How you plan for the future depends on where you are in life. When you are 40, chances are you are not the same person as you were when you were 20. Here’s a rundown of the estate-planning tools you should have if you’re just beginning your life’s journey, midway through or approaching the final leg.

Young & Single

A young and unmarried person with his or her first job is at the beginning stage of financial and estate planning. Anyone over the age of 18 should have certain basic estate planning documents: a will, a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information.

As a young person with a modest-sized estate, you may not believe that you have sufficient assets to warrant estate and financial planning. However, you may be overlooking contract assets (i.e., life insurance, car insurance that has a value at sudden illness or accident) that would require planning. You may also be overlooking the possibility that a sudden illness or accident could require your parents or some other loved one to assume responsibility for your person along with your assets. If you are involved in an accident in a different state or if you have a sudden illness which renders you unconscious and you do not have the appropriate planning documents in place, your parents and/or other loved ones would have to apply to the probate court for the appointment of a guardian over your person and over your estate.

These guardianship proceedings are the most expensive legal work performed by an elder law attorney. Guardianships require that all matters be supervised by the court. In other words, if your guardian wants to move you from a hospital in the Oklahoma where the accident occurred to a hospital in Austin, Texas, they would need to file an application in the court in Oklahoma and an application in the court in Texas to be granted court permission to move you from one location to another. Since these matters are generally charged on an hourly basis, preparation of the documents, the hearing process, and the court costs generally exceed a young person’s asset base, and therefore, the parents and/or other loved ones who assume responsibility end up paying the costs of these legal proceedings.

If you have the basic estate planning documents in place, your parents and/or other loved ones could utilize them to perform all of the same actions but without court supervision and unnecessary costs.

Young & Married

The next stage of financial and estate planning begins with marriage and the purchase of your first home. When two persons marry, they usually begin to acquire assets jointly which need to be allocated among the two families in the event that both husband and wife are involved in a sudden accident and pass away.

A will, a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information should be prepared for both husband and wife so that in the event an accident or sudden illness results in an estate or a guardianship, the surviving spouse and/or the parents of the husband or wife are properly empowered to act. Also, the consideration of joint tenancy with rights of survivorship, payable on death accounts, and transfer on death accounts along with the proper designation of beneficiaries for IRAs, 401(k)s, 403bs and other similar accounts (i.e., life insurance) should be reviewed for the proper transfer in the event of an unforeseen passing or illness.

If you have the basic estate planning documents in place, your parents and/or other loved ones could utilize them to perform all of the same actions but without court supervision and unnecessary costs.

Married with Minor Children

A married couple with minor children have reached the third stage of estate planning. Because a sudden illness and/or passing may incapacitate you as a parent, planning should be put in place to name a guardian for your minor children as well as someone to manage your assets for your children. Instead of a simple Will, the husband and wife could prepare a will with testamentary trust provisions for minor children along with a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information. The will has two provisions for the children: (1) a designation of guardian over the physical placement of the children; and (2) an appointment of a trustee over the monetary assets of the children. Remember, ongoing involvement in the probate court requires formalities that increase the cost of administering your estate.

The court would appoint a testamentary trustee pursuant to the testamentary trust language in the will. The trustee would operate pursuant to the testamentary trust provisions, which normally state that the trustee can pay for any bills related to health, maintenance, and welfare of the children through the age of minority with distribution of principal amounts at ages 25, 30, and 35. This spreads the distribution of the principal over a period of years rather than delivering a lump sum at one age.

Alternatively, parents may consider a living trust with provisions for minor children similar to those described in the testamentary trust. A living trust is a contract that is enforced outside of the probate court jurisdiction, which therefore reduces the amount of government involvement considerably. Normally, a living trust is managed by trustees—persons whom the parents trust with the proceeds from their estates.

Under 60 with Adult Children

The next stage of financial and estate planning occurs when the married couple have attained the age when they may still have minor children as well as adult children. Because a sudden illness and/or passing may incapacitate the parents, planning should be put in place to include a guardian for any minor children as well as an individual to handle your financial affairs. Instead of a simple will, the husband and wife could prepare a will with testamentary trust provisions for minor children along with a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information.

The will has two provisions for the children: (1) a designation of guardian over the physical placement of the children; and (2) an appointment of a trustee over the monetary assets of the children. Remember, ongoing involvement in the probate court requires formalities that increase the cost of administering your estate.

If both parents were to pass away suddenly, the court would consider appointing a guardian over the person of the child for purposes of health, maintenance, and welfare. The guardian would then be responsible for day-to-day matters concerning the child, including placement in a school system, medical treatment, and other similar issues.

The court would appoint a testamentary trustee pursuant to the testamentary trust language in the will. The trustee would operate pursuant to the testamentary trust provisions, which normally state that the trustee can pay for any bills related to health, maintenance, and welfare of the children through the age of minority, as well as with distribution of principal amounts at ages set forth in the will.  If you do not wish for your children to receive a lump sum distribution, we can draft provisions that allow distributions at certain ages of over a period of years.

The parents may also consider a living trust with provisions for adult children similar to those described for the testamentary trust. A living trust is a contract that is independent of probate court jurisdiction, and it therefore streamlines the work considerably. The trustees of a living trust are persons who the parents trust with the proceeds from their estates.

Between 60 to 70 1/2 with Adult Children

If empty nesters have reached and/or gone by age 60, a thorough and proper review of their retirement planning is necessary. Each type of deferred compensation plan (i.e., IRA, SEPP, 401(k), 403(b), PERS, STRS, etc.) has rules and regulations which govern the withdrawal and the receipt of the account at the participant’s death. These rules should be reviewed both financially and in the retirement and estate planning aspect so that no adverse tax rules apply.

Before attaining 70 1/2, you should review all of your estate planning documents along with those describing financial and retirement benefit planning. Because the age of 70 1/2 has been designated by Congress and the Internal Revenue Code as a lock-up date for certain types of tax-deferred compensation plans, it is imperative that all persons within a year of 70 1/2 review their plans to avoid any income tax and/or estate tax complications. Age 70 1/2 is the trigger when most people must begin making required minimum distributions, or RMDs, from their qualified retirement accounts.

You should prepare a will in conjunction with a living trust, a pourover will, a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information. The living trust avoids a probate estate and also has tax provisions in the event your estate has tax consequences at death. The trust would have provisions for the surviving spouse and would have provisions if no spouse survives for distribution to the adult children and/or grandchildren. Empty nester estate planning becomes more complicated because the children’s lifestyles have been established, and special planning may be necessary in light of the adult child’s capabilities. In some instances, an adult child may be disabled and/or become disabled.  In this event, special trust provisions must be created to avoid the interruption of governmental benefits.  In some cases, the adult child is competent, but may not be one with a great deal of financial responsibility.  This may lead the parent to consider an ongoing trust for protection of the corpus from bad decisions of the child. These matters are thoroughly discussed in estate planning and are tailored to specific client circumstances.

Seniors Over 70 1/2

You should prepare a will in conjunction with a living trust, a pourover will, a power of attorney to manage assets, a medical power of attorney to manage health care, an advance directive to physicians (also known as a living will), and a HIPAA release to authorize disclosure of medical information. The living trust avoids a probate estate and also has tax provisions in the event your estate has tax consequences at death. The trust would have provisions for the surviving spouse and would have provisions if no spouse survives for distribution to the adult children and/or grandchildren. Empty nester estate planning becomes more complicated because the children’s lifestyles have been established, and special planning may be necessary in light of the adult child’s capabilities. In some instances, an adult child may be disabled and/or become disabled. In this event, special trust provisions must be created to avoid interfering with governmental benefits. In some cases, the adult child is competent, but may not be one with a great deal of financial responsibility. This may lead the parent to consider an ongoing trust for protection of the corpus from bad decisions of the child, such as spendthrift trust provisions. These matters are thoroughly discussed in estate planning and are tailored to specific client circumstances.

We Can Help You with Your Estate Planning Needs

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