When Do I Get Started With Estate Planning?
True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
Most people wait until they’re older, retired, or facing a health scare to think about estate planning. But is life really that predictable? Just like coding, a solid estate plan now helps you avoid costly bugs down the road.
If you are a tech professional interested in learning how we can help claim your financial independence by investing wisely, minimizing taxes and maximizing your equity compensation, please book a no obligation call here.
Picture this: A 35-year-old software engineer, thriving in his career and family life, is suddenly disabled by an unexpected accident. With no plan in place, his family is left scrambling to manage healthcare decisions and finances on their own.
Key Takeaways:
- Estate planning isn’t just for the elderly, life’s unpredictability makes it essential at any stage of life
- Without a plan, your family may face legal and financial challenges when making decisions on your behalf
- Estate planning includes more than just a will; it involves healthcare directives, power of attorney, and proper asset titling
- Regularly review and update your estate plan to ensure it reflects your current situation.
Why Estate Planning Is Crucial Now, Not Later?
Even if you’re young and healthy, life can throw unexpected challenges your way. Just like planning your career or finances, estate planning is a proactive move to protect your loved ones. Without a plan, families are left scrambling with making tough decisions about healthcare, finances, and guardianship in moments of emotional distress. Set up an estate plan now to give your family clarity and security when they need it most.
Wondering Where to Start?
Here are 4 essential estate planning documents to kick off your plan
- Durable Financial Power of Attorney:
A durable financial power of attorney allows you to appoint someone to manage your financial affairs if you’re ever incapacitated. This includes paying bills, managing investments, and making other important financial decisions on your behalf.
Without this document, your family may need to seek court approval to access your accounts, which can be time-consuming and stressful. Having a trusted individual step in ensures your finances are in order during any period when you’re unable to manage them.
- Advance Healthcare Directive:
An advance healthcare directive ensures that your medical wishes are followed if you’re unable to communicate them yourself. It consists of two important parts:
Living Will: This document outlines your preferences for medical treatment, including life-support decisions and other critical care choices.
Durable Healthcare Power of Attorney: This appoints someone you trust to make healthcare decisions on your behalf, ensuring your wishes are honored.
Having these documents in place not only protects you but also relieves your loved ones of the burden of making difficult healthcare decisions in a time of crisis.
- Will:
A will is a cornerstone of estate planning and outlines how your assets will be distributed after you pass away. But it does more than just distribute money and property, it can also name a guardian for your minor children. This is crucial if you have young kids, as it ensures they will be cared for by the person you choose.
While a will is essential, it’s important to understand that certain assets, such as life insurance or retirement accounts, may not be governed by your will. This is why it’s vital to ensure your beneficiary designations are current and reflect your wishes.
- Living Trust:
A living trust can offer more flexibility than a will and helps your estate avoid the often lengthy and costly probate process. With a living trust, your assets are transferred to your beneficiaries directly, without going through the court system. This is particularly useful if you have significant property or investments.
A living trust can also provide privacy, as the terms of the trust remain confidential, unlike a will, which becomes a public document during probate. For individuals with more complex estates, a living trust is a key part of a comprehensive estate plan.
Don’t Forget to Align Your Assets
Even if you have a solid will or living trust in place, one often-overlooked detail is the proper titling of assets. If your assets like your home, investment accounts, or vehicles aren’t titled correctly, they may not be distributed according to your estate plan.
- Homes and Property: Ensure your home’s title aligns with your estate plan. If it’s in your name alone, it will likely go through probate, unless retitled under a living trust. If you want it to transfer directly to a spouse or heir, joint tenancy with rights of survivorship may be appropriate.
- Investment Accounts: Review the titles on your investment accounts and update beneficiary designations as needed. Titles often determine who receives the asset, regardless of what your will states.
- Vehicles: Like your home, the title of your vehicle should reflect your estate plan. In some states, you can title it to transfer upon death, simplifying the process for your loved ones.
Why Beneficiary Designations Matter?
Another critical, often overlooked aspect of estate planning is updating your beneficiary designations. These designations apply to assets such as life insurance policies, retirement accounts, and even some bank accounts. What many people don’t realize is that these designations supersede the terms in your will.
If you’ve experienced any life changes such as marriage, divorce, purchased new assets or the birth of a child, you should revisit and update these designations to ensure that your assets go to the right person.
Key assets to review include:
- Life insurance policies
- Retirement accounts (401(k), IRA)
Estate Planning Is an Ongoing Process
For example, Ethan’s accident was a wake-up call. Though he survived, it made him realize that his estate plan needed to be updated to reflect his growing family and new assets. But what if the outcome had been different? Without a plan, his wife would have been left sorting through legal red tape, adding financial stress to emotional grief.
He’s since made sure his estate plan is in place. By revisiting his plan, he ensured that if anything were to happen in the future, his wife and daughter would be well taken care of.
Next Steps For You
Start your estate planning journey today as it’s the smartest way to protect the ones who matter most. Schedule a call now to get started.
Leave a Reply
Want to join the discussion?Feel free to contribute!