by Jacqui Thompson, CFP®
Associate Wealth Planner
In an ever-changing world, one thing remains constant: life’s unpredictability. As such, it is never too early to begin establishing your estate plan. Creating an estate plan early in life is essential for safeguarding the interests of your loved ones and the institutions you support. As your circumstances change, it’s important to remember that your estate plan is not static, but is instead a dynamic plan that should evolve alongside your life.
Outlined below is the significance of estate planning at different phases of life, key events that may require adjustments to your plan and the essential estate planning documents to consider during each period.
Early Adulthood (Ages 20 - 40): Setting the Foundation
Beginning the process of estate planning in early adulthood lays a strong foundation for your financial future. This phase of life typically involves significant milestones that should be considered when creating your estate plan include:
Marriage or divorce
Birth or adoption of children
Purchasing a home
Starting a business
Key estate planning documents at this phase should include:
Last will and testament: Your will specifies how your assets should be distributed upon your death and allows you to name guardians for minor children.
Revocable trust: Another way of outlining your estate wishes that may provide better incapacity planning, privacy and probate avoidance.
Power of attorney: This document names an individual to act as an agent on your behalf when you cannot or don’t want to. The extent and duration of the agent's authority can be broad or restricted, based on your preferences.
Healthcare power of attorney: A legal document that appoints someone to make medical decisions on your behalf if you are unable to do so.
Healthcare directive: This legal document gives you the opportunity to write down your preferences for medical care in specific situations.
Midlife (Ages 40 - 60): Refining Your Plan
Your financial situation and family dynamics often become more complex as you age and accumulate assets. You might experience career advancements, children leaving for college, planning for retirement and more. From here, it may make sense to explore strategies for minimizing estate taxes through charitable contributions or gifting, either outright or using trusts. Looking ahead, you might evaluate your options for long-term care insurance, which provides financial coverage for extended healthcare needs. Other considerations may include:
Significant increase in assets or income
Changes in family structure (e.g., marriage of children)
Inheritance from parents or relatives
Any changes in health or diagnosis of chronic illness
Estate planning documents to consider during this phase:
Irrevocable trusts: As assets and tax complexity grow, using advanced and irrevocable trust structures may help manage and protect assets, minimize estate taxes and provide for beneficiaries. An estate planning professional can help determine which type of trust is the best fit for you.
Healthcare directive: Revisit this document to confirm your wishes regarding life-sustaining treatments.
Retirement and Beyond (Ages 60+): Securing Your Legacy
In retirement and later years, your focus may shift to ensuring that your assets provide for your needs as well as the needs of your loved ones. This phase will likely involve finalizing your plans for asset distribution and preparing the next generation for inheritance. It is particularly important to consider incapacity planning, your wishes in the event of a prolonged health issue and your key decision makers. Major events that may prompt changes to your estate plan in this phase include:
Retirement
Birth or adoption of grandchildren
Death of a spouse or family member
Health deterioration
Estate planning documents and questions to consider during this phase include:
Updated will: Do the beneficiaries and guardianships still align with your wishes?
Revised trust: Does the management of the trust and the plan for asset distribution fit in with your current objectives? Does the trust document account for the latest estate tax laws and regulations?
Portable Order for Life Sustaining Treatment (POLST): Consult with your physician to determine whether to establish an Oregon POLST. This medical order allows you to outline your medical treatment preferences for advanced healthcare needs.
Beneficiary designations: Ensure that the beneficiaries on life insurance policies, retirement accounts and other financial accounts reflect your current preferences.
Conclusion
Life is unpredictable, but an estate plan can help create clarity during moments of uncertainty. Estate planning is a dynamic process that must adapt to changes in your life along with evolving regulations and laws governing estate planning and taxation. Regularly reviewing and updating your plan with your team of professional partners ensures that your legacy will reflect your values and priorities, providing peace of mind for you and your family.