Why You Need an Estate Plan in Your 30s (and Beyond)

You have an estate plan, whether you created it or not. If you pass away unexpectedly without a Will and other documentation expressing your wishes, the state you live in has laws to determine who will receive your assets. Have children? The state will decide who should take care of them. Own a small business, the state has a plan for you. What about your 401k? The account has beneficiaries, but if you listed your parents when you started working and subsequently got married and now have kids, that could be a problem.

Not convinced? Here are some examples of what we mean. In Alabama, if your parents are still alive, approximately 50% of your estate goes to your spouse and the remainder goes to your parents. If you have kids, half to your spouse and half for your kids. That could work out, unless your son is 15 and needs a sports car for prom. In Tennessee and Georgia, your spouse would split your estate with your children. Your spouse receives an equal share or one-third, whichever is higher. Perhaps you might intend for your spouse to inherit all of your assets to support your family? You need a will to ensure that happens. So estate planning is not just for the “super-wealthy” that need to avoid taxes or for “people who may die soon.”

Here are a few things to consider when you create your estate plan, whether you use an attorney or an online service.

1)Your children

Perhaps the most important decision you will make is who will be the guardian of your minor children. If you have siblings, godparents or friends that you would prefer to take this responsibility, you need to have a discussion with them first. Are they willing? Have they thought about the implications? If the planned guardian declines after you pass away, the question will go back to the state to answer on your behalf. Also, you should consider how the guardian will support your family financially. Do they have the resources to support additional children. Should you leave some assets to the guardian directly or in a Trust to use for your children’s benefit?

2) Do you have the resources to support your family if you are gone?

If you are the primary breadwinner, or if your family could not maintain their standard of living without your income, you need to think about how expenses would be covered. Consider both the day-to-day and long-term big-ticket items like college and weddings. This is where low-cost, term life insurance can be useful to cover the gap between your current savings and your family’s long-term financial needs.

3) Who will be the executor of your estate?

This person is responsible for ensuring assets are distributed according to your will. Many married couples assume this would be their spouse. But what if both spouses pass away in the same accident? The executor will need to be able to access your estate documents and bank accounts. It is helpful if they understand your broad intentions, even if you do not share the specifics of your will ahead of time. You might also consider having someone besides the guardian of your children serve as executor, as they will be busy guiding your children through a challenging time.

4) Advanced Medical Directive and Medical Power of Attorney

This is especially important in non-traditional families. Outside a legal spouse and biological parents, hospitals not legally allowed to share information with third parties unless they have been told in advance. Additionally, in non-traditional families, decision making rights can cause friction between parents and partners. Even for traditional families, children may have differences of opinion about the treatment of a parent. Who will make the ultimate decision? Powers of attorney and medical directives take the guess-work out and limit the friction in stressful times by clarifying your wishes and decision rights.

5) Businesses or Rental Property

For business owners, if you pass away without a will, your stake in the business must be valued and will be transferred to your heirs according to the same provisions we shared earlier for cash assets. If you have other partners, they may not want your children or spouse as active participants in the business. Your spouse or children many not want to participate either. If your family could be better served with the liquid assets, the other partners need to have the financial capacity to buy them out. There are also tax implications for liquidating closely held businesses. Again, advanced planning is key to ensuring the best outcome for your business and your family.

6) Coordinate your financial and estate plans

Your financial advisor is a great place to start the process. If they are properly educated and comprehensive, they can help you organize your assets and determine your primary objectives, which will save you time and money when you sit down with an attorney. Also, they can be a valuable resource for your executor because they should know about your major assets and can guide the executor during what will be a difficult time.

If you aren’t confident that your estate plan is up-to-date, you should work on making an update. We usually give clients a 1 year timeline to complete the process. A deadline helps ensure planning doesn’t get pushed off perpetually. We are happy to help you set initial goals, understand the key components of a plan, and connect you with an attorney that can draft your documents.

Note: This is our guide to estate planning and it is clearly not comprehensive. It should not be taken as legal advice. We also don’t pay or receive referral fees from attorneys and are not a marketing service for attorneys. So, if this created concern for you, schedule a meeting to get the expertise your need! (It should be self-explanatory but we had to say it).