Is Estate Planning A One Size Fits All? Does Every Phase In Life Require Planning?
Estate planning is not a one size fits all endeavor. What is right for a 35-year-old may not be sufficient to fulfill all the needs and desires of a 75-year-old. A 35-year-old may not have as much savings as a 75-year-old; a 35-year-old may have young children whereas the 75-year-old will have adult children. The 35-year-old will be in pretty good health; the 75-year-old adult may not have great health. Each has a different perspective on what they want to accomplish in their lives. When it comes to estate planning, everyone needs to think about the issues that are most important to them. What should happen if they become incapacitated and cannot manage their financials? What happens to their assets and liabilities upon their death?
Estate planning is not just for the wealthy. Even someone with no savings or assets needs a plan for medical decision making and family harmony. Every phase in life requires a different perspective. For the younger family, having children usually starts the first phase and the next phase begins when the children turn 18. Another phase can be at retirement and then periodic maintenance, as the retirement funds are spent. “One size fits all” does not contemplate whether you have immediate family, like children and spouses. Planning is especially needed if multiple people think they’re entitled to make decisions on your behalf if you become incapacitated or die, because those people can potentially become embattled.
What Estate Planning Documents And Special Issues Need To Be Addressed In Each Of The Following Scenario?
Young Couples Or Individuals With No Children
As a young adult, when you’re just starting out, you need to have estate planning documents in place in case there is an accident. While a person at this age may not have accumulated assets and savings, accidents do occur. The age of maturity is 18, meaning if you have not reached the age of maturity, then you don’t have the legal capacity to make decisions and the law presumes that your natural parents or your guardian is the proper person to make decisions on your behalf.
When a person turns 18, they’ve reached the age where a parent can no longer make binding decisions for them. The 18-year-old must make their own decisions. If an 18-year-old is in an accident and is unconscious or unable to consent to medical treatment, they need to have a designation of healthcare surrogate in place naming their parents as their medical decision makers. They should also consider a HIPAA authorization release for disclosure of medical information to your parents, a living will directive about potential life support, and a durable power of attorney for financials, so that your bills can continue to be paid.
Without the above documents granting legal authority to act on someone’s behalf, medical decisions and financial decisions are made through a court supervised guardianship. Guardianship is time consuming and the attorney’s time that is required causes it to be very expensive. There are also additional ancillary costs that are not associated with the attorney’s legal fee, which need to be paid. The time and expense of guardianship can be avoided by preparing simple legal documents.
Young Couple With A Child Or Children Under The Age Of 18
At the point of having children, most people will have some degree of savings or a house. The biggest factor building on the earlier needs of a couple without children is the fact that beneficiary designations on your accounts and your last will and testament must be considered. With respect to your last will and testament, there are two important items to address: First, naming guardians who would take care of your minor children if both you and your spouse were to pass away. The naming of guardians in the will prevents fighting between family members over the custody and care of the late couple’s minor children.
The second item to address in your last will and testament is whether it makes sense to set up a testamentary trust for the benefit of your minor children. A testamentary trust is as a trust that is created at death. Instead of simply naming your minor children as outright beneficiaries, you leave it to be held in a continuing trust to be managed for the benefit of your minor children. This is important because when your minor children turn 18, without this testamentary trust, they will receive all the money that you’ve left them – outright. In this phase of life, you want to review your estate planning documents to cover your children under age 18.
Also consider that the sum of money in question could include life insurance proceeds and your retirement accounts. Retirement accounts can raise tricky legal issues with respect to excessive income taxation. If you don’t like the prospect of your child receiving all your wealth at age 18, then you need to get your estate planning completed.
The next issue with estate planning is if you have children with special needs or disabilities. If you have a minor child with special needs, you likely understand the cost of care and raising this child compared to your other children. If you were to pass away with a child with special needs, it is more likely that public benefits will be needed to help assist this child through adulthood.
The child may need Medicaid to assist with the activities of daily living, especially if this child’s disabilities would prohibit them from working and generating his or her own income. When someone has a disabled minor child or adult child, they need to consider creating a special needs trust for when both parents pass away or when the providing parent passes away. The special needs trust would pay for things for the benefit of your disabled child but the payments would be made directly to the provider of the goods or services; not into the child’s bank account. This makes the pool of assets not countable towards your disabled child’s public assistance resources.
Couples With Adult Children
The next season in life that you need to consider for estate planning purposes is when you have adult children. Adult children can go away to college; they can live on their own. Adult children can have substance abuse issues, bad marriages, or money management problems. These are among the reasons people look to estate planning – to avoid their adult child squandering a lifetime of wealth. You can tailor estate planning with these types of children through the creation of trusts upon your death for the benefit of that child.
You can work with an estate planning attorney to create testamentary trusts and talk about what is most sensible for that particular child and his or her needs. You could create a spendthrift trust, which would be protected from creditors and from the child trying to take loans against the principal balance of the trust. For adult children, you need to consider how you feel about the potential for squandering any inheritance or the protection of that child from themselves.
Another phase in life where estate planning needs to be considered is the middle-aged person or couple. At that point, if you haven’t done your estate planning, you really need to consider that you may need to do estate planning to address based the fact that you have accumulated wealth. Trusts and business planning documents and utilization of corporations and LLCs can provide an asset protection shell against creditors. If you’re a business owner, you may have worries about potential creditors that could be out there or you may be looking for an efficient way to transition your business to future ownership upon your retirement, death or incapacity. An estate planning attorney can help you with these plans.
The next phase of planning would be preventative measures when planning for incapacity or nursing home care. This type of planning could potentially be done any time after age 60. The purpose of considering your estate planning and long-term care planning in the same breath is that a large threat to your estate could be long term care costs. In the state of Florida, nursing homes typically cost $8,000 to $11,000 per month and assisted living can cost anywhere between $3,500 and $6,000 per month. In-home care companies typically charge around $20 per hour for aides to be sent to your home to assist you.
Long term care planning and your desires as you age and become less mentally or physically active should be considered in how you structure your estate, trusts, and assets. An elder law and estate planning attorney can work in conjunction with financial advisors and insurance agents to make sure that the legal effect of your financial positions will properly address your estate needs. During this phase of preplanning for incapacity and long-term care, you should also consider the decision makers. The need for estate planning for when you become incapacitated increases with each year that you age. The reality of the people you choose and your perception of their potential effectiveness at serving you will become more apparent as you become older.
The last phase where estate planning comes into play is what we term as crisis planning. This is the latest stage in life, where someone is looking at potential nursing home costs or rapidly waning mental capacity to make any sort of decisions. This is typically the least preferable time to perform estate planning. For crisis planning, the goal would be to protect your assets from long term care costs. Another factor can be the threat of a third-party actor who could be or is inflicting harm. Estate planning documents can be used to trump adverse people who have older legal documents in play that are giving them the authority to act.
In any stage of life, you could use an estate planning attorney to make sure that your wishes are set forth in writing. A lot of people will have these discussions with family members but discussions are not concrete. Verbal instructions can be misconstrued and interpreted in different ways by the relevant parties in your life. Having your wishes and instructions in writing and relying on the right writing will always trump a verbal agreement if you become incapacitated or pass away. It is important to keep a periodic review schedule of your estate planning documents.
For more information on Estate Planning For Different Phases Of Life, an initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (904) 398-6100 today.
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