When to Start your Estate Planning (Part II)

In our previous article we began a discussion on good times to begin an estate plan. (Click here for Part 1 of this article) In that article we talked about the value of estate planning while in a long term relationship or after getting married. In this article we will talk about the value of estate planning during other significant occurrences in life, positive, negative or otherwise. It’s important to remember that you do not need to wait for any life milestone to begin your estate plan. It is valuable to you to create your estate plan today. These milestones are just good markers to remind you to look to the future, evaluate your goals and plan to protect yourself and your family.

Birth of a Child

The most common time for clients to begin their estate plan is after the birth of a child. The main reason that people get an estate plan after the birth or a child is to appoint a guardian to care for the child should both parents die. The way a person appoints a guardian is usually through a will. If you don’t have a will that appoints a guardian, it will be up to a court to make this designation. The court will make their decision based on the best interests of the child. Remember, the court does not know your family as well as you do, so they may not appoint the same person that you would choose. Depending on your financial situation and goals, there are other tools and techniques available that would help you accomplish your goals. You may want to create a vehicle to provide assets for your child’s care if something happens to you and you are unable to care for them. You may also want to transfer assets to your child, but still have control over how your child can use those assets. There are estate planning tools available that will allow you to accomplish these goals, as well as minimize taxes and transfer assets more efficiently.

Major Purchase

For many of us, the purchase of a home is our most significant financial transaction. How you structure a large transaction can have a major effect on how the law will treat this asset. This could lead to major tax consequences, change the way the asset is transferred in probate, affect your access to government benefits, or determine if creditors have access to the property. If you use the services of an attorney before making your transaction, they can help guide how you title this property and what techniques to use to accomplish your goals. Similarly, determining when and how to transfer your assets can affect your estate and income taxes. These assets will most likely be a major part of your estate; planning ahead can save you and your future heirs a significant amount of money, ensure that you have assets to government funds and protect against divorce and creditors.

Starting a Dangerous Job

If you start a dangerous job your chances of becoming incapacitated or dying increases. This increase raises the need to plan ahead and protect yourself and your family. Even a basic estate plan will contain a will, living will, financial power of attorney, health care proxy and financial power of attorney. These documents will allow you to appoint people to make medical and financial decisions for you when you can’t make those decisions for yourself. These documents allow you to ensure that your agent will enforce your specific beliefs and desires about end of life care, and will lessen conflict amongst your loved ones about who gets to make decisions for you. Additionally, by planning ahead, you avoid forcing your loved ones from going through a costly and time consuming guardianship proceeding in order to help handle your affairs while you are incapacitated. A new job also means a new financial situation for you, including changes in pensions and retirement accounts. Estate planning can allow you to determine how these assets are treated and transferred in the future.

Divorce

When you start a divorce proceeding you should get an interim will to protect you incase an accident or illness hit while the case is still pending. If you pass away without a will during a divorce proceeding your soon to be ex-spouse will usually receive all of your assets. Creating an interim will avoids this issue. After a divorce, it is valuable to go through all of your assets to determine who you would want to leave them to, as well as change how your property is titled and who the named beneficiaries of your other accounts are.

Retirement

As we get older and approach retirement age it’s important to start thinking about estate planning. As we age our risk of illness and incapacity grows, making it more important to plan for incapacity and get affairs in order. As discussed above, a basic estate plan will allow you to appoint agents to make decisions on your behalf when you are unable to, all while avoiding expensive and time consuming guardianship proceedings. This is also a good time to think about your financial situation to decide if you need to plan a way to quality for government benefits, minimize estate taxes, efficiently transfer assets to your future heirs, and avoid probate among other potential goals. While some of these goals can be accomplished by simple estate planning documents, some goals will require more complex estate planning tools and techniques.