An estate plan is a great way to protect your legacy and loved ones long after you are gone -- but if this process is so important, why do so many people brush it aside? It is not uncommon to wait until well into old age to begin thinking about an estate plan. Unfortunately this strategy involves a lot of risk, and often goes unhandled. This can put loved ones into a difficult position.
There are several life milestones that suggest it’s time to start thinking about estate planning so you can avoid these challenges. Keep reading to learn which signals to pay attention to and identify the right time to put your affairs together:
- When should you create an estate plan?
- Do you need to update an estate plan
- What happens if you don’t create an estate elan?
When Should You Create An Estate Plan?
The recommended time to create an estate plan is when you become a legal adult at age 18; as you can imagine, not many teenagers are thinking about end of life planning. As a consequence, other life milestones have become synonymous with creating an estate plan.
There are several different components of an estate plan, and different life events can cause you to think about each of them. A typical estate plan will include a Last Will and Testament and the creation of a Trust, if necessary. However, there are also processes to help you nominate an official guardian for your children or select a power of attorney for your future medical or financial decisions.
Certain moments in life will trigger the need to start thinking about each of these components. Here are a few of the most common examples that it’s time to start estate planning:
- Getting married: Marriage is an important milestone in many contexts. The moment you begin combining your finances, taxes, or anything else with another person it is crucial to take time to make an estate plan. This will help ensure each of you are legally protected and financially taken care of should anything happen.
- Buying a house: The first time you buy property is an exciting event -- but where will that house go if something were to happen to you? It’s important to begin thinking of a will (or in some cases, a trust) so that your mortgage and other expenses are taken care of. This way the property can stay in your family or be sold according to your wishes.
- Having children: One of the most common examples when talking about estate planning is having a child. It is necessary to nominate an official guardian and follow the appropriate legal processes to ensure your child is always in the hands of a loved one.
- Making an investment: When you begin making larger financial decisions, it can be a good idea to designate how you want those accounts managed in the future.
- After a death in the family: Another common signal to create an estate plan is after experiencing a death in the family. Not only does writing a Will ensure that heirlooms and other valuables stay in the family, but it can also help loved ones navigate the probate process with ease.
Other Life Milestones In Estate Planning
The perfect time to start estate planning does not exist, after all it can take some time to get all of your affairs in order. That being said, here are a few other important life milestones that can trigger the need for an estate plan:
- Starting a retirement account
- Adopting a pet
- Medical concerns
- Managing the estate of a loved one
Do You Need To Update An Estate Plan?
You do need to update an estate plan in order to accurately reflect your financial situation and end of life preferences. Life changes fast, and it’s always a good idea to make sure your affairs are managed accordingly. Further, you can always build upon your estate plan as life goes on. In these cases, it can be beneficial to update your estate plan where you see fit.
Let’s say for example you nominated your sister as the potential guardian for your two children. One day your sister leaves the country for a long-term job opportunity, and is unable to continue the commitment of being a guardian. At that time, you will need to update your estate plan and nominate someone else you trust to take on the responsibility. If not, your sister and other loved ones could face numerous legal challenges if anything were to happen.
How Often Should You Update Your Estate Plan?
It is typically recommended that you update your estate plan every three to five years. The purpose of this guideline is to help people stay on top of their financial and legal affairs. Think about where you were five years ago and where you are now: would anything be left out of your estate plan?
The good news about updating your estate plan is that small updates are relatively easy to enact. After all, you have already done the work of listing all of your assets and end of life wishes. When updating, all you need to do is make adjustments to account for changes.
You can also build on your existing estate plan to better fit your financial needs. After significant financial changes, it is a good idea to meet with a financial advisor and update your will to ensure the necessary adjustments are made.
What Happens If You Don’t Create An Estate Plan?
If you don’t create an estate plan, your loved ones could get stuck in lengthy (and sometimes expensive) court proceedings to get your affairs in order. In these situations, it can take families months to get assets and other valuables returned. In cases where there are children involved, the children could be placed in the custody of whoever is nominated by the court.
Your loved ones would also be responsible for determining your end of life wishes and medical care (if you were unable to do so). They may find themselves responsible for the associated costs if your finances are locked up in probate proceedings. These can be challenging obstacles to overcome during an already emotional time.
Fortunately, with digital estate planning platforms, like Willful, putting together a legal estate plan is easier than ever. If you live in the U.S. and are ready to start thinking of an estate plan, reach out to our partner at Trust and Will to get started. Remember that getting started is often the most intimidating part; and once you have an estate plan you can update as often as needed to accommodate your life changes.
It’s hard to say for sure when you should start thinking about an estate plan. While many lawyers would tell you to start as soon as you turn 18, the reality is that not many individuals do this. Instead, pay attention to the list of milestones above. Let these serve as signals that it’s time to start thinking of your future, and taking care of your loved ones in the process.