Everybody is unique and should create an estate plan that is a reflection of their personal objectives and lifestyle but contemplating the broad classification you fall into can help you establish which type of estate plan and paperwork is best for you.
As stated by a 2022 survey from Caring.com, sixty seven percent of Americans do not have an estate plan, with forty percent of individuals saying they just haven’t found the time to it. While most Americans understand the importance of estate planning, many think they don’t have sufficient assets to pass on or find the process too expensive to see through.
Don’t succumb to this mindset. No matter what phase of life you are in or how many assets you have accumulated, a simple estate plan enables you to plan for you and your family’s needs.
Perhaps you have an illness and wish to establish a healthcare directive that states your medical care preferences should be unable to tell anyone. Perhaps you are un-married but want the person that you live with to inherit your assets should something happen to you.
This post offers some guidelines that can help you decide on the right estate plan for you.
Single Under the Age of Thirty
A lot of 20-somethings most likely haven’t thought much about how they are going to want their property allocated following their passing away or who is going to make their financial medical and decisions in the event they cannot. They believe that estate planning is for older people that have more money and assets, but probably aren’t aware of how many benefits they can get from estate planning at a younger age.
While your average twenty-five-year-old may not own real estate or a brand-new Porsche, they usually have physical possessions like laptops or painting, and digital assets such as social media accounts or digital currency. Without a will prepared, all your property is going to pass through intestacy laws which typically means putting your relatives and loved ones through the drawn out probate process and having no control over how your estate is distributed.
Estate Planning Does Not Only Include a Will
A will isn’t the only estate planning document that a young adult under the age of thirty should think about getting. Other documents, like a living will, healthcare directive, and financial POA provide an opportunity for young people to leave instructions for their loved ones should they ever are incapacitated and cannot communicate their wishes directly.
Whereas it’s not easy to think about, accidents do occur, and even younger adults should have an estate plan prepared to guarantee their medical decisions are made and financial affairs overseen according to what they want should something happen to them.
Young adults creating estate plans have the benefit of smaller, basic estates that they can plan for using a DIY approach. If you are single and under thirty, consider building your simple estate plan today. Online forms are customizable in accordance with your state’s laws and can help guide you through creating your will, POA, living will and healthcare directive.
Un-married But Living with Someone
If you live together with someone but are not married, creating a will is vital to bringing you and your partner peace of mind should one of you pass away. Your partner could end up with nothing if you pass away intestate (lacking a will).
Unless you live in a state that enables domestic partnerships or civil unions, your property is going to go through the intestacy statutes of your state and is going to probably go to your parents or other surviving relatives. The best way to guarantee your partner is supported is to create a will that gives the property and assets you wish to bestow to them following your passing.
Another estate planning alternative to take note of, when you are un-married is to buy and hold deed (own) to big purchase items, like houses and vehicles, in “joint tenancy with the right of survivorship” with your partner. This enables one partner to take total ownership of the property should the other partner (the other joint tenant) passes away.
You Have Young Children
When you have minor children, it is vital to have a will and other important documentation in place for providing for their future. An estate plan enables you to designate a guardian them and plan for the assets you want to earmark to provide for their care and education.
Should you and your spouse suddenly pass away lacking a will, a court is going to be in control of naming a legal guardian for your minor children. If you are not content with the state making this very personal and significant decision, you should create a will that clearly states your wishes.
Life Insurance Is Part of Your Estate Plan
After you have children, purchasing a life insurance policy is another significant item to check off your estate planning list. The policy allows you to have designated beneficiaries that are paid directly following your passing away, outside of probate proceedings.
Don’t forget that when you designate a different beneficiary for this asset in your will than the one in your life insurance policy, the individual designated on your life insurance policy is going to take precedence.
For young individuals that are in acceptable shape and don’t have any serious health issues, term life insurance is somewhat low cost and can prevent your spouse and children from having financial difficulties in your absence.
You Have Reached Middle-Age
After you reached that magic number and crossed the line into “middle-age,” you can most likely make an approximate calculation of your assets, comprising of any 401(k) plans, investment accounts, retirement plans and financial institution accounts. Don’t forget that this calculation if going to most likely change in five or ten years, so you are going to need to occasionally revisit and overhaul your will and estate plan.
Prior to meeting with a financial consultant or estate planner, it is wise to familiarize yourself with some of the estate planning approaches used to avoid probate and decrease tax liabilities on your estate.
Below are some of the more popular options to think about in your estate plan:
Revocable Living Trusts
This type of living trust is a great option for transferring property to your loved ones without the hassle of heading to probate court. They are somewhat easy to set up and your financial institution is most likely more than willing to assist you with the process.
One of the best factors of a revocable living trust is that (different from an irrevocable trust) you can modify it however you want while you are still living. You are able to add money, take out money, designate new beneficiaries (maybe you have a “surprise child” when you’re fifty), and take out beneficiaries. By putting in place this type of trust, you can likely ensure that when you pass away the assets in the trust are going to be transferred swiftly and efficiently to the individuals that you chose.
Creating a Totten trust is even more easy than creating a revocable living trust. If you have a financial institution account, you can merely make it into a Totten trust by signing a document provided by your financial institution that enables you to make the beneficiary appointments you want on the account.
These types of trusts are a great alternative for avoiding the probate court and gift taxes. They can also be established to transfer securities (stocks and bonds) in addition to a financial institution account.
Steps to Reduce Estate Taxes
Only a small number of individuals have enough funding and property to think about the federal estate tax in their estate planning approach. In 2022, the federal estate taxes only applies when your taxable estate is valued at more than twelve point six million for individuals and twenty-four point twelve million for married spouses at the time of passing.
Should it happen that your estate is going to most likely exceed the 2022 restriction, then you should take steps to bypass these taxes since can take a huge chunk out of your estate. Below are some steps you should take to decrease or eliminate possible estate taxes:
- Be sure to give your property away prior to you passing away. If you can give your property away prior to your death, it is less likely that the federal government is going take a chunk out of your estate. In 2022, you can give up to sixteen thousand annually per recipient without obtaining a gift tax or having to contend with the IRS.
- Devise an AB trust. One other way that you can safeguard your estate from federal tax laws is to establish a bypass, or AB trust. If you and your spouse establish an AB trust, you’re leaving your property to one another for life, then to your children. If one of you passes away, the living spouse is able to spend the income out of the trust, and often the principal. This type of trust can safeguard up to two times the federal estate tax exemption amount. You should remember that this type of trust can be costly to establish.
- Devise a charitable trust. There are several benefits to establishing a charitable trust. Through a charitable trust, you can support your preferred charity while also receiving a tax deduction for your donation. A charitable remainder trust, in which is one of the more general kinds of charitable trusts, allows you donate assets to a charity (this charity is required to be tax exempt) and withdraw annual income for life or for a specific period of time.
You Are Unwell Or Elderly
It is specifically vital for seniors and those with terminal ailments to have estate plans established. Creating a living trust is a perfect place to begin since it can help you bypass any issues with the probate court. You need to also find out if your estate is substantial enough to induce the federal estate taxes and take action to decrease the amount that the federal government is able to take.
Whereas planning for your own end-of-life care is challenging, it can also bring peace of mind knowing that you have some authority over your medical care and treatment choices should you ever be unable to communicate on your own. Creating an advance health care directive enables you the choice of the treatments you do and do not want to receive in ahead of time. You should also designate a trusted friend or relative as your medical power of attorney to make medical decisions for you in the event you are debilitated.
Don’t gamble having the state make these very individualized decisions for you. Save time and keep costs down by utilizing a healthcare directive & living will document to declare your treatment preferences and name your healthcare agent.
Naming someone as your DPOA to make financial decisions is also wise. At this point in life, you most likely have a more substantial estate than you did when you were in your twenties. You can give your FPOA the authorization to make your financial and business decisions should you be unable to manage them on your own.
Need Assistance Creating Your Estate Plan?
Whether you are graduating from university, expecting a baby, or preparing to retire, Creating an estate plan that reflects your present situation is the best approach to care for yourself and your loved ones.
If you have an extensive estate, think about getting a hold of a knowledgeable estate planning attorney that can assist you in deciding on a plan and create the legal paperwork that are right for you. For simpler estates, you can create a plan reasonably and without leaving your house. There are online do-it-yourself estate planning devices and forms to assist you in creating a last will and testament, healthcare directive and living will, and FPOA.
A. Hollyn Scott, E. (2022, December 20). Estate planning tips: Find the right estate plan for you. FindLaw. Retrieved January 18, 2023, from https://www.findlaw.com/forms/resources/estate-planning/find-estate-plan.html
There’s nothing better than the peace of mind you will have knowing you’ve protected your family at a time when they need it most. Let us help. Schedule a consultation or contact Ogborne Law, PLC of Arizona today.