A person’s estate planning needs change over their lifetime. Think of The Game of Life® board game. Estate planning is a process that must be updated periodically to match your life.
Turn 18. Welcome to adulthood! Your parents can no longer make financial or medical decisions for you but you may want them to so they can help with financial items or if you get sick. ACTIONS:
- Financial Power of Attorney - Allows your parents or other trusted person to address financial issues like bill paying, moving assets around, helping manage money while you are away at college or abroad.
- Health Care Power of Attorney - Allows your parents or other trusted person to make medical decisions for you if you can’t make them for yourself.
- Will - If you have assets, this says who gets them. If you don’t create one in New Jersey your assets go to your parents.
Get That First Real Job. Way to go! The job likely offers benefits like a 401k plan or life insurance. You should also be saving some of that new paycheck. ACTIONS:
- Beneficiary Designation Forms. Consider who should be named as the beneficiary of your 401k or life insurance or any other employee benefit where you get to name a beneficiary.
- Will - Now you are creating assets. Create a Will that says who gets them if you die. Do you want to name your parents or siblings or a life partner or anyone else?
Buy a House. Look at you - a homeowner. Is it in owned joint names? If so, do you intend that it goes to the other owner? ACTIONS:
- Will - If you haven’t created your Will yet you really need to now.
Get Married. Congratulations! So as soon as you got married, your spouse became entitled to some of your assets when you die. Instead of relying on this, consider what you want to happen to your assets and who should make decisions for you. ACTIONS:
- Power of Attorney - Should it be updated to add your spouse?
- Health Care Power - Should it be updated to name your spouse?
- Beneficiary Designations - Should they be updated to name your spouse? Note, your 401k must go to your spouse unless they sign off on another beneficiary.
- Joint Assets - Should your spouse be added as a joint owner of anything? Note if you do this and get divorced joint assets are marital property that will be divided in half. Is that your intention? If the assets were a gift or inheritance, would that be the other person’s intention?
- Will - Does everything go to your spouse or some other division of your spouse and other family members.
Have children. Welcome to parenthood! If you have not yet done a Will yet you must do one now that (1) names a guardian for your child, (2) create trusts for your child to manage any inheritance. ACTIONS:
- Will - Update to incorporate trusts, trustees, and guardians.
- Life Insurance - Consider getting a life insurance policy to replace your income and provide financial security if you pass away.
Get divorced. Sadly, it happens. As soon as you are contemplating divorce you should change your Power of Attorney and Health Care Power to name someone else. You should also change your Will to eliminate your spouse’s right to elect a share of your estate. When the divorce is final review the Will again to make sure that you name the right fiduciaries. ACTIONS:
- Power of Attorney - Update to name a new Attorney in Fact.
- Health Care Power - Update to name a new Health Care Representative.
- Joint Assets - Ask your matrimonial attorney before anyone files for divorce what action you can take with joint accounts.
- Beneficiary Designations - Ask your matrimonial attorney before anyone files for divorce what action you can take to change beneficiary designations. Review again for correct beneficiaries after divorce is final
- Will - Update before the divorce to name new beneficiaries and eliminate your spouse’s right to an elective share. Review again when divorce is finalized to see if any changes are needed based on the new set of assets or to the fiduciaries named.
Start a business. You now work for yourself! This also means that you are responsible to your business partners, customers and employees if you get sick or pass away. You should put agreements in place that addresses what happens to your business if you pass away or get sick. Are you bought out? At what value? Who should make decisions about the business if you can’t? ACTIONS:
- Buy-Sell Agreement - A document governing how your business interests are liquidated if you die or become disabled.
- Life Insurance - Consider purchasing additional insurance either on your partners’ lives to buy back their business interest or on yourself to provide a liquidation value to your family for the value of your business should you pass away.
- Will - Should the Will be changed to reflect who gets the business asset.
Empty nester. The kids are launched! Is now the time to consider naming them as fiduciaries or update your Will to take into account their new independent circumstances? ACTIONS:
- Power of Attorney - Review who is named and consider if the children should be named instead of another relative or friend.
- Health Care Power - Review who is named and consider if the children should be named instead of another relative or friend.
- Will - Have you helped launch any one child more than the others financially? Should there be any equalization? Have you planned to minimize estate taxes? Do asset protection trusts for the children where they are a co or sole trustee make sense? Review who is named as Executor and Trustee and consider if the children should be named instead of another relative or friend.
Retirement. Congratulations - You are almost there or just did it. Now is the time to consider long term care insurance and income tax planning for retirement. Your assets are probably a lot more than the last time you did your estate plan so consider if different fiduciaries should be named and asset protection trusts for the children to protect their inheritances from any future creditors (divorce, business failure, health care costs, creditors). ACTIONS:
- Power of Attorney - Review who is named and consider if the right person is named given your assets, your children’s career and lifestyle, and where they live.
- Health Care Power - Review who is named and consider if the right person is named given your assets, your children’s career and lifestyle, and where they live.
- Will - Is the way you are leaving your assets “fair” to all family members? Should you consider your parents or charity? Is there estate tax minimization planning? Do asset protection trusts for the children where they are a co or sole trustee make sense? Review who is named as Executor and Trustee and if the right person is named given your assets, your children’s career and lifestyle, and where they live.
- Long term Care Insurance. Speak to your financial advisor if this makes sense within your financial plan.
- Residence. Consider the income tax impact of where you want to live during your retirement and possibly changing residency.
70+. The golden years! While you are enjoying the fruits of your labors, you may find that some of your now very adult children want or need financial help, or you may have experienced the loss of a spouse or the devastation of long term care costs for friends and family. ACTIONS:
- Asset Protection Plan and Family Trust. Create an asset protection plan and family trust to minimize the possible effects of long term care costs on your assets.
- Power of Attorney. The chances of this being used are higher now. Is your spouse still the right person? Maybe two people should be named together.
- Health Care Power. If you become ill have discussions with your doctor about your end of life medical desires so that they can help you plan to make this a reality.
- Gifting. Do you want your family to enjoy some of your assets now? Create a gifting plan that meets your goals but does not give rise to unnecessary taxes or prevent you from getting long term care should you become ill.
- Will. The time to be unequal is now. Who exactly do you want to get much. Is there a second marriage and you are trying to balance competing interests? Should assets pass in trust for a spouse? Are you concerned that your daughter is less financially secure than her sister? What about grandchildren? Whatever your goals are the Will should reflect them.
- Joint Accounts. These will pass at death to the joint owner. Is it your intention that your son who helps you pay bills gets the account when you die? Better to name him as a power of attorney on that specific account with the financial institution than to name him as a joint owner.
- Beneficiary Designations. Make sure these match your Will or if you intend to leave assets with beneficiary designations differently than your WIll, make a note of your intentions in your WIll.
