It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns.
Estate planning is a crucial process for everyone, regardless of what assets you have now. You might say, “I don’t have a lot of assets,” or “All I have is debt.” Planning still applies to you. If you want the people close to you to be able to deal with your affairs, debts included, putting together a plan is vital.
Unfortunately, death affects us all and does not consider age. Just this week, a family came to see me because their 23 year old son had passed in an accident. While he had no children, he had been married. It was not a pleasant marriage as the couple only lived together one month. While they had separated, they had not divorced. Because he was “too young” to need a Will, his estate passes pursuant to Texas law. His parents were devastated to lose their son, but to also lose all his possessions and insurance (no named beneficiary), was another blow.
If you have young children, or other dependents, I can not stress enough how important planning is. The less you have, the more important your plan so that it can provide as long as possible and in the best way for those most important to you. You can not afford to make a mistake.
You should sit down with your family and discuss various “what if” situations. This is important for a couple of reasons. One, so that you have communicated your wishes to those around you and, two, so that you have thought about the many contingencies that can occur (i.e., injury, incapacity, illness and death). This would also give you the opportunity to explain why you may have made a larger gift to someone rather than another or equal division. Many may have a second marriage and therefore children from different relationships and of broad age ranges. This and health can affect how you provide for your family. A frank discussion can help avoid hard feelings later.
Everyone should have the basic estate plan components. A life insurance policy, a Will, a designation of agent to control disposition of remains, a durable power of attorney and an advance directive are all important aspects of an estate plan that should be established at the beginning of the planning process.
Life insurance can provide money in the event of an untimely death and loss of income. This may be especially beneficial to young individuals. Perhaps a young couple has not accumulated enough savings or put aside for retirement. Loss of one or both spouses’ income can have devastating effects. Another factor to consider is that the younger you are when you take an insurance policy, the easier it is to pass required physicals and obtain lower rates.
Drafting a Will allows you to state how you would (or would not) want your assets transferred. A Will can designate guardians of young children and financial account trustees. As a general rule of thumb, the more detailed the Will, the better.
I have discussed powers of attorney and advance directives in previous columns, but suffice to say that these instruments are the only legal means by which you can choose who you want (or don’t want) in charge of your money, assets and health care decisions in the event you can not make those decisions. An advance directive allows you to communicate end of life decisions to your health care providers and family so that you eliminate that burden for them.
Finally, your estate plan should never be a "one and done thing." You should review the plan every five to seven years, to adapt to significant life events, tax law changes, the addition of more children or their changing needs. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment.
When drafting these documents, you should seek professionals who are trained and familiar with estate planning and probate. The advice they provide will assist you in making the best and least complicated plan.