“Congrats – you just finished high school!” is not often followed by, “Now before you head off to college, make sure you have your estate plan documents made official.” While we at TFC believe that everyone should have an estate plan, we are cognizant that it is not a priority for some individuals and it often depends on their season of life.
When should I make an estate plan? A key time to really think about getting the process started is when you have become established in your career and have gathered some assets. Another time and this is often more common, is when you get married and start thinking about having children. That is when it becomes a very important issue.
Don’t put it off: Most states allow for the creation of a will at the age of 18. Realistically, very few individuals in their late teens and 20s have a will. Often it is not until a couple gets married and has a child does the topic of a will and an overall estate plan get discussed. And many individuals put it off much beyond then. It is estimated that 60% of American adults do not have a will in place, let alone a broader & more complex estate plan. Woof.
It is not just about a will: Many people think of a will and what will happen upon death as the big decision, but it is also important to have a plan if and when a serious illness or accident occurs leaving you incapable of making health-related decisions. If you have a child, naming a guardian in the very unfortunate event something happens to you and your spouse is critical.
Put thought into other documents & scenarios: Making the will is often the easy part of the process, and it can be done relatively quickly. The more tricky and sensitive subjects include the scenario planning process of who makes health-related decisions in the event one becomes incapacitated. Naming a guardian for your children is also very difficult for most people to discuss. Framing the estate planning process with an emphasis on these two key areas helps to make it a priority. AARP reports that people are more proactive about naming their health care power of attorney versus assigning assets upon death. Only 22% of millennials, those born between the early 1980s and mid-1990s, have a POA in place.
Many assets bypass the will: did you know many individuals may not even need a will? Assets such as individual retirement accounts (IRAs), 401(k)s, life insurance, even checking accounts bypass the will so long as a beneficiary or Transfer on Death individual is named. The beneficiary form is higher in the pecking order than the will. What does that mean? If a single individual passes away with no house, no car, limited physical assets, and only financial accounts with named beneficiaries, they may not need an estate plan. But is also risky and applies to few individuals. Most of us should have a will and an estate plan in place. And it is imperative that those with children have an estate plan.
Here’s the point:
- TFC believes in starting the estate planning process when you have gathered significant assets or (often more common) when you are considering having or adopting a child
- A will can actually be the easy part of the process; health care proxies, naming a power of attorney, assigning the guardian of your children can be the more complex and sensitive topics
- TFC wants to help you through this process as soon as possible to reduce your risk and to put your mind at ease
Action Items:
- Thinking about having a child? Do you already have children? It is time to have an estate planning discussion.
- TFC wants to guide you through the process and take care of the legal paperwork for you based upon your wishes and priorities
- We will periodically review the plan based upon changes in your life
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This was Blog Post #3 in our Estate Planning Series. Make sure you circle back to check out all the posts in this series if you have not yet had the change to read them!
Estate Planning Series Post #1: What is Estate Planning?
Estate Planning Series Post #2: Establishing an Estate Plan: What is the process?
Featured Image: Photo by Joseph Chan on Unsplash