When should I think about my estate plan? As a new attorney, I sometimes even find myself asking this question. When many people think about estate plans, they think of appointing guardians for their kids and what treasured personal items they want their family members to have. While these are significant parts of estate planning for many people, there are lots of other important estate planning questions we should consider throughout our lives.
One question we should all start considering as young adults and continue to reflect on as we age is "Who do I want to help care for me if something happens to my health?" Financial power of attorney, healthcare power of attorney, and HIPAA releases are all documents we should consider having throughout our lives. As much as we don't like to think about bad things happening to us, it's important to consider what will happen if we can't make decisions for ourselves. Together, these documents help ensure we're cared for if we're unable to do so for a period of time.
As we start to settle into adulthood, many people start to see their family grow and begin to ask the question: "Who do we want to take care of our children if we're not there?" While this question is a great starting point, there are several other life events linked to the growth of your family that play an important role in your estate plan. For instance, as your kids grow older, is there a college or trade school you want to help them attend? As grandkids start to come into our lives, often people want to leave a part of their estate to their grandkids, as well.
While many family-based estate planning questions come from exciting events such as the birth of a child, others come during difficult times. For those going through a divorce, it's an important time to re-visit your estate plan. Depending on how your previous estate plan was drafted, it may still leave some of your assets to your ex-spouse or include them as your executor or power of attorney. Losing a loved one may also spur a change in your estate plan. While it's not an easy question to ask, it's important to consider what you want to happen to the gift you originally left to a now deceased family member. Depending on the situation, you may want to leave it to your loved one's kids, their spouse, or a new individual entirely. For others, the loss of a loved one inspires them to use part of their estate plan to carry on their loved one's legacy through a donation to charity or even through the creation of a charitable foundation. Depending on how your prior plan was drafted, you may need to make some updates to accomplish your new goal.
As life goes on, some find themselves moving from one state to another, which, while exciting, may require some updates to your estate plan. For example, the guardian you named for your child may now be on the other side of the country. You should also make similar considerations for your executor and/or trustee; if you've fallen out of touch with the friend you selected from your old state, they may no longer be right person to help distribute your belongings. If moving from a state with inheritance or estate taxes to one without any, your previous estate plan may need an update because the taxes it was structured to avoid no longer exist. Additionally, some states treat the transfer of property after death very differently, so your possessions may no longer transfer the way they did in your old state.
What if you decide to start your own business? It's important to ask yourself questions like, what do I want to happen to my business if I'm not there? Depending on your situation, gifting your business to your kids may be the answer. For those without kids or whose kids may not be interested in taking over the business, the answer might be selling the business to some of your employees.
As you move towards retirement, other estate plan considerations tend to become more prevalent. While most people fresh out of college don't need to worry about the effect estate taxes may have on them, for those wrapping up a lifetime of work, there's a greater chance estate taxes could cut into the gifts you were planning on leaving to your loved ones. While, as the saying goes, taxes are certain, there are often ways you can soften the blow of estate taxes to help your giving go the extra mile. This could include establishing an irrevocable trust to lower your taxable estate, structuring a gift-sale to your children, or making some strategic gifts to charity to help ensure your children receive the most tax advantageous assets in your estate.
Questions about this or estate planning in general? We can help. Give us a call at 765.423.7900 or send us an email at firstname.lastname@example.org.