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People frequently ask me why they need their estate plan reviewed every year. The answer is simple. Things change on a daily basis sometimes, and certainly every year. New children or grandchildren are born. Assets increase or decrease. Different types of assets come into the picture. Goals and desires change. Laws change. As such, touching base with your estate planning and elder law attorney on an annual basis is just a good idea to make sure your plan and documents align with your goals. But more importantly, every life stage has a different strategy in estate planning and asset preservation. As such, every year you need to visit with your estate planner to discuss what life stage of the plan you are in, what needs to happen next, and how best to preserve the assets you've worked so hard for. That's what this blog post is about.
Young Single Adults (18-30)
In this life stage, you will have no children (although you may be married). The goal of an estate plan in this phase is simple: control where the assets go in the unlikely event of your death without probate. You'll want something set up to ensure your spouse, family, or others get assets without having to go through an "intestate" probate proceeding. A simple will with well established beneficiary designations can usually take care of this. However, you may also need a trust in place if you have assets over $100,000 or assets spread across multiple states. In this phase, we'll also discuss other end of life decisions and draft documents such as powers of attorney and living wills. We'll also make sure that your investment time goals align with your estate plan.
Young Parents (22-40)
In this life stage, you will have children that you want to provide for in the event of your death. Parents must have a trust. It can be a testamentary trust that is set up in your will, but most of the time I encourage a living trust (also known as a revocable trust) so that as your assets increase over time you have a pre-established means of avoiding probate. In a trust, you can control how the assets are spent on your children's behalf while they are still young. You can provide for their education, health, maintenance, and welfare. You can control how quickly they have discretionary access to the assets so that they don't inherit a decent amount of money as an 18 year old and blow it in a few weeks or months. If you start estate planning in this stage, we'll take care of your powers of attorney and living wills, and we'll still be making sure that your investment goals align with your estate plan and vice versa.
Middle Ages (40-55)
In this life stage, we start paying very close attention to the potential for estate tax liability. The first reason we do this is because by this point in life many people have begun accumulating substantial assets. Secondly, even if you are no where near the estate tax exclusion limits right now, the law changes every time there is a shift of power in Washington (yet another good reason to have an annual touch base with your estate planner). Ultimately, the goal here is to structure assets between several types of trusts, establish charitable giving and other gifting strategies, and take other steps to minimize your federal estate and gift tax liability by maximizing deductions, exclusions, and credits in estate and gift tax law. This is a complicated and ever-changing area of law that requires routine visits and updates with your estate planner. Of course, if this is where you start estate planning we'll most definitely take care of powers of attorney and living wills. At this point, we'll work with your financial advisor to make sure that you have enough income in retirement, and probably get a head start on the next phase of estate planning: asset preservation.
Young Seniors and Beyond (55+)
As you get nearer to the end of life, detailed planning becomes even more important. Life spans are getting increasingly longer, and as such the need for skilled nursing care later in life is becoming more and more necessary. However, skilled nursing care is extraordinarily expensive. One way to pay for it is Long Term Care Insurance. However, many will need to engage in certain asset protection strategies to prevent Medicaid from requiring you to exhaust almost your entire estate before paying for long term skilled nursing care. You've spent a lifetime paying Medicaid taxes; why spend your entire estate just so Medicaid will kick in? This planning phase should start before retirement so that your retirement income can be taken into account first. We'll continue working with investment advisors to that end. Through retirement, a very close eye must be kept on estate size (have I mentioned the need to have routine checkins with your estate planner?). Once we know you'll have the income you need for retirement, we'll start putting assets in specialized irrevocable trusts through which you can still take some income if needed. We'll start establishing giving patterns and routines to further clear your estate. Keep in mind that Medicaid will look back five years to determine what gifts must be recovered before it will pay for your care. In short, you must be well ahead of the game here. Of course, we'll stay on top of any powers of attorney, living wills, and other documents you need as well.
These categories are a gross estimation. There are many people in these stages of life that will need much more complicated plans. It really must be custom to the individual. If I can be of any assistance, please let me know. You can email me at firstname.lastname@example.org or call me at (866)597-5621.