Estate Planning For Each Stage of Your Life

People have been in a frenzy lately about the estate tax, and how Congress’ inaction could have negative results. Forbes points out that Congress will likely approve an exemption retroactively. In the mean time, all of the concern about the estate tax is shrouding the problem that affects a larger number of families. 2.5 million people die in America each year, and many Americans do not have the basic will documents. A 2011 Associated Press survey demonstrated this, reporting  that 64% of baby boomers do not have a living will. This is especially disappointing since every person over the age of 18 should have a living will. Forbes goes through appropriate minimum estate planning steps that you should take at each stage of your life.

1. Young and Broke: Most young people think that they do not have any assets to bequeath, so they do not consider wills or estate planning. This is a mistake when you consider that accidents are the leading cause of death for young adults. Taking this into account, all 18-year olds should have a health care proxy to give an individual the power to make medical decisions, and a living will, to express how he would like an end-of-life decision to be handled. Another recommended document to have is a power of attorney to give someone the power to handle finances.

2. Single and Employed: Similar to those in the young and broke category, young workers may not feel they have much to pass on. It is still important to have all of the documents listed above. Additionally, designating beneficiaries for your 401k becomes important in this stage. And even though you may not think you have much to pass on, drawing up a basic will is still a good idea.

3. In a Relationship: Since relationships do not provide the same inherent protections as marriage does, recording your wishes in a will is necessary to get around the state’s default laws. It is also important to pay close attention to how things are titled. For example, if you are purchasing a house with your partner, it makes a difference whether you own it as tenants in common or joint tenants with a right of survivorship. Choosing between these two options requires an examination of your state’s inheritance and/or estate taxes. It is best to consult a lawyer on these matters.

4. Just Married: The inherent protections of a marriage often lulls married couples into postponing estate planning, but that could have negative results. Your state’s default laws may not match your wishes, so it is best to have a will.

5. On the Parent Track: The first thing you should do is name a guardian for your child in the event something happens to you. Second you should get life insurance to cover your child’s future expenses. Third, a testamentary trust is a good idea so you can appoint someone else to hold onto or control the money you leave behind to a child if that child is not old enough to responsibly handle the money when you die. Finally, it is important to consider that not all states give all of your assets to your surviving spouse. In fact, that is the law in only 16 states. Be sure that you’re aware of your state’s laws, and plan accordingly.  If you fall into this category, a lawyer can be helpful in making these numerous plans.

6. Heading for a Divorce: The most important estate planning move you should make here is to be sure to revise your will as soon as you decide to separate from your spouse.

7. Planning to Remarry: In this situation, it is important to discuss estate plans with your future spouse before you get married. Consider what should be done if one of you has children from a previous relationship.

8. Newly Widowed: This group of people may be able to take advantage of the portability election. This is also another stage of life where it is important to revise your will and your living trust.

See Deborah Jacobs, The Real Estate-Planning Crisis Isn’t About Taxes, Forbes, June 26, 2012.