• Brenden Leese, CFP®

Estate Planning at Every Stage of Life

Updated: May 26


Key Takeaways

  • It’s important to assess where you are in your life cycle and plan accordingly.

  • Most people find wills, estate plans, and medical directives morbid; but you will want your assets to pass according to your wishes.

  • As a rule of thumb, your estate plan should be revisited every three to five years or when life circumstances change. It’s not a “set it and forget it” exercise.

When new clients start working with us, one of the first things we notice is that their estate plan is out of date—if they have one at all. When you consider that Americans will be transferring nearly $60 trillion in wealth over the next 40 years, that’s an awful lot of money that could be mis-directed, overtaxed or the source of intra-family squabbles.

While the pandemic has been a time of great reflection for many, a recent LegalZoom survey found that only one-third of American adults believe the COVID-19 pandemic has motivated them to create a will or estate plan.

Don’t be one of the procrastinators. You and your family have too much at stake.

Real World Example Recently I met with a couple in their 70s to review their beneficiaries and estate plan. Both were financially savvy, but their estate plan was a tad bit out of date - some of their beneficiaries were no longer alive. It was the second marriage for both spouses and each came into the marriage with substantial assets. However, the husband had a number of children from his previous marriage and the wife had none. Figuring out an equitable way to break up their wealth and pass it on to children, grandchildren and favorite charities created some unique planning dynamics. I could tell from their demeanor that this wasn’t a topic they were enthusiastic to discuss.


If this sounds like you, you’re not alone. Three fourths of American adults (74%) believe estate planning is a confusing topic, according to WealthCounsel research.

When You Don’t Have a Current Will

We also found that many people we work with do not have up to date wills. The risk here is that if you die intestate (i.e. not having a legal will) the courts (probate) will decide where your assets go. Not only does this prolong the process, but the court’s decision about how to divvy up your assets may not align with your wishes.


Not only are wills and estate plans complex for non-attorneys, but many people don’t enjoy planning for their own demise. And of course, good estate attorneys are not cheap. If you are young and your situation is simple, you can get the ball rolling on LegalZoom. Here you will find a suite of forms to establish a basic will, set up your financial and healthcare powers of attorney, medical directives, etc. for a fraction of the cost that an estate attorney would charge.

However, a number of clients have told me that they started via LegalZoom and then got to some complex questions that led to tough conversations that were just too much to think about. So, they put their planning on the back burner and never went back to it. Bottom Line: Legal Zoom is good for getting up to speed on estate planning, but we don’t recommend it for setting up trusts and other complex estate planning strategies.

How often to update your estate plan?

Even if you have not had any life-changing events, you should review your will and estate plan every three to five years, due to general administrative changes. However, when you have life altering events, such as marriage, divorce, birth of children, job loss, inheritance, death of a close family member, etc. you’ll want to update your plan shortly thereafter.

Estate Planning Considerations for Key Stages of Life Now that we’ve covered the basics, you’ll want to consider the different issues and planning items at each major stage of life.

When You Are Young

This is when you want to set up your living will and healthcare proxy (i.e. who makes decisions on your behalf if you’re on life support). The biggest issue for younger adults is having your wishes met if something tragic happens.

When You Get Married, Start a Family Guardianship designation for the kids is the most important topic for parents to discuss at this stage of life. Make sure you have thought very carefully about who you will designate to look after your kids in case something tragic happens to you and your spouse. This is definitely a decision to revisit as your guardian’s life situation changes and relationships change. Life insurance is also something you should strongly consider at this stage of life to protect your family’s income and college savings if something happens to the main breadwinner in the family. The point here is that you will want to make sure ownership and beneficiaries are properly set up. Life insurance will be talked about more in a later post.

When You Start to Accumulate Assets

This is a stage of life when you’ll want to revisit your will. As your assets become substantial, you want to have trustees and successors lined up. With successors, you may want to consider children or close relatives who are younger than you. That way, there’s less risk of a successor pre-deceasing you and rendering your estate plan (and wishes) invalid. Beneficiaries are important and can lead to trusts for your kids. Many affluent people design trusts for their children so they can grow into the responsibility for a large inheritance gradually—rather than inheriting the windfall all at once. One common technique is to stagger the inheritance with equal amounts transferred at say, age 25, age 30 and age 35.

Decumulation Stage of Life (post-work)

This is when you no longer have a paycheck and are starting to draw on your retirement portfolio. Here you’ll review current exemption amounts and make sure your will and estate plan are up to date, in that it matches your desires for passing assets to family and charities. You’ll want to minimize estate taxes to children and/or grandchildren, and maybe set up a charitable remainder trust or other advanced planning vehicle to transfer wealth to favored charities as tax advantageously as possible.

Conclusion

No one enjoys planning for their own demise, but you have too much at stake to keep kicking the can down the road. If you or someone close to you has concerns about your estate and legacy planning please don’t hesitate to reach out. We’re happy to help navigate these difficult conversations, and steer you in the right direction.

 

BRENDEN LEESE is a Paraplanner at Novi Wealth