Estate Planning Tips: Find the Right Estate Plan for You

According to a 2022 survey from senior living referral service Caring.com, 67% of Americans have no estate plan, with 40% of people saying they just haven’t gotten around to it. While the majority of Americans understand the importance of estate planning, some believe they don’t have enough assets to pass on or find the process too costly to follow through.

Don’t fall victim to this mindset. No matter what stage of life you are in or how many assets you have amassed, a basic estate plan allows you to plan for your own needs and the needs of your family.

Every person is unique and must draft an estate plan that reflects their personal goals and lifestyle, but thinking about the broad category you fall into can help you determine which estate plan and documents are best for you.

Maybe you have an illness and want to set up a healthcare directive that expresses your treatment preferences in the event you are unable to tell anyone. Maybe you are unmarried but want the partner that you live with to inherit your assets if something happens to you.

This article provides some guidelines that can help you choose the right estate plan for you.

Single Under the Age of 30

Most twenty-somethings probably haven’t thought much about how they want their property distributed after they die or who will make their medical and financial decisions in the event they are incapacitated. They think that estate planning is for older adults with more money and assets, but likely don’t realize how many benefits they can get from estate planning at a young age.

While the average 25-year-old may not own real estate or a brand-new Tesla, they often have physical possessions such as laptops or jewelry, and digital assets like social media accounts or cryptocurrency. Without a will in place, all your property will pass through intestacy laws which usually means putting your family members and loved ones through the time-consuming probate process and having no control over how your estate is distributed.

Estate Planning Doesn’t Just Include a Will

A will isn’t the only estate planning document that young adults under the age of 30 should consider getting. Other documents, such as a living will, health care directive, and financial power of attorney provide a chance for young people to leave instructions for their loved ones if they are ever incapacitated and unable to communicate their wishes directly.

While it isn’t easy to think about, accidents do happen, and even young adults should have an estate plan in place to ensure their medical decisions are made and financial affairs managed according to what they want if something happens to them.

Young adults drafting estate plans have the benefit of smaller, simpler estates that they can plan for using a do-it-yourself approach. If you are single and under 30, consider building your simple estate plan today using FindLaw’s estate planning package. The forms are customizable according to your state’s laws and can help guide you through drafting your will, power of attorney, healthcare directive and living will.

Unmarried But Living with Your Partner

If you live together with your partner but are not married, drafting a will is essential to bringing you and your partner peace of mind if one of you passes away. Your significant other may end up with nothing if you die intestate (without a will).

Unless you live in a state that allows civil unions or domestic partnerships, your property will pass through the intestacy laws of your state and will most likely go to your parents or other surviving family members. The best way to ensure your partner is taken care of is to draft a will that gives the property and assets you wish to give to them after your death.

Another estate planning option to keep in mind if you are unmarried is to purchase and hold title (own) to big ticket items, such as homes and cars, in “joint tenancy with the right of survivorship” with your partner. This allows one partner to take full ownership of the property if the other partner (i.e., the other joint tenant) dies.

You Have Young Kids

If you have minor children, it is essential to have a will and other important documents in place to provide for their future. An estate plan allows you to appoint a guardian for your children and plan for the assets you want to set aside to provide for their care and education.

If you and your spouse unexpectedly pass away without a will, a court will be in charge of appointing a legal guardian for your minor children. Unless you are comfortable with the state making this very personal and important decision, you should draft a will that clearly expresses your wishes.

Life Insurance Is Part of Your Estate Plan

After having children, shopping for a life insurance policy is another important item to check off of your estate planning checklist. A life insurance policy allows you to have designated beneficiaries who are paid directly after your die, outside of the probate process.

Remember that if you name a different beneficiary for this asset in your will than the one on your life insurance policy, the person named on your life insurance policy will take precedence.

For young people that are in decent shape and don’t have any serious health problems, term life insurance is relatively inexpensive and can prevent your spouse and kids from struggling financially in your absence.

You Have Reached Middle-Age

Once you hit that magic number and cross the line into “middle-age,” you can probably make a rough calculation of your assets, including any 401(k) plans, brokerage accounts, retirement plans and bank accounts. Keep in mind that this calculation will probably change in five or 10 years, so you will need to periodically revisit and update your will and estate plan.

Before meeting with a financial advisor or estate planner, it is a good idea to be familiar with some of the estate planning methods used to avoid probate and minimize tax liabilities on your estate.

Here are some of the more popular options to consider in your estate plan:

Revocable Living Trusts

Revocable living trusts are a great option for passing property to your loved ones without the hassle of going to probate court. They are pretty easy to set up and your bank or other financial institution is probably more than willing to help you with the process.

One of the best features of a revocable living trust is that (unlike an irrevocable trust) you can alter it however you wish while you are still alive. You can add money, withdraw money, name new beneficiaries (perhaps you have a “surprise child” when you’re 50), and remove beneficiaries. By setting up this type of trust, you can likely guarantee that when you die the property in the trust will be transferred quickly and efficiently to the people that you chose.

Totten Trust (Payable-on-Death Accounts)

Setting up a Totten trust is even easier than setting up a revocable living trust. If you have a bank account, you can simply turn it into a Totten trust by signing a form your bank provides that allows you to make the beneficiary designations you want on the account.

Totten trusts are a great option for avoiding the probate court and gift taxes. They can also be set up to pass securities (stocks and bonds) as well as bank accounts.

Steps to Reduce Estate Taxes

Only a handful of people have enough property and money to consider the federal estate tax in their estate planning process. In 2022, the federal estate taxes only apply if your taxable estate is worth more than $12.06 million for individuals and $24.12 million for married couples at the time of death.

If it happens that your estate will probably exceed the 2022 limits, then you should take steps to avoid these taxes as they can take a large chunk out of your estate. Here are some steps you can take to reduce or eliminate potential estate taxes:

• Make sure to give your property away before you die. If you can give your property away before your death, it is less likely that the federal government will take a bite out of your estate. In 2022, you can give up to $16,000 per year per recipient without incurring a gift tax or having to deal with the Internal Revenue Service (IRS).
• Create an AB trust. Another way that you can protect your estate from federal tax laws is to set up a bypass, or AB trust. If you and your spouse set up an AB trust, you leave your property to each other for life, and then to your children. If one of you dies, the surviving spouse can spend the income from the trust, and sometimes the principal. An AB trust can protect up to double the federal estate tax exemption amount. You should keep in mind that AB trusts can be expensive to set up.
• Create a charitable trust. There are several advantages to setting up a charitable trust. With a charitable trust, you are able to support your favorite charity while also receiving a tax deduction for your contribution. A charitable remainder trust, which is one of the most common types of charitable trusts, lets you donate assets to a charity (this charity must be exempt from taxes) and draw annual income for life or for a specific time period.

You Are Ill or an Older Adult

It is particularly important for seniors and people with terminal illnesses to have estate plans in place. Drafting a living trust is a great place to start because it can help you avoid any problems with the probate court. You should also determine if your estate is large enough to invoke the federal estate taxes and take steps to minimize the amount that the federal government can take.

While planning for your own end-of-life care is difficult, it can also bring the peace of mind of knowing that you have some control over your medical care and treatment decisions if you are ever unable to communicate them yourself. Drafting an advance health care directive allows you to choose the treatments you do and do not want to receive in advance. You should also assign a trusted friend or family member as your to make medical decisions for you in the event you are incapacitated.

Don’t risk having the state decide these very personal decisions for you. Save time and money by using FindLaw’s health care directive form to express your treatment preferences and appoint your heath care agent.

Creating a durable power of attorney that appoints someone to make financial decisions is also a good idea. At this point in life, you probably have a more robust estate than you did when you were 25. You can give your financial power of attorney the authority to make your financial and business decisions if you are unable to manage them yourself.

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Need Help Drafting Your Estate Plan?

Whether you are graduating from college, expecting the birth of a child, or getting ready to retire, drafting an estate plan that reflects your current situation is the best way to care for yourself and your loved ones.

If you have a comprehensive estate, consider contacting an experienced estate planning attorney who can help you choose a plan and draft the legal documents that are right for you. For simple estates, you can create a plan inexpensively and from the comfort of your home. FindLaw provides do-it-yourself estate planning tools and forms to help you draft a last will and testament, healthcare directive and living will, and financial power of attorney.