Blog, Estate Planning, Retirement Planning

The Different Stages of Estate Planning

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On our list of things we love to avoid, estate planning is one of the most prominent.

Who wants to confront their mortality, especially at a young age when that possibility seems so remote?

Contrary to what many believe, estate planning is not a daunting task and is not reserved for the wealthy or elderly.

Regardless of your age or financial status, having an estate plan in place is essential to protect your assets, ensure your loved ones are provided for and prevent legal issues from arising after you die.

First stage: early adulthood

Many people might assume that estate planning is only necessary later in life.  Starting in early adulthood is an excellent way to lay the foundation for successful estate planning.  Once you turn 18, you are legally an adult.  It’s time to put some estate planning basics in place.

While your chances of dying prematurely between the ages of 15-24 are small, they aren’t non-existent. In the US, in 2021, approximately 180 young adults in that age range per 100,000 population died.

That’s why you should consider creating a will that states how you want your assets distributed, even if you don’t have a significant estate.

You should also execute a durable power of attorney and advance healthcare directives to ensure your financial and medical decisions are in the hands of someone you trust if you cannot look after your affairs and want your medical wishes implemented.

A durable power of attorney allows the person you designate to manage your legal and financial affairs.  The durable power of attorney can also give this person the authority to make medical decisions on your behalf if you cannot do so.

You might consider a living will, which specifies what treatment you want or wish to decline if you are in a persistent vegetative state.  These instructions can also be set forth in health care instructions, an advance directive that can be used alone or with the appointment of a health care agent.

The laws concerning advance directives vary by state.  Most states have prescribed forms that must be used.  That’s why it’s essential to consult with a qualified attorney who can ensure the documents you execute are valid in your state.

Second stage: marriage and partnerships

young couple financial planningOnce you enter into a committed partnership or marriage, it’s time to revisit your estate plan.

If you combine assets, you’ll want to be sure both parties have estate planning documents that accurately reflect their wishes for distribution upon their death.

You’ll also want to review beneficiary designations for insurance policies, retirement accounts, and brokerage accounts.

You should review your durable power of attorney and health care directives at this stage.  You may want to change the designation of the person entrusted to make critical financial and healthcare decisions.

Third Stage:  Children

The birth or adoption of a child is a significant event that requires you to update your estate.

You’ll need to protect your children if one or both of you die prematurely.  This is usually accomplished by appointing a guardian for minor children, setting up a trust to manage their inheritance, and updating your life insurance policies.

Fourth Stage:  Asset accumulation.

As you accumulate more assets, your estate planning needs become more complex.

You may need to establish a revocable trust or create a family limited partnership.

A revocable trust (which is also known as a “living trust,” “inter vivos trust,” or “loving trust”) is used in estate planning to describe a trust created during your lifetime.  It can help you manage your assets and give you protection when you are unable to manage them.

 A family limited partnership is a holding company owned by two or more family members.  It’s often used to hold business interests, real estate, publicly traded and privately held securities or other assets contributed by its members. The purpose of a family limited partnership is asset protection and reducing gift and estate taxes without sacrificing control over the management and distribution of the assets held in the partnership.

This is also an excellent time to review your will to see if it reflects how you want your more substantial assets distributed.  Depending on the size of your estate, you may need to engage in tax planning to minimize federal and estate taxes.

Fifth stage: retirement planning

Retirement planning coupleAs you approach retirement, your estate plan should be reviewed to reflect your changing needs and priorities. Reevaluate your investment strategies, insurance policies, and how your assets will be distributed to ensure they align with your current goals.

This is also the time to consider long-term healthcare planning, including the potential need for nursing home care or assisted living facilities.

The need for flexibility

While some stages of life are predictable, others aren’t.

Divorce, remarriage, a spouse’s death, or a grandchildren’s birth may require you to adjust your estate plan. That’s why reviewing and updating your estate plan regularly is important.

At Allied Integrated Wealth, we help our clients define their legacy and transfer their wealth to their heirs, charities, or other beneficiaries.  It’s part of our comprehensive financial planning services.

Let us help you create a comprehensive, customized financial plan.