When is the right time to start estate planning?

Updated: Mar 9

When is the right time to start estate planning? There is quite a bit of misinformation out there about when to start the estate planning process. Many are under the impression that estate planning only applies to those who have achieved a certain net worth or to those who are getting ready to retire. In truth, estate planning is for anyone who is 18 years of age or older. The key detail to note is that each person's estate plan is going to look different. Estate plans are not one size fits all.

Estate planning basics

"I don't really own a lot."

This statement can mean different things to different people. For the purposes of this post, a basic estate plan is going to be for someone who owns less than $100,000.00 in assets.

Durable power of attorney. Any adult can benefit from having a durable financial power of attorney (DFPOA) in place and a durable healthcare power of attorney (DHPOA). These documents are often used when an individual is incapacitated and needs someone to be able to make decisions. None of us know when an emergency will happen, and without a durable power of attorney in place, a guardianship will need to commence. With a durable power of attorney, you get to choose who you would like to make decisions on your behalf. In contrast, a variety of folks can petition to become a guardian.

Healthcare directive. Additionally, a healthcare directive gives instruction in regards to healthcare decisions. This document can include your views on life-sustaining treatment and when you would like it administered and/or withdrawn.

Last will and testament. Lastly, a simple last will and testament is a helpful document to have in any estate plan. This document comes into effect after death and will answer many questions regarding who is in charge of managing the estate, who your beneficiaries are, and how you would like your items to be distributed. The clarity this document provides to your loved ones is invaluable.

What are the components of an advanced estate plan?

"I'm starting to think about my legacy and how to protect it."

Whether someone is beginning to feel more established in his/her/their career or expanding an empire, a more advanced estate plan may be needed.

Testamentary trusts. For those who do not have an immediate need for a trust, a testamentary trust can be an especially useful estate planning tool. A testamentary trust comes into existence after death. Folks can include these as part of their estate plan to place conditions on beneficiary inheritance or implement tax planning strategies when the need arises. Further, a testamentary trust can protect a beneficiary's inheritance from creditors.

Living trusts. There are two main living trust categories, revocable and irrevocable. Within each trust category, there are a plethora of estate planning options available. You may want to include trusts as part of your estate plan for probate avoidance, creditor protection, tax planning or conditional bequests. When set up correctly, trusts can provide many protections and monetary savings to the beneficiaries.

Business Ownership. Starting a business is a big and exciting undertaking. Whether someone is a solopreneur or plans to build a team of employees, estate planning is crucial. Business ownership and estate planning intersect when figuring out who takes over the business should the worst happen. For example, if a business owner dies, a buy-sell agreement can ensure that a buyer is lined up and proceeds of the sale go to the beneficiaries of the deceased business owner. Further, a well-drafted operating agreement can protect a business owner from business liabilities.

In sum, each estate plan is unique and everyone can benefit greatly from having a plan in place. Schedule your consultation today to see what type of estate plan makes sense for you. Schedule here.

Disclaimer: The purpose of this post is to provide general information and a general understanding of the law, not to provide specific legal advice. By accessing this blog site you understand that there is no attorney-client relationship between you and Sekhon Law, PLLC. This post should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.