An Age-By-Age Guide to Planning Your Estate

One of the biggest misconceptions about estate planning is that it is only for the elderly, but the simple fact is a terrible accident could cause incapacitation or death at an early age.  In fact, it’s almost more crucial to complete essential estate planning earlier in life when you are more likely to be of sound mind and body.

Here’s a decade guide to when you should begin different estate planning items:

In Your 20s

The biggest hesitation of estate planning during this decade is that many feel that they haven’t garnered enough assets to merit the time and dedication to creating an estate plan, however an estate plan isn’t just how to handle your assets – it’s also how to handle major decisions.

Those in this age group should complete a healthcare power of attorney, a HIPAA release (medical information), and and an advanced health care directive, giving a designated loved one the ability to make medical and end-of-life decisions for you should you be unable to do so. Next, you should also create a financial power of attorney, giving your parents, close relative, or friend the ability to make financial decisions if you suddenly are unable to. After you turn 18, these decisions are no longer defaulted to your parents.

In Your 30s

Typically, this is the decade where you’ve purchased your first or second home, and may be well into starting a family. This is the age where you can begin to gather your financial information including assets, and even if you feel like you haven’t accumulated a large amount of assets, you still need to start planning your estate.

Wills – While creating a will in your 20s can be very beneficial, in your 30s, or anytime you begin to garner assets, is where it becomes crucial. Start by making a list of potential inheritors and how you would want your inheritors to receive your assets, especially if you have financial dependents. Also, determine who would be an executor of your will – this trusted individual will ensure that your will’s provisions are followed.

If you have a spouse and children, you will want to determine who will care for your children in the incident of you and your spouse passing, as well as who you would want to manage trusts established for the benefit of minor or disabled children.

As your family and your assets grow, the need for an estate plan also grows.

Trusts – Living trusts used by themselves or in conjunction with a will become really beneficial in safeguarding your family in the event you should become incapacitated. A trust is a legal device that states that your assets are transferred into the ownership of a designated trustee, who will manage those assets. You will have to determine a trustee and who will have the right to use the assets (beneficiary).  Learn how trusts and powers of attorney differ.

Regardless if you choose a will or trust, be sure to coordinate and review all beneficiary designations on your financial accounts. Beneficiary designations will control over the will, and if not carefully reviewed can circumvent the planning in wills and trusts.

Life Insurance –  This is the perfect age to begin the process of purchasing a life insurance policy for you and a spouse. Those in good health in this age range can find very affordable insurance rates. Consider purchasing disability insurance as well – this can protect your family in the event that you become disabled and can no longer provide for your family. Look for options available from your employer, however, proceed with caution since most companies provide only up to 60% of your income if you become disabled. You may also want to consider purchasing life insurance and disability insurance that is not employer sponsored to continue this important coverage should you lose your job.

During this decade, begin to consider retirement fund options and start saving. Review any decisions, including investment diversificiation, annually.

Here you can also continue to update any healthcare or financial powers of attorney and advanced health care directives if necessary.

In Your 40s and 50s

In addition to your estate plan from previous decades,  you should also be completing the following items.

Long-term care insurance – Typically, long-term care insurance rates are lower for those below 60 years of age, and considering long-term care costs could range from $3,500 to $20,000 per month, the earlier you enroll in a policy, the better.  As you age, the likelihood of getting rejected for long-term care insurance increases (nearly 25% of applicants from the ages of 60 to 69 are denied).

Retirement planning – In these decades, you are most likely earning more than you did in your 20s and 30s, but may have the added costs of taking care of your parents and covering college costs for your children. If you haven’t already begun saving for retirement at this point, it is absolutely important to begin now. Assess your desired income replacement rate, then visit 401(k) Plans to save as much as your employer will match, and seriously consider supplementing that retirement plan with an individual retirement account (IRA).

Again, continue to update wills, trusts, life insurance policies and beneficiaries, any healthcare or financial powers of attorney, and advanced health care directives if necessary.

In Your 60s and Beyond

Full preparation for your senior years is a result of starting your estate plan early.

The best thing to have done by this age is to have laid out a clear-cut plan on how your loved ones should proceed with your estate. Your 60s and beyond should really be focused on updating and refining any estate planning provisions you’ve have previously set out. You should also put together a list of trusted advisors such as attorney, financial planner, tax professional, and review this with your family in case you become ill, and your children or family need guidance and advice in handling your affairs.

Estate planning shouldn’t wait until your elderly years. The earlier you begin, the less you will have to complete all at once, and the more protected you’re keeping your family. Contact the Law Office of Christina Lesher at (713) 529-5900 for any help with your estate planning – it’s never too early to start.