When Should You Plan Your Estate?
May 12th, 2016
Did you know yesterday is history, tomorrow is a mystery and today is a gift, which is why we call it the present?
Anything can happen to any one of us at any time and in any place. Cars crash, strokes strike and each of us has a date with potential incapacity and certain death. Given this reality, it is never prudent to presume when it comes to the future. Have you created your estate plan? If no, then there is no time like the present.
Young people need to create their own estate plans upon reaching the “age of majority” (i.e., age 18 in most states). Why? On that magical birthday they become newly minted adults who are responsible for their own personal, health care and financial decisions. Just ask any well-meaning parent who has ever tried to step in and make health care and financial decisions for an incapacitated adult child. Without proper planning for “incapacity probate” the parents cannot make such decisions and a judge will appoint the decision-maker.
Just like the parents of incapacitated young adults, spouses cannot make fundamental decisions for one another if incapacitated. This is true whether married for 50 years or five minutes. Of course, minor children need to have guardians (i.e., backup parents) appointed and arrangements need to be made regarding their inheritance. Since some children become adults and other children just get older, inheritance planning deserves the same focus it took to create the inheritance in the first place.
As soon as the judge bangs the gavel and you are divorced, update that estate plan without delay. While your spouse may always be the guardian over your shared minor children, that does not mean your spouse needs to manage the inheritance you leave them. Change beneficiary designations, too. Under federal law your spouse will inherit your ERISA retirement plan if still the designated beneficiary at your death, despite state laws to the contrary.
Whether you are divorce or widowed, you may remarry and form a blended family. Without a carefully designed, executed and maintained premarital agreement, you may disinherit your own children. If you already tied the knot, then you may pursue a post-marital agreement. Either way, you and your new spouse must pay careful attention to how you title assets and arrange beneficiary designations after the ink is dry on any “marital” agreement. What do you call disinherited children? Plaintiffs.
Are you approaching or in retirement? If yes, then congratulations! Many retirees move to another state, whether to be closer to family or to someplace warmer all year long. Consequently, such retirees may end up owning real estate in more than one state. Without careful estate planning, this can trigger death probate in each state where real estate is owned. Retirement also is a time to review your life and consider charitable giving to the institutions most dear to you. Recently, the “Charitable IRA Rollover” became a permanent way to direct your required minimum distributions income tax free directly to charity.
Finally, regardless of your current personal circumstances, once you create an estate plan … you are not done. Just like a home, automobile, or your own health, regular maintenance is required to keep it up-to-date with all of the changes life brings.
Categories: Estate Planning FAQ