Estate planning is not just for older or wealthy people. There are logical reasons for a young couple to create an estate plan. Here are four tips to help you map out the details for what may best be described as your “life plan.”
1. Draft your will
Your will provides instruction for the distribution of your assets when you die. Who should raise your children and take care of the family dog? Who should have your home, your car or your wine collection? If you do not have a will, the court will make these decisions. If you are single and without children, this means your estate could go to your parents or a sibling. If you are living with your partner, he or she will have no legal standing as a beneficiary. Without the guidance provided by a will, the court would likely designate your biological family members as beneficiaries. If you are in a second marriage and die without a will, your assets will probably go to your current spouse. The child of your previous marriage would not see an inheritance.
2. Create powers of attorney
An estate plan is not all about your death. Powers of attorney can be extremely useful while you are still alive. You can use a medical power of attorney to name the person you want to make medical decisions for you in the event you become incapacitated. A financial power is similar. You can appoint someone to make financial decisions if you cannot do so. For example, you and your spouse could designate each other.
3. Address beneficiary designations
If you have retirement accounts, brokerage accounts, life insurance or a pension, keep your beneficiary designations up to date. Life changes frequently, and you should review those designations every few years for required updates.
4. Update your estate plan
Speaking of updating, revisit your estate planning documents occasionally to make sure the information is current. This is especially important for young couples who have years of changes ahead. A good rule of thumb is to sit down with your attorney every three to five years to review your life plan and make any necessary corrections.