The Stages of Estate Planning From Your 20s to Your 80s (and Beyond)

Published 08/01/2019

By Juan C. Ros, CFP®, AEP®

 

The term “estate planning” is a misleading one. For many, it conjures up images of lavish mansions and wealth. And, while estate planning is important for individuals and families of significant means, it is also a critical process for just about everyone else.

 

Your estate consists of whatever you own that you wish to transfer to someone else at your death. The estate planning process also considers what might happen in the event you become incapacitated, either temporarily or permanently.

 

According to the National Association of Estate Planners & Councils, “The purpose of estate planning is to develop a strategy that will maintain the financial security of individuals through their lifetime and ensure the intended transfer of their property and assets at death, while taking into consideration the unique circumstances of the family and the potential costs of different methods.”1 The key phrase is “through their lifetime.” You are never too young, or too old, to plan your estate.

 

Let’s examine the stages of life and where proper estate planning plays a role within each stage.

 

AGE RANGE: 20s–30s

KEY LIFE EVENTS: First child, first property purchase

 

The birth of a child or the purchase of a first home should serve as the catalyst for your first estate plan. A will to name guardians for children, a trust to hold property, as well as durable powers of attorney and advance health directive documents generally constitute an initial estate plan.

 

Note that trust and estate law is state-specific. For less complex situations, a service like LegalZoom or TrustandWill.com can generate documents at minimal expense. However, you may also want to work directly with an experienced estate attorney in your state. To locate an estate attorney in your area, search for one who holds the Accredited Estate Planner® (AEP®) designation by visiting National Association of Estate Planners & Councils.

 

AGE RANGE: 30s–40s

KEY LIFE EVENTS: Birth of additional children, accumulation of assets

 

As more children are born and as children get older, you should revisit your estate plan. Are the guardians you initially named still the best people to care for your children? Has anything else changed in your life that would require a change to your estate planning documents? You should also review the beneficiary designations for your life insurance policies and your company retirement plans and make any necessary updates.  

 

AGE RANGE: 40s–50s

KEY LIFE EVENTS: Continued accumulation of assets, children turn 18

 

The continued accumulation of assets including potential inheritance from parents will merit revisiting the estate plan every three to five years for potential changes.

 

When children turn 18, parents should consider having a “starter” estate plan established for the new adult in their family. Normally, 18-year-olds don’t have significant assets, but they still need some key documents in place, especially if they go off to college.

 

Young adults should consider setting up: 1) a health care power of attorney or medical proxy granting their parents the legal right to make medical decisions should the young adult become incapacitated, 2) a durable power of attorney, 3) a HIPAA (Health Insurance Portability and Accountability Act) Authorization allowing health care providers to disclose health information to a named “agent” (the parents) and 4) a FERPA (Family Educational Rights and Privacy Act) Release, permitting colleges and universities to disclose your young adult’s educational records to you, the parent.

 

AGE RANGE: 50s–80s

KEY LIFE EVENTS: Anything (grandchildren, liquidity events, divorce, death)

 

For older adults, any significant life change such as the birth of grandchildren, divorce or death would require a review of the estate plan. This is also the stage of life when most charitable giving takes place, sometimes as part of the estate plan. Again, a solid estate plan still needs maintenance every three to five years.

 


OTHER KEY LIFE EVENTS: Death of spouse, death of surviving spouse

 

Following the death of a spouse, the deceased spouse’s estate will require some administration. With a strong estate plan in place, this work will hopefully be made easier for the surviving spouse. An experienced estate planning attorney can provide crucial support and advice during the administration process.

 

When the surviving spouse passes away, the successor trustee(s) will step into his or her shoes and handle the remaining estate administration. Again, this job is made simpler and with minimal expense if the estate plan has been properly maintained over the years.

 

Conclusion

 

The chart above summarizes these stages of estate planning. For assistance in this process, contact your financial advisor who can help identify gaps and facilitate working with an estate attorney to ensure gaps are filled and current plans are updated (or new plans are established) so your wishes are honored.


Source


1 “National Estate Planning Awareness Week October 21-27, 2019.” National Association of Estate Planners & Councils, http://www.naepc.org/affiliated-councils/awareness. Accessed May 18, 2019.

  


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