.
Your estate plan will need updating over time to account for changes in the people and assets in your life, as well as evolving values and beliefs. When you first start the planning process, your plan will likely be simple. As your life progresses it can become quite complex. Here is an example of how a person's estate plan may evolve.
Young and Single
Even though you may be unmarried and have no children, it is important to have at least a basic estate plan in place. A staple of every estate plan is a will, which allows you to dictate who will receive your assets when you die. If you die without a will, a probate court will decide what happens to your assets. In addition to a will, you can fill out a personal property form listing your most valuable assets and whom you want them to go to.
Other key documents to have in your initial estate plan include a HIPAA authorization form, an advance health care directive, and a financial power of attorney. The financial power of attorney is used for naming the person, or persons, who are allowed to make financial decisions for you when you are unable to do so. The advance health care directive does the same thing as the financial power of attorney, but for medical decisions. The HIPAA authorization form is basically a list of persons who are allowed to receive your medical information. You can explain what should happen to your body after you die and what type of memorial service you want.
Young and Married
Once you are married, you will probably want to add your spouse to your estate plan documents. Your spouse may not automatically be able to act on your behalf and make decisions for you. Spell out every detail in your documents. If you have children, be sure to factor them into your plan as well. If your children are minors, you can name a person, or persons, to act as a guardian for your children if you and your spouse are no longer able to care for them.
If you don't already have life insurance or long-term disability insurance, now would be a good time to start these policies. If you are unable to support your family due to injury, illness, or death, you will want them to have some support. Additionally, there are various investment plans to choose from when setting aside funds for your children's education and for your retirement.
Later in Life
At this point in your life your children have probably finished school and may have families of their own. You may be retired or getting close to retiring. Your estate plan is likely more robust and complex than when you first started it years ago. It may contain a revocable trust or an irrevocable trust, or both. Aside from your primary resident, you may have other property, such as a vacation home.
Passing on your assets to your descendants is something you are likely thinking about. You may also have different ideas about your end-of-life care and what you want to happen to your body after you die. Now is a good time to review your estate plan documents to ensure they still reflect your wishes.
No matter your stage of life, it is never too soon to create your estate plan. Doing some research online and talking with family and friends is a good start, but the first real step is consulting with an estate planning attorney. An experienced estate planning attorney can guide you through the estate planning process and create a plan that fits your unique needs.
This article offers a summary of aspects of estate planning law. It is not legal advice, and it does not create an attorney-client relationship. For legal counsel or additional information, please give us a call at (714)374-2244, or fill out our Contact Us form here.