When Exactly Should You Start Estate Planning?
When should you start estate planning for the future? This is obviously an important task, but it might not seem necessary in your 20s. However, many financial professionals advocate starting that early.
Starting to make decisions this early can pave the way for more complicated planning and harder decisions down the road. Also, having a firm foundation early can mean far less difficulty for those around you should the unexpected happen along the way.
Net worth isn't the primary factor here actually. Even those who are broke, low in assets, or if they have any at all need to handle estate planning. The primary emphasis is caring for those you love. Even if you have only a thousand dollars in your checking account, you don't want to leave your parents or siblings having to go through a probate process for that money while they mourn for you.
Estate planning in your 20s doesn't have to be very complicated. It all starts with designating a specific decision-maker in the event that you pass away or are somehow incapacitated. Once you turn 18, your parents probably can't even schedule doctor and dentist appointments for you.
Your top priority in estate planning is naming a durable power of attorney, as well as a health care proxy. Filing such documents can cost money, but it's worth it. Even if nothing ever happens to you, these powers bestowed on others can help if you're overseas or in college away from home.
The second step is the consideration of beneficiaries and a potential will. Once you start working for a living, you might get benefits like life insurance coverage and even a 401(k) plan. Each account would need a beneficiary listed in the event you pass away.
A will is useful in determining who would get your assets, should you leave any behind. Without a will, the court would decide, and if you have a romantic partner you're not married to, they might lose out if there's no will.
Keep costs down along the way. Your potential estate would be responsible for any debt you have. Fortunately, another potential cost-savings move is using online resources for simple legal documentation. Although nothing really can replace the value of professional legal counsel.
Even if you missed estate planning in your 20s, it's never too late to start. Regardless of your age, you can start the process and catch up. As you move through the decades, however, there are certain phases your estate planning might need to be going through.
The steps for those in their 20s have already been covered, but by your 30s you might need to decide between a will or a trust, especially if you have children or any financial assets. A will specifies who inherits your assets whereas a trust transfers the ownership of your assets to a chosen trustee. The trustee is the person who manages the assets for any designated beneficiaries.
In your 40s, if your parents are still alive, you need to talk to them about having their own estate plan. This admittedly difficult conversation needs to cover asset distribution, medical decisions, their personal preferences, and long-term care.
Have you waited until your 50s to handle estate planning? Per the AARP, you're not alone. Between a-third and one-half of Baby Boomers waited until their 50s to start.
By the time you get to your 60s or 70s, your estate plan should not only be completely fleshed out but also reviewed and updated routinely or as needed.
Regardless of the age in which you approach the question of when you need to start estate planning, there are always certain questions that need to be answered along the way. Here are 10 specific ones to keep in mind throughout the whole process:
1) Do you have any kids involved?
2) How big is your estate?
3) What state is your estate in?
4) Do you have retirement accounts? If so, can the beneficiary distributions get 'stretched'?
5) How important is privacy to you?
6) Do you want charities to get any money from you?
7) Have you considered succession planning for your business?
8) What stage of life are you currently in?
9) Is anything making estate planning increasingly important?
10) Do you need to account for special circumstances like a special needs family or a blended family unit?
The earlier in life you can start estate planning as an adult, the better, even if you think at the age of 18 that you'll live forever. Even without assets, proper estate planning makes life much easier on your family if anything happens to you along the way, be it death or incapacitation that leaves you unable to make your own decisions.
Proper estate planning changes and grows based on your stage of life, but it's never too late to start.