Estate planning is an important topic, but it's hard to know when the right time to get started is. Here's what you need to know about when you should start estate planning.
Contrary to popular belief, estate planning is important regardless of the amount of money you have.
Not only does your estate plan dictate the distribution of your assets after your death, it also dictates several other important things, such as:
Even if you don’t have many assets, dying without a plan in place will launch a long and expensive probate process where the government will determine who inherits your belongings. Having a basic will in place can alleviate stress for your family members down the road and give them peace of mind that they’re respecting your wishes.
To understand when to begin estate planning, it’s important first to understand the different aspects of an estate plan.
A basic estate plan includes four important documents: Will, living will, power of attorney, and a trust (this is optional). Each document serves the following functions:
So, when should you start estate planning? Many experts advise creating an estate plan once you become a legal adult, and updating your plan every few years (or whenever you encounter major life changes).
Here is a general guide to estate planning by age:
Let’s be honest – no one wants to think about death during their 20s and 30s, but you should plan for the unexpected. It’s good to have your affairs in order in the event something does happen, even if this seems unlikely. There’s no need to spend a ton of money on estate planning during this period since your estate plan will likely be quite simple. You can update this plan as your affairs grow more complex over time.
Consider preparing the following documents as part of your estate plan during this time (these documents are essential regardless of your wealth or assets):
As you enter your 40s, the same documents are equally important. But now, your affairs may be more complex, and your wishes may have changed. For example, you may want to change the legal guardian for your children or wish to revise your power of attorney. Your 40s is a good time to update these documents.
Additionally, as you accumulate more assets, you may also want to consider establishing a trust. A trust can allow you to have more control over the distribution of your assets. For example, if you want your children to put their inheritance toward education expenses, or if you want to control when they receive their funds, a trust can allow you to add these types of conditions. Setting up a trust will also help you avoid probate.
If you begin estate planning in your 20s, you won’t have much to worry about by the time you turn 50 or 60. That said, it would be wise to revisit some of your healthcare-related estate planning documents with your current health conditions and age in mind.
It’s a good idea to specifically take another look at your living will and powers of attorney you may already have in place to ensure they still adequately reflect your wishes.
And if you didn’t begin estate planning in your 20s – it’s never too late. At this point in your life, it’s more important than ever to get the documents mentioned above in order if you haven’t already.
Experts recommend updating your estate plan every 3-5 years, or whenever you experience a major life change. The following life events which we'll discuss in greater detail below are usually cause for updating your estate plan:
There is no single correct answer to when you should start estate planning. Whether based on your age or certain life events, there are a number of different occasions which might prompt someone to begin the process.
That said, it’s best to expect the unexpected and ensure you have your estate plan in place sooner rather than later. An estate planning attorney can provide more guidance on what type of estate planning options best suit your needs.