Estate planning is an essential part of the financial planning process but can get overwhelming when it comes to all the moving parts, such as figuring out what to do with the financial power of attorney, life insurance, real estate and beneficiary designations. While thinking about who you will leave your belongings to is uncomfortable for many, estate planning is a smart thing to do.
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Anyone who owns a home or has a bank account, a safe deposit box, expensive jewelry, collectible artwork or anything else they consider of value should protect their assets with the proper legal documentation. Here’s how and when you should start estate planning now.
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Quick Take: When Should You Start Estate Planning?
Throughout life, you will experience different chapters and reach new milestones, from your first job to figuring out your retirement plan. According to experts at Trust & Will, there is no better time than now to start planning and making updates. Things you should cover in your estate planning include, but are not limited to, the following:
Savings account: From the moment you set up your first savings account, you should determine who your money will go to in the event of your death. Examples include surviving spouses or minor children.
Home and property: Upon buying your first home or property, start your estate planning documentation to ensure your home won’t go into probate court.
Marriage: Whether you’re combining assets or keeping them separate, your estate plan should indicate what happens in the event of one spouse dying, or both.
Children. A growing family is always a good time to update your estate plan.
Inheritance: It should be made clear in your estate planning where your inheritance should go in the event of death. This can be helped by choosing a durable power of attorney or who you wish to act on your behalf.
Divorce: Your estate plan should be updated immediately in the event of a divorce.
Grandchildren: Update your plan with any new family members you’d like to distribute your assets to.
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If You’re an Adult, You Should Have a Will
Depending on your financial situation, you may or may not be surprised to find out that many people still don’t have a written will, let alone an estate planning attorney. That can complicate matters for family members. Per Trust & Will, “The best time to make a will is essentially as soon as you become a legal adult or reach any of the above estate planning triggers.”
Not Everyone Needs a Trust
If you have a lot of assets, like properties, you should create a trust, according to Trust & Will. “Trusts give you more control over where your assets will be distributed while you’re still living and after death, [they] and can help you avoid probate. Additionally, creating a trust can help you avoid additional taxes or fees as your assets pass to various beneficiaries,” the company stated.
Always Update Your Estate Plan
Life changes, and so should your estate plan. “A good rule of thumb is to revisit and update your estate plan every three to five years,” per Trust & Will. To make sure those you love are covered in the long term, editing your financial information as you go, when it comes to everything from retirement accounts to income taxes, can make your estate plan as accurate as possible and save those you love a lot of financial headaches.
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: When Experts Say You Should Start Estate Planning
