Whether you’re single, married, a parent or nearing retirement, everyone needs an estate plan. Here’s how to get started.
By: Jennifer Chappell Smith
Millie, a content program about women and money, is licensed from Dotdash Meredith, publisher of Real Simple, InStyle, Investopedia, The Balance and more.
The phrase “estate planning” conjures images of grand, ivy-covered walls guarding the rich and famous. But in reality, everyone needs a plan for what happens to their assets after they’re gone. And that plan evolves as you age.
Ideally, your plan starts when you’re building the foundations of your financial life, like setting up a savings account along with a 401(k) or IRA. Those kinds of accounts require you to name a beneficiary—the person who will receive the funds when you die. If you’ve done this already, you may well have covered your estate-planning bases for the time being! But if you choose a partner and decide to merge finances … it’s time to do it again.
Next, maybe your first child arrives, and you need to make changes—again! But faster than a toy car down a Hot Wheels track, your toddler will be driving off to college, and suddenly, your retirement looms—and, you guessed it, it’s time for more estate planning.
My husband and I married in our mid-30s, each with our own 401(k)s and our own credit card debt. It was a merger of lives and finances. We signed the marriage license, and then, after the honeymoon, we logged on to our retirement plans to change our beneficiaries to one another. Less romantic but necessary.
“It’s wise to reevaluate your estate plan every three years,” says Ginger Fuller Mlakar, an Accredited Estate Planner and a board member at the National Association of Estate Planners & Councils. “Keep reviewing it at different times with a different focus.”
Here’s a quick look at some of the basics to consider as your world turns from one stage to the next.
Merging your finances with a partner
“Conversations are key,” says Mlakar. Talk and talk some more until you’re in agreement about how things are titled—your house, your car, your retirement accounts. Do you want to own assets jointly or separately? Do you agree with the beneficiaries on things like IRAs and life insurance policies? And the ultimate question: “If something happens to one of us, who should benefit from those assets?”
“When people get married or find a life partner, they should start thinking about how their assets will pass to a survivor,” says Mlakar. And that survivor doesn’t have to be your partner: It can be an elderly parent, a special needs sibling or even a favorite charity.
Once you’re married, the government can get involved with how your assets are allocated upon your death—and that involvement varies depending on the state where you reside. Avoid the courts and probate process and ensure your wishes are carried out by getting your will written.
But a will is just one of the important estate planning documents you’ll need. Once your fate is tied to a partner, it’s vital to consider the full suite of estate-related documents listed below And note that if you unmerge your finances at some point—get separated or divorced—you’ll want to reconsider the documents you signed as a couple.
Will. Usually kept on file with an attorney and a copy at home, this document spells out what you want to happen to your assets after you’re gone and can be updated to name guardians for any future children.
Trust. This document allows your trustee to manage your affairs if you become incapacitated or unable to make decisions for yourself.
Revocable living trust. You create this trust while you’re alive and it can be changed at any time.
Successor beneficiary. This refers to the person who gets everything in your trust after you die.
Financial power of attorney. This document allows you to name a trusted ally to make financial decisions—about retirement accounts, for example, which can’t be in a trust—on your behalf if you become unable to do so.
Durable power of attorney for health care or health care proxy. You can use this document to authorize someone to make medical decisions on your behalf if you become incapacitated.
Living will. Also called a directive to physicians and family in some states, this document allows you to dictate your care in end-of-life scenarios, such as whether you would like to prolong life via a feeding tube.
Starting a family
Updating estate plans should be on any expectant parents’ checklist. Within two years of our wedding, my husband and I were spending dinner dates talking about who we should name as guardians of our unborn son instead of what movie to see.
Naming guardians in a will and listing your child as a successor beneficiary in a trust are both important. Many types of trusts exist, but a revocable living trust can protect the inheritance you intend to give your heirs, including young children who will need help with money management and controlling spending. When your child is still very young, you can appoint a reliable accountant, friend, guardian or even a bank as the “corporate trustee.” But once your child is old enough to take control, you can easily change the trust to appoint them as the trustee.
Mlakar explains that some couples avoid saddling guardians with the role of trustee, as it could require financial expertise and become a burden beyond just raising the child.
If you have a second or third or fourth child? It’s time to revisit those documents once again. Just note that some wills allow you to name “future” children so you don’t have to pay to insert their names later on.
Facing retirement
Once your kids are grown and flown, you may be facing retirement, considering a second-act career or entering full retirement. As your personal finances change, your estate planning needs will be affected as well.
Regardless of your circumstances, now is the time to update your will, and if you haven’t already set up the estate documents listed above, don’t ignore them any longer. Get your medical power of attorney, living will and financial power of attorney in place. Revisit beneficiaries on any retirement accounts, cash-value life insurance policies and the like to ensure your survivors are adequately named.
At this stage of life, Mlakar advises people to take advantage of a “multidisciplinary approach”—that is, allowing a range of professional advisors to help guide your estate plan. They could include:
- An estate attorney
- A financial planner
- An insurance professional
- An accountant
- A philanthropic advisor if you want to leave a legacy related to a charity
Three things to do
- Use this checklist to see if you’re on track with your estate planning.
- Learn why estate planning is important—even if you have no heirs.
- Blended families have unique estate planning considerations. Find out what they are.
