When do you need estate planning? At every stage of adult life!
Estate planning isn’t just something older people with great wealth do. Everyone needs an estate plan — the newly legal adult about to head off to college, the single mom of two struggling to pay rent, the middle-aged married couple funding three college educations, the retiree in the process of downsizing, the 80-year-old without close familial ties, and everyone in between.
At Matlin Law Group, we guide Chicago and Northbrook, Ilinois, residents of every age through the estate planning process. No matter what stage of life you’re in, you can and should take steps to prepare for your death or incapacitation — regardless of how distant these events may seem. In this blog post, we’ll explain what estate planning is and outline how you can start preparing for the inevitable today.
What Is Estate Planning?
Estate planning is the legal process of outlining what you want to happen if you become incapacitated or pass away. Creating an estate plan is the only way to ensure that your wishes will be granted when you’re no longer able to speak for yourself.
Although the contents of your estate plan will vary depending on your specific needs and circumstances, your plan should at least contain the following five documents:
- Will: Divides your assets and other possessions up among people of your choosing. Outlines how to care for your minor or disabled children and remains.
- HIPAA Authorization: Gives others the ability to access your healthcare information.
- Power of Attorney for Health Care: Appoints someone to make medical decisions on your behalf if you become incapacitated.
- Power of Attorney for Property (Finances): Designates who will manage your financial affairs, such as bill paying, if you become incapacitated.
- Revocable Living Trust: Determines how your assets will be handled after you pass away. Names beneficiaries and the provisions they will be given. Can be changed or canceled at any time before you die Assets owned by your RLT avoid probate court upon your death.
How to Plan Your Estate at Every Stage of Life
The earlier you start estate planning, the better.
However, 78 percent of millennials, 64 percent of Gen Xers and 40 percent of Baby Boomers don’t have a will. But the longer you go without an estate plan, the more complex the process becomes for you and your family.
At Matlin Law Group, we often recommend creating your estate plan in steps, as your life and circumstances evolve. This way, you and your family are ready if tragedy strikes.
Let’s take a look at the ideal estate planning timeline.
18-21: Create Power of Attorney for Healthcare and HIPAA Authorization
When you become a legal adult, you become responsible for your healthcare decisions. If you were to suddenly become incapacitated and needed medical attention, without the proper legal documents, no one would be able to make decisions on your behalf or access vital medical information.
Once you become a legal adult, you should designate a responsible family member to make medical decisions for you — known as a power of attorney for healthcare.
In addition to this document, you should grant family members access to your medical history with a HIPAA authorization. This way, if they need to make decisions on your behalf in a medical emergency, your doctors will be able to give them all of the details of your state.
20s: Add Power of Attorney for Property and Simple Will
As you journey further into adulthood and begin to work full time, you gain assets and financial responsibility. Even though you don’t have any dependents, there are still important decisions to be made.
For example, if you were to enter a coma as a single 20-something, you’d want to designate people to:
- File your taxes for you
- Pay your bills
- Take care of your pets
- Make other financial decisions for you
You might assume that someone would “just step up” if tragedy strikes, but this might not be the case. Don’t leave important decisions to chance.
Create a power of attorney for property to ensure that someone can assume financial responsibility for your assets. You should also consider creating a will to outline how to divide up your assets and take care of your remains if you pass away.
30s: Update Your Will and Grant Guardianship if Necessary
After a decade as a legal adult, your financial and legal responsibilities grow even more. You may own property. You might be married or in a relationship and have children for whom you are legally responsible.
In your 30s, you should update your will to ensure that your family shares your assets as desired. If you have children, you should also name a legal guardian to take care of them if you and your spouse are unable. This person will be responsible for all aspects of your children’s lives including where and how they will live.
40s: Create a Trust
In your 40s, your assets and life circumstances continue to grow and change. You may have growing children and life insurance, a mortgage and college to pay for. Or maybe you’ve gone through a divorce and become part of a blended family.
During this time, you should create a trust to ensure that if you die, your insurance money and other assets will be used to benefit your biological or non-biological children for as long as possible and not dissipated when they become legal adults.
50s: Grant Adult Children Fiduciary Responsibility
In your 50s, your priorities change. Your children are adults, your parents are aging and retirement begins to enter your mind, though it’s 10-20 years away.
At this point in your life, you probably have more assets than ever before. You may have paid off your mortgage. As your children begin their working adult lives, you no longer bear as much financial burden as you once did.
At this stage in life, you may want to update your estate plan to name your responsible adult children as fiduciaries instead of your aging parents or siblings.
60s: Update Your Trust to Accommodate Aging Parents and Descendants
When you’re in your 60s, retirement is closer than ever. You’re laser-focused on saving your assets and avoiding financial risk. You also have elderly parents nearing their end of life to care and make decisions for. If you were to become incapacitated tomorrow, you would need to make sure they were taken care of.
During this time, you should consider writing your parents into your trust so that if something were to happen to you suddenly, they would have financial help.
70s: Amend Your Estate Plan to Account for Financial Changes in Retirement
Although the majority of Americans over the age of 65 are retired, 20 percent still work full time — and this number is multiplying. Regardless of how long you work, your 70s are an excellent time to update your estate plan to accommodate personal and financial changes that have occurred since your last update.
If your estate is large, you may want to deplete your assets by gifting them to your family for tax reasons.
80s: Clarify Your Wishes and Finalize Your Legacy
In your 80s, the decisions you once made as a middle-aged adult may no longer seem appealing. At this time, you may want to clarify how you’d like to spend your remaining years in the event of incapacitation.
Some questions to consider at this age include:
- How do you feel about nursing homes versus in-home health?
- What does quality of life look like to you?
- How would you like caregivers to treat you?
You should not only communicate your wishes verbally but ensure that they are outlined clearly in your estate plan documents.
As you move through the stages of estate planning, remember that preparing now will ensure your assets are treated as you wish and save your loved ones from difficult decisions in the future.
Need help getting started with your estate planning process? Matlin Law Group can help! Contact us to learn more or request a free consultation.Like this article and want to receive more like this? You can! Sign Up for Our Newsletter