Estate Planning at Different Stages of Life

By Kevin Reardon CFP®

Different Life Stages Require Different Types of Estate Planning

When I started my career, there was an overriding belief that Estate Planning was just for ‘rich people.’ As the years progressed, the industry recognized that ‘old people’ are prime candidates for planning too.  I could write a satirically funny article on how the world defines ‘rich people’ AND ‘old people,’ but let’s save that for another day.  The reality is virtually everyone over the age of 18 needs some form of estate planning documents.  Let’s review what type of estate planning we should be doing at various stages of life.

Post Teen Years

At age 18 we are liberated from our parents’ control, at least in the sense that parents no longer have unfettered access to their adult children’s (another air quotes opportunity) medical and financial records.  Although most of these young adults can do without a will, all of them should have a Durable (Financial) Power of Attorney (DPOA) as well as a Healthcare Power of Attorney (HPOA).  These are necessary when young Tommy or Suzy go to college and need Mom and Dad to facilitate money movements for them at the bank, file a tax return, purchase a car on their behalf, etc.  If they end up in the hospital with an illness or due to an accident, the HPOA helps facilitate decision making with healthcare providers.

Married Life

As young adults get married, it’s a great opportunity to update these documents.  Most often, you’ll name your new spouse as your DPOA and HPOA, and open joint bank accounts to facilitate household cash flow.  Having a will at this stage of life is recommended but not totally necessary until children come along.  When children do arrive, you’ll want to name a guardian to take over parental duties in the event both spouses pass away.  Although 50- and 60-year-old parents are frequently listed as primary guardians, be sure to list secondary options for future flexibility.  If you name a 60-year-old parent today as guardian and pass away 15 years later without any updates, your children will be running circles around their 75-year-old grandparents.

Special Needs Child or Grandchild

In the event you have a special needs child or grandchild, there are estate planning techniques to consider that will maximize the federal assistance available to this child.  Frequently these considerations will be addressed with an updated will or trust.

Older with Assets

You persevered in raising your family and all has gone well.  You have developed a nice nest egg and now is a good time to consider the benefits of a Revocable Trust, which include:

  • Avoiding the costly and public component of probate.
  • Easier management and transition of assets upon your disability or death.
  • The ability to leave your assets in trust for your children or grandchildren, providing protection from their creditors and securing your assets.

It’s also a good idea to review and update POA documents every 10 years in light of changing circumstances–sooner if you experience changes within the family, such as marriage, divorce, or death of a close family member.

Divorced

Listing a former spouse as the inheritor of your assets and person responsible for your health and financial decisions is usually not ideal, so updates are always recommended when divorcing.  Be sure to update beneficiary designations to life insurance and retirement accounts as well so your former spouse is not included.  This assumes those are your intentions and there are no constraints from your divorce decree.

Widowed

Upon losing a spouse, you’ll want to review your documents to see if any changes are warranted.  Even if you have listed your deceased spouse as your POA and primary beneficiary in your will, these documents typically include secondary agents who become primary agents when the first option is gone so updates aren’t always needed.

Co-Habitation

The demographic group who frequently overlook estate planning issues relates to those who live together but are not married.  Co-habitation isn’t just for the young, as a large percentage of older adults who have previously been divorced or widowed are now living together without marriage.  Do you want your child who lives out of state making medical decisions for you or your partner of the last 15 years?  If the partner who owns the house dies, the surviving partner has no right to stay in the house without legal documentation.  Visiting with an estate attorney is important to clarify your intentions with the many issues that can pop-up with co-habitation.

Inheritance

If you have received a large inheritance and it’s not meant to be marital asset upon your demise, clarifying your intentions through your estate plan and with your financial advisor is imperative to ensure your objectives are met.

Changes in Tax Laws

Major legislative changes can also prompt changes to your estate plan.  Keep an eye out for tax and estate laws coming out of Washington and identify if changes to your plan are needed.

Conclusion

Visiting an attorney once in your life to draft a ‘forever’ estate plan is not optimal and will not cover many of the scenarios described above.  As major life events occur, reach out to your financial advisor and estate attorney to identify if any updates to your estate plan are warranted.  Keep in mind that certain updates can be handled quickly (and affordably) with a simple amendment to an existing document.