July 8, 2024 – Wealth Planning Commentary

Estate Planning for Every Decade of Life

Whether you are just beginning your adult life or enjoying the golden years of retirement, it is crucial to keep your estate plan current. While the focus may shift during different stages of life, the key objective remains the same: ensuring that loved ones are cared for after your passing.

Ages 18-20s

When reaching 18, an individual becomes a legal adult, and parents or guardians no longer have the automatic authority to act on their behalf. While most parents remain actively involved in their children’s lives during this period, it is essential to consider the unexpected. Should something happen to your adult child while they are at college or starting their career, a healthcare proxy or healthcare power of attorney (POA) can designate a trusted person to make medical decisions if they are incapacitated. Most young adults do not possess substantial assets and designating beneficiaries on all accounts is a simple and prudent measure. This strategy, also known as the “poor man’s will,” allows transfer-on-death accounts to bypass probate and transfer directly to the beneficiary upon death.

Ages 30s-40s

Marriage is common during these decades, making asset protection a critical consideration. A prenuptial agreement is important for those who accumulate significant assets prior to marriage. Documenting separate property in writing before marriage is essential. Equally important is establishing a financial power of attorney, which grants an individual the authority to act on your behalf regarding finances, property management, and legal matters, with either limited or broad powers. A durable POA remains effective if you become incapacitated, unlike other types of POAs.

Creating a will is a significant step beyond designating beneficiaries on accounts. It is crucial to note that accounts with designated beneficiaries will take precedence over a will. Establishing a will is particularly vital for parents, as it allows them to name a guardian for their children in the event of their untimely death. A revocable trust typically keeps the estate settlement process private, reduces fees, and expedites the settlement process. It is important to remember that the speed of probate can vary by state. A revocable trust also allows for easier estate administration during life.

Ages 50s-60s

The 50s and 60s are dynamic and transformative years. Folks often care for aging parents. This is a good time to initiate a conversation with parents about their estate plan to ensure it exists and is up to date. The conversation does not need to be about inherited assets.

Those in their 50s and 60s may find that their retirement funds are more than sufficient.This is an opportune time to consider wealth transfer and gifting strategies. Remember to create a plan to fund long-term care (LTC) before transferring assets! Planning for LTC may be relying on investment accounts, leveraging real estate, saving and investing in a synthetic annuity, or purchasing a hybrid life/long-term care policy.

Ages 70s and Beyond

The 70s and 80s present an excellent opportunity to solidify your legacy. While it is important to enjoy this stage of life, updating your estate plan as life circumstances change, such as the arrival of new grandchildren, remains essential. Also, agents that are designated in your documents may no longer be willing or able to serve in their roles. Pay particularly close attention to trustees that have moved to another state. Trustee domicile may have a negative impact on the plan. And, of course, if assets are abundant, consider maximizing the annual gift exclusion to optimize your estate planning.

Please do not hesitate to contact your Wealth Manager with any questions regarding estate planning.