When Should You Start Estate Planning? (Hint: Don't Wait)

Estate planning is a complex project that many people believe they will start as they near retirement age. It's easy to think of this as something you wouldn't know how to begin until you've worked close to a couple of decades.

Nothing could be further from the truth, and you may be surprised to know how the law automatically distributes your adult assets at any age.

You will need to state in your will where assets of any size or value will go in the event of your death. Many young adults don't know that their sibling or cousin is not their next of kin and will likely not receive any goods without a will.

An experienced firm can help you put your wishes in writing as soon as you turn 18. Work with a legal team that understands your unique situation, family law issues, inheritance law, health prognosis, and finances. You don't have the same end-of-life legal the day you turn 18, so get started early and think ahead.

The Best Time to Start Estate Planning

Meet with a legal team and start planning your estate soon after your 18th birthday. You can come prepared to discuss future plans in detail or simply decide what to do about a few important things.

Starting Early in Adulthood

You might have a few prized possessions, family photos, and some savings that must go to the right person if you pass on. Adults aged 18 to 30 often have sporting goods from their youth or college years, trophies and medals, and collectibles. It is a good idea to designate a beneficiary for even a small amount of savings.

Never underestimate the importance of stating your end-of-life wishes regarding your health care and burial. Your estate planning includes your directives allowable under the law in the event you become incapacitated as well.

Major Life Events

Major life events affect the legal distribution of your assets, and you should put as much as you can into your estate planning regarding these changes early on. Consider your plans for circumstances that include a child your family finds out about after your passing and other complex situations.

Major life events include:

  • Marriage

  • Substantial change in assets

  • Children

  • Divorce

  • Additions or changes to citizenship

  • Buying or selling a home

  • Relocation

  • Change in fiduciary

  • Diagnosis

  • Buying or selling a business

Midlife Considerations

Midlife estate planning addresses many unique challenges and should involve strategic planning with extra consideration for family dynamics. Many people find that their family dynamics have changed by the time they reach middle age. Talk to a legal team that understands issues like blended families, personality conflicts, health care, and more specifics of your situation.

Your midlife estate planning should include specific care plans for minor children and financial directives for all children. Outline things like college funds, trusts, property inheritances, stock distribution, business acquisitions, and more. Include gifting strategies designed to work with the dynamics and financial constraints of individuals in your family.

Later in Life

Pay special attention to your estate planning process regarding your wishes for care if you become incapacitated. Take legal advice from professionals at a law firm who understand the difficulties people face regarding powers of attorney and medical decisions. You might anticipate complexities around durable powers of attorney, bank account management during emergencies, or financial security.

Many people don't know what to do for loved ones when it comes to retirement accounts, healthcare power of attorney, savings accounts, and life insurance policies. Things like the birth of a child, charitable donations, and medical care priorities can complicate issues in court.

Plan to keep your family out of probate, and note that doing this can take a significant amount of time. Take into consideration taxes and any inheritance law complications to make sure your assets go where you want them to. Work with an estate planning lawyer who applies reliable strategies for clients navigating local and state laws during the estate planning process.

Key Components of an Estate Plan

Your estate plan has five main components. They are:

  • Will

  • Trust

  • Power of attorney

  • Living will

  • Beneficiary designations

Your will includes directions for trusts, charitable giving, and the distribution of your assets after your passing. A trust allows you to structure and have money or assets managed for people in your family or institutions you've worked with. The person with your power of attorney is allowed to make some legal decisions and sign documents for you if you become incapacitated. Your living will covers your health care wishes if you are incapacitated or very ill. Your designated beneficiaries will receive things when you die; update and review this list often and after major life events.

Wills and Trusts

Wills are usually easier and cheaper to set up than trusts and cover guardianship of your children if you die. They go into effect only after you pass and are subject to probate. These are important, but they don't offer any relief from taxes, which can be up to 40 percent for some individuals.

Trusts can be more expensive and complex to set up, but they go into effect upon completion and offer protection if you become incapacitated. They often help people bypass probate and may be either revocable or irrevocable, which can help with taxes.

Power of Attorney

You can designate someone with power of attorney to make legal decisions for finances, assets, and medical issues. Your legal document will specify what they can and cannot do if you become incapacitated.

Healthcare Directives

Healthcare directives often cover your wishes regarding end-of-life care, cardiopulmonary resuscitation, surgery preferences, and overall care.

Beneficiary Designations

Update your beneficiary list often with a lawyer who can explain what will happen in each case. People may deal with more or less taxes, legal considerations, management issues, or legal restrictions in unique inheritance cases.

Guardianship Designations

Designate guardianship for minor children and any grandchildren you might have taken care of prior to your passing.

Common Misconceptions About Estate Planning

Many people believe their will is sufficient to get them out of probate, that they can do the entire estate plan by themselves, and that they only need to do this once. Nothing could be further from the truth, and you shouldn't do yourself the disservice of failing to update.

Whether you are young, have only a few assets, or don't have children, putting things off can cost you and your family later on. You never know when you could get sick, pass on, or make or lose a quantity of money before you get to update your plan.

"I’m Too Young to Need an Estate Plan"

Remember that whatever assets and precious items you have, their financial and sentimental value increases when you pass. It doesn't matter whether you need to give your cousin your trading cards or make sure a few thousand dollars goes to someone important.

The law changes the distribution of your assets the day you turn 18, and you should not overlook your power of attorney.

"I Don’t Have Enough Assets"

Your estate plan does not have to be extensive, and you don't have to invest too much time for a few assets. Remember to prioritize any healthcare directives and end-of-life wishes as much as your assets; a competent lawyer can help you prepare wisely.

Ask about additions to your estate plan that will cover any assets you acquire and cannot immediately address in the event of early death or incapacitation.

"I Can Do It Later"

We never know when we will become ill, and it's always good to avoid significantly limiting the time you can spend on your plan. Start early and take the time you need to get answers from a lawyer who can invest the time it takes to do a thorough job.

Steps to Start Your Estate Plan

Assess Your Assets

Consider the assets you have as well as any in development or ones you might receive in court in the future. Think about how these will accrue value, how they can be divided or shouldn't be divided, and who can have them.

Determine Your Goals

Whether you are interested in a family legacy of charitable giving, protecting those with fragile health, or building assets, plan accordingly.

Choose Your Beneficiaries

Each beneficiary will have unique needs that may change as your list evolves, so meet with a financial consultant and attorney often.

Consult with an Estate Planning Attorney

The right attorney will help you create a strategic plan that brings you peace of mind and helps provide for your family.

How to Keep Your Estate Plan Updated

You will need to meet with your attorney and complete necessary documents unique to each update. You may need birth certificates, medical documentation, deeds, financial paperwork, and many other types of legal documents for each case.

Stay in contact and work with your attorney often to stay ahead of difficulties that may take up energy and time.

Estate planning decisions often change when people get new family members, acquire real estate, have second homes appraised and updated, and learn more about inheritance taxes.

The estate planning needs of high-net-worth individuals in places like New York can vary significantly from those of other people.

Variances in state laws can mean different things for financial decisions, healthcare decisions, the probate process, estate taxes, capital gains taxes, and property ownership.

Regular Reviews

Most people review their estate when they review their accounts with a financial advisor, which is typically every three to five years. It can be better to review everything quarterly, semi-annually, or annually for many people; an advisor can help you decide.

Regular Reviews

Regular reviews may not always involve much more than updating a few lines of your comprehensive estate plan and making sure your stipulations apply to each case. Work with an attorney who can help you stay ahead of things in the event it is time for major alterations.

Updating After Major Life Changes

Major life changes usually mean more documents for estate plan updates and adjustments due to family dynamics, but prompt updates benefit you. Take extra care to review your plan and consult with an attorney if you move to another state or have major insurance coverage changes. Be sure to do the same whenever your relationships with family or other loved ones undergo major changes.