A Guide to Estate Planning for the 4 Stages of Life
Quick Summary: Estate planning is not just reserved for older people with a lot of assets. It's for everyone, and how it's done depends on what stage you are in life. Here is a guide, offering a list of simple, but effective, estate planning documents for everyone from a single college student to an octogenarian.
Many people think that estate planning is only for those who are either old or have a lot of money. This is simply not the case. I have been an estate planning attorney for 30 years. Every single week I sit down with at least one family of someone who has recently died. More than half never planned for that day. Instead, their families were left to sort out the mess that they left behind.
Estate planning is not just for the old and rich. Every single adult should take the time to prepare even the most basic plan. As you will find by reading this article, most of the steps I recommend can be easily accomplished, often for little or no cost.
Each stage of life has different requires an estate plan. But I understand that it can be confusing for anyone who isn't taught how to proceed. So I thought I would offer you the ideal planning strategies along with a short list of documents for each of the 4 stages of life: young adulthood, marriage and family, middle adulthood, and retirement.
The thing to remember is not to wait for a future event to get a plan in place. Instead, recognize that all individuals at each stage of life can benefit from having even the most basic estate plan. Getting an estate plan done today allows you to control the things that are important to you and your family. Plus, you can easily avoid putting the people who mean most to you through a lengthy probate process filled with unnecessary costs.
To that end, we are here to help guide you. Let's get started.
Young adults rarely take the time to plan. But taking a few basic steps can really help in unforeseen situations.
1. Young Adulthood
While as a young adult, most feel invincible. But it never hurts to have some things planned just in case. Here are the steps I think those of college age, and the first 10 years after leaving home, should have in place.
You're going to want to start with a simple will. A will is explained later in this article, but most people understand the basics. This is the document that you decide who gets your stuff if you die.
The correct TOD's (transfer on death or beneficiary designations) is perhaps one of the most overlooked ways to plan your estate. Any account that has money in it (checking, savings, or whatever) allows you to designate who gets that money when you are gone. There may not be much in your checking account at this stage in your life, but do your family a favor and designate a TOD to keep that money out of probate.
A Health Care Directive (often called a Living Will, a Patient Advocate Designation, or a Medical Power of Attorney) helps convey to your family how you'd like to be treated as far as life-saving or preserving procedures go. Most importantly, it selects who you want to make to make decisions for you when you're unable. The Health Care Directive should also have a HIPAA authorization so that a hospital can share your private health information with them when necessary.
A simple Financial Power of Attorney can be beneficial if you are laid-up because of an accident. With it, the person you select can pay your bills, collect your mail, and handle anything else regarding your finances.
Lastly, having a list of account passwords and information designated to a specific person can save your loved ones a lot of troubleshooting. Don't forget to have a way to access your social media accounts and even your iPhone. You'd hate to have your family prevented from access to your pictures and other information if you suddenly weren't here.
So in summary, here is a list of the things that make up an estate plan for a right-thinking young adult:
A Simple Will
The Correct Transfer on Death Designations on Bank Accounts
A Health Care Directive
A Financial Power of Attorney
A List of Online Accounts and Passwords
Starting a family is perhaps the most important and overlooked time to get a plan completed.
2. Marriage and Family
Getting married and starting a family can be the most exciting time for most people.
When you get married, it's likely that you'll want to re-designate both your financial and health care powers of attorney to your spouse. You also want to consider how your assets are controlled and directed now that you are married.
So here is the list of what I think you need at this life stage:
A More Complex Will with Testamentary Trusts Provisions to Protect Your Minor Children
A Guardianship Directive
A Child Care Authorization
The Correct Transfer on Death Designations on Bank Accounts
Life Insurance with Proper Beneficiary Designations
A Health Care Directive for Each Spouse
A Financial Power of Attorney for Each Spouse
A List of Online Accounts and Passwords
If you decide to have children, updating your will is vital if you plan on designating anything for your child. You can also set up a trust for your children, so in the unlikely event something happened to both you and your spouse, your children's money was controlled for their support and education, and not released to them at 18 without restriction.
You will also want to designate a guardian for your minor children. We suggest selecting one person to care for the children, and another to handle their money.
This is also a time to look into life insurance. You will have different needs with your children in the home.
So you’re empty nesters with retirement on the horizon. Now what? There are several steps to make sure your house is in order.
3. Mid-Life
Once you hit middle-age, you're going to want to start focusing on the steps to retire comfortably. For many, their children are grown and through college and starting families of their own.
It is time once again to take a comprehensive look at your estate plan. This is the time that I think most people should consider a trust. A living trust avoids probate and offers a much more comprehensive plan than a simple Will. There are many other advantages to a living trust. While this is beyond this article's scope, you should strongly consider a trust-based plan as possibly the best tool for most people at this stage of life.
You also should reexamine your life insurance coverage. For many folks at mid-life, the need for life insurance coverage no longer makes sense.
This might be the time to invest in long-term care insurance. It might seem too early, but it's better to do it early rather than late. This coverage will protect you if it is ever necessary to go into assisted living, and the rates are much better by starting early.
The last item to consider is what professionals are advising you. I personally think having a good estate planning attorney makes more sense if you also are being advised by a good financial planner and a tax advisor. These three professionals, working together with at least an annual joint meeting focused on you and your family, is a terrific approach.
So here is your middle-age estate planning list:
A Living Trust-based plan
A Pour-over Will for each spouse
The proper Real Estate Deeds to avoid probate
The Correct Transfer on Death Designations on Bank Accounts
Life Insurance with Proper Beneficiary Designations
A Health Care Directive for Each Spouse
A Financial Power of Attorney for Each Spouse
A List of Online Accounts and Passwords
You will be more confident and secure during a full and happy retirement knowing you have the right estate plan in place.
4. Retirement
Once you have reached this stage of life, it is my hope that you aren't starting from square one in getting an estate plan completed. For many families, this is the first time they attempt to tackle these issues. The good news is that getting a plan in place at any stage of your life puts you ahead of about half of your neighbors.
The list of estate planning documents recommended at mid-life is just as applicable after retirement. What is more critical now is keeping it updated and accessible.
As most banks have eliminated mailing monthly account statements, I strongly recommend that you routinely print out copies of your investment and insurance statements. Put them in a 3-hole binder at least two times each year, including a list of user-names and passwords to access these accounts. This can be so valuable if you have a future health issue.
Also, I would evaluate your beneficiaries as to their own stage in life, and whether receiving an inheritance from you in a single, lump-sum payment is the right choice. Leaving a large sum of money to a beneficiary who has addiction issues, is receiving disability payments, can't control their spending, or is in a troubled marriage can create more problems than not leaving them anything.
Talk to your attorney about whether you can protect a child's inheritance if you have these issues in your family. A few changes to your trust can create much-needed protection.
Next, it is important to reexamine your medical directives. Have you changed your thinking about the circumstances you would want or refuse life supporting measures? This is especially important because of the Covid pandemic, and the more widespread use of ventilators. Do your legal documents reflect your current wishes? Is the right person appointed to advocate for this wishes if you are unable?
This is also the right time to consider who your personal property should go to. Dividing money between your children is usually easy. However, who gets your hunting rifle or diamond ring can cause disputes between your heirs. The best approach is to take pictures of valuable items and write down who they should be given to upon your death.
Lastly, a subject no one likes to talk about is your choices regarding funerals, burials vs. cremation, and memorial services. People’s wishes have changed dramatically regarding just cremation alone. 20 years ago, less than 20% of people who died in the United States were cremated. Today, more than half are cremations. Traditional funerals with 2 days of viewing are almost unheard of anymore. The point here is that it is important to make your wishes known. If you think someone in your family won’t abide by your wishes regarding the disposition of your body after death, Michigan allows you to designate a “funeral representative” by signing a notarized designation.
So here is the final, most complete of estate planning documents you should consider for the last stage of your life:
A Living Trust-based plan
A Pour-over Will for each spouse
The proper Real Estate Deeds to avoid probate
The Correct Transfer on Death Designations on Bank Accounts
Life Insurance with Proper Beneficiary Designations
A Health Care Directive for Each Spouse
A Financial Power of Attorney for Each Spouse
A List of Online Accounts and Passwords
A Personal Property Distribution List.
A Funeral Directive
Estate Planning: You Don't Have to Do It Alone
Estate planning in any stage of life can be confusing. The good news is there is help to assist you in creating the right estate plan for each stage.
Please know that we are here, right in your community, to guide you. Visit our site anytime for more information or book an appointment with us to get started.
