It is never too early to start looking into the estate planning process. Anyone with a family, a home, and other assets should take steps to protect their family and plan for their passing. Although no one wants to think about death, it is an inevitable part of life.
One of the most loving things a parent or grandparent can do for their family is keep their affairs in order. A secure estate plan is the key to preventing stress, confusion, and family disputes when a loved one dies.
This discussion explains why now is the best time to plan for the future, how to get started, and what to include in an estate plan at every age to protect one’s assets and heirs.
What to Consider in Your 20s
Readers may be surprised to know they can start estate planning as early as their 20s. Once a person turns 18, their parents or guardians no longer have the authority to make decisions about their finances or health care. But life is unpredictable. At this stage, it is wise to meet with a family lawyer to establish a power of attorney and a health care directive.
Power of attorney. A power of attorney (POA) names someone to make critical decisions for someone if they are unable for whatever reason. Although there are a few different types of POA, the most common are a financial POA and a health care POA.
The person designated POA should be someone trustworthy and willing to take on that responsibility if necessary. It should be noted that a POA is effective only while the person is alive. Should they die, any POA in place is no longer binding.
Health care directive. A health care directive lets family members and doctors and other medical staff know a person’s wishes if they become incapacitated and unable to communicate. The directive can address organ donation, resuscitation, and other personal medical choices.
What to Consider in Your 30s
By the 30s, many people have established a career, bought a home, and have children. Now is a good time to meet with a family law lawyer and discuss the pros and cons of wills and trusts.
Will. Most people are familiar with the concept of a will. It is a written document that clarifies a deceased person’s wishes, including everything from leaving cash and valuables to friends, family, or charity, to naming a guardian for a minor child. Wills are subject to a legal process called probate and are active only on the decedent’s passing.
Trust. Unlike a will, which is inactive until the creator dies, a trust is valid the day it is created. With a will, the grantor can document the distribution of assets prior to their death. A trust establishes a fiduciary relationship between the grantor and the person they give the authority to manage their assets.
There are several types of trusts available. They are either revocable, or changeable, while the trustor is alive, or irrevocable once they become active. Many people prefer trusts because they allow the trustor to pass property on to beneficiaries immediately, prior to one’s passing and without the need for probate court.
Life insurance. Life insurance makes sense at this age, especially if one has a spouse and/or children. Life insurance is essentially a contract between the insured person and the insurance company. The insured makes regular premier payments in exchange for a lump sum, or death benefit, that is paid out to their beneficiaries after their passing.
The death benefit helps family members pay a mortgage, household bills, college tuition, and other expenses. There are several kinds of life insurance. The right policy and coverage depend on the individual person’s financial needs and goals for their family.
What to Consider in Your 40s
By the time a person is in their 40s, it is a good idea to think more about the distribution of assets. A person in their 40s has probably acquired more income, investments, and property. This is prime time to review will, trust, and beneficiary designations to make sure they are accurate.
It also makes sense to start thinking about medical decisions and make any changes to a health care directive and POA. Long-term care is another issue that needs a plan. Although 40 is still considered young, it is better to be prepared and have a plan in place than to get sick and leave loved ones wondering if they are making the right decisions.
Long-term care plan. Long-term care, whether that is a nursing home, assisted-living facility, or in-home health care, is a costly undertaking. Make an appointment with a financial planner and a family law attorney to discuss the best ways to plan and pay for care during the golden years.
Estate Planning in Your 50s, 60s, and Beyond
For anyone starting the estate-planning process later in life, do not panic. It is not uncommon. According to AARP, 42 percent of baby boomers have not completed all the important estate-planning documents. It cannot be stressed enough that now is always the best time to plan for the future.
Estate Planning: Where to Start
Regardless of one’s age and stage of life, there are steps they can take to initiate the estate-planning process.
Inventory all assets. The first step in the estate-planning process is to account for one’s possessions, including:
- Land and property
- Cars, boats, motorcycles, and other vehicles
- Coins, jewelry, art, and other collectibles
- Bank accounts
- Retirement funds
- Stocks, bonds, and mutual funds
- Business interests
- Life insurance policies
Assess the family’s needs. Once they have an idea of what their estate is worth, it is time to make choices to protect the family and their assets.
- Review life insurance: Ensure there is enough life insurance for the family needs, including household bills, education, and other expenses.
- Name a guardian: If children are involved, it is vital for a parent to name a guardian in case of their death. Some parents even list a back-up guardian. Doing so offers peace of mind and prevents ugly court battles that cause mental and emotional pain for the children.
Set up the directives. The next step is to set up all of the important directives that ensure one’s wishes and goals are met. That may include one or more of the following:
- Financial power of attorney
- Health care power of attorney
- Medical care directive
Name the beneficiaries. As life changes and people have children, marry, and have grandchildren, it is smart to review the beneficiaries on these estate planning documents often. Start with beneficiaries on insurance and retirement accounts, as these will often take precedence over a will and other documents.
Revisit beneficiaries after any major life change such as the birth of a child or a divorce. Inadvertently forgetting to make these updates can leave valuable assets in the wrong hands.
Make sure to name back-up or contingent beneficiaries, and do not leave any beneficiary sections blank on any documents. Without this information, assets will be divided according to state law.
Review the estate plan often. As life changes, so does one’s estate plan. Make an appointment with a family law lawyer and a financial planner at least once a year, or after any major legal, financial, or family change.
Life changes that warrant an estate plan review include the following:
- Birth or death in the family
- Newly acquired wealth
- Major job change
- New marriage or divorce
- Purchase of a property or land
- Major illness in the family
The goal is to ensure life insurance, health care directives, trusts, and wills are accurate, complete, and reflect a person’s financial and legal needs.
Although estate planning is not something to delay, it is also never too late to get started. With the guidance of a trusted family law lawyer, anyone can build a solid, customized estate plan that protects everything they have worked for and provides for those they love in the years to come.
New Jersey Family Law Lawyers at Lyons & Associates, P.C. are Ready to Discuss Your Estate Planning Needs
If you are ready to start estate planning, have questions about what is right for your family, or want to make changes on your estate documents, reach out to the experienced New Jersey family law lawyers at Lyons & Associates, P.C. We take time and care to assess your financial needs and create a comprehensive estate plan that honors your wishes, preserves your assets, and protects your family. To learn more about our estate planning services or to schedule a free case review, call us at 908-575-9777 or contact us online. Located in Somerville and Morristown, New Jersey, we proudly serve clients in Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.