Do I need an estate plan? Three times in life the answer is yes.

On Behalf of | Jan 14, 2025 | Estate Planning

We often overlook estate planning when discussing life milestones, yet it is an important part of financial planning. Most agree that having an estate plan makes sense, yet only about 30% of Americans actually have one in place.

Why the low number? Some find the idea of organizing these documents overwhelming while others think they do not need these documents. Regardless of the reason for the delay, there are big issues that accompany a failure to get an estate plan. Some of the more notable include:

  • The state decides what happens to your assets.
  • Your loved ones are left without any guidance on what you want.
  • You lose the ability to take advantage of tax savings and make the most of your assets.

You can remove these issues at any stage in life by putting together an estate plan. Three specific times in life when it makes sense to get these documents in order include the following.

#1: Entering adulthood

When young adults turn 18, they gain full legal control over their financial and health decisions. This transition into legal adulthood is the perfect time to start thinking about an estate plan. Reasons that are most relevant at this stage in life include:

  • Health care: A health care directive allows individuals to appoint someone to make medical decisions on their behalf if incapacitated.
  • Finances: A financial power of attorney designates a trusted person to handle financial affairs if necessary.

In many cases, these documents serve as a safety net. They are there if needed in the event of a serious accident or illness that results in the creator’s inability to communicate their wishes with their health care provider or to take care of their financial affairs.

#2: Marriage and family

As individuals start families, the need to protect their loved ones becomes more pressing. Estate planning in this phase should focus on:

  • Wills: Essential for specifying the distribution of assets and getting documentation in order for who will care for minor children if needed.
  • Trusts: Useful for managing how family members receive assets, which can help minimize estate taxes and provide for children’s education and welfare.

This stage often requires revisiting earlier estate plans to update beneficiaries and guardians in light of new family dynamics.

#3: Retirement

Preparation for retirement is a prime time to review or, if not yet in place, get an estate plan. This is a time to ensure that all estate planning elements are in place and reflect current wishes and circumstances. Key components to review include:

  • Asset management: Tailoring strategies to preserve assets for future generations while providing for potential long-term care needs.
  • Legacy wishes: Outlining charitable gifts or contributions to organizations that hold personal significance.

Documenting these preferences helps avoid family disputes and better ensures that your legacy is executed as you envision.

It is also important to note that there are certain events that trigger a need to review and update an existing estate plan. Life events like marriage, divorce, the birth or death of family members, as well as shifts in tax laws or personal assets are common examples. Taking the step to put together an estate plan at any age is a powerful tool for managing your future. It is a big step that offers peace of mind that your personal and financial wishes are honored, no matter what life brings.