When Should You Start Thinking About Estate Planning?

"Are my kids taken care of?"

This is a question that many retirees or those nearing retirement often find themselves pondering. According to the most recent survey, 67% of Americans have not engaged in estate planning, a concerning statistic given the significant implications on asset distribution, family well-being, and tax obligations.?

Estate planning is often a topic that individuals postpone, associating it with a distant future or seeing it as a complex endeavor. Yet, this vital aspect of financial planning should not be relegated to the periphery of your considerations.

This article aims to help provide you with the necessary insights to plan for estate planning, enabling you to make informed decisions that align with your financial goals and personal values.

What Exactly is Estate Planning??

Estate planning is the strategic process of arranging the management and disposal of an individual's assets during their lifetime and after death.?

The process encompasses a variety of financial and legal elements, including the drafting of wills, designating beneficiaries, establishing trusts, and making arrangements for healthcare directives and powers of attorney.?

The objective is to maximize the value of the estate by reducing taxes and other expenses, while ensuring that assets are distributed in accordance with the individual's wishes. It also aims to provide clarity and guidance for families during emotionally challenging times.

At What Age Should You Start Thinking About Estate Planning?

When to start estate planning is often dependent on individual circumstances rather than a specific age. However, there are key life events and milestones that can serve as indicators for when it's appropriate to begin the process.?

Early Adulthood (Late Teens to Early 20s)

Once you reach the age of legal adulthood (usually 18 or 21 depending on the jurisdiction), it's advisable to at least have basic estate planning documents like a durable power of attorney and healthcare directives. At this stage, the focus may not be on asset distribution but more on who will make decisions on your behalf should you become incapacitated.

Family Formation (Late 20s to Early 40s)

As you start a family, have children, or acquire property, estate planning becomes increasingly important. At this stage, you'll want to think about setting up a will, appointing a guardian for your children, and possibly establishing a trust.

Midlife (40s to 60s)

During these years, many individuals focus on wealth accumulation and may also inherit assets from parents or other family members. This is a good time to revisit and update your estate plan to reflect your growing asset portfolio and changing family dynamics.

Pre-Retirement and Retirement (60s and Beyond)

As retirement approaches, your estate plan may need to be adjusted to consider factors like retirement accounts, Social Security benefits, and Medicare. This is also the time when you might look into more complex estate planning tools like irrevocable trusts to help mitigate tax burdens.

High Net Worth Individuals

If you have significant assets, you may need to engage in estate planning strategies earlier than others to optimize for tax implications and to help ensure that your wealth is distributed according to your wishes.

While there's no universally "right" age to start estate planning, it is generally beneficial to start sooner rather than later. Engaging in this process early allows for greater flexibility and can help offer you comfort that your assets and loved ones are taken care of.

What are the Reasons to Start Estate Planning Early

Starting estate planning early has a multitude of benefits, ranging from financial advantages to asset protection. Here are some key reasons you could include in your article to elaborate on why it's beneficial to start the process sooner rather than later:

Flexibility in Asset Allocation

Starting early allows you to make deliberate and well-thought-out choices about how your assets are to be distributed. With more time, you have the flexibility to adjust your decisions as your life circumstances change.

Mitigation of Tax Burden

Estate planning can offer various strategies for reducing or deferring taxes, such as gifting during one's lifetime or setting up specific types of trusts. The more time you have to implement these strategies, the more likely they are to be effective.

Ensuring Guardianship for Minors

If you have minor children, estate planning help ensures that you can designate trusted guardians for them, should something happen to you and your spouse. Waiting too long may leave these critical decisions to the court.

Healthcare Directives and Powers of Attorney

An early start allows you to lay out your wishes in case you become unable to make decisions for yourself. This can include healthcare directives, which specify your wishes for medical treatment, and powers of attorney, which help allow someone to make financial decisions on your behalf.

Avoiding Probate

Many estate planning tools, like living trusts, can help your estate avoid probate, a court-supervised process of distributing assets that can be lengthy and costly. Setting these up well in advance can save your heirs time and money.

Asset Protection

Effective estate planning can also help provide a shield for your assets against creditors or legal judgments. Some structures can even offer a degree of asset protection during your lifetime, not just after your death.

Capturing Business Value

If you own a business, early planning can be crucial in helping to ensure that the enterprise continues smoothly in your absence, and that the value you've built in the business is preserved for your heirs.

Family Harmony

By clearly outlining your wishes and plans, you can help mitigate the risk of family disputes over your assets after your passing.

Working with a Private Wealth Management Company

Engaging with a private wealth management company offers a myriad of advantages for comprehensive estate planning. These firms typically specialize in providing holistic financial services that encompass not just estate planning but also investment management, tax planning, and retirement planning. Here are some key benefits to consider:

Comprehensive Financial Planning

One of the main strengths of a private wealth management company is its ability to take a 360-degree view of your financial life. This isn't just about looking at your bank account or your investment portfolio; it's about understanding how all the financial pieces of your life fit together.?

From your annual income and spending habits to your long-term investments and retirement savings, these firms aim to get a comprehensive understanding of your financial situation. This helps them to craft an estate plan that's not an isolated document but a natural extension of your overall financial strategy.?

This level of integration can provide you with a well-rounded plan that considers tax implications, income requirements, and investment goals, all aligned cohesively with your estate planning needs.

Coordination with Legal Advisors

When it comes to estate planning, the legal landscape can be a minefield of complexities—from navigating wills and trusts to understanding state and federal tax laws.?

What makes wealth management firms invaluable in this regard is their network of specialized legal advisors. These aren't generalist lawyers but ones who understand the nuances of estate law.?

By coordinating closely with these legal advisors, the wealth management firm can help you ensure that your estate plan is not only optimized for your financial situation but is also legally sound.?

This dual approach can help save you from potential legal pitfalls that you might not even be aware of, helping to ensure that your assets are distributed according to your wishes and in compliance with the law.

Proactive Management

The financial world doesn't stand still, and neither should your estate plan. A private wealth management company typically takes an active role in managing your finances.?

This means constantly monitoring your financial status and the markets to identify both opportunities and potential risks.?

Maybe it's a new tax law that offers an advantageous estate planning opportunity, or perhaps it's a market downturn that could impact your investment goals.?

Either way, by being proactive, they can suggest timely modifications to your estate plan, helping to ensure it remains aligned with your financial objectives and risk profile.

Stress Reduction

Let's be honest—thinking about one's own life and how your family will fare financially in your absence is emotionally taxing.?

The legal and financial complexities of estate planning can add an additional layer of stress to an already sensitive topic. By working with a private wealth management company, you can help offload much of this stress.?

They help you through the decision-making process, providing clarity, which helps you to make well-informed, rational decisions.?

Knowing that qualified professionals are managing these intricate details can help offer a sense of calm and confidence, making the emotionally charged process of estate planning more manageable.

Conclusion

The timeline for initiating estate planning isn't dictated by a specific age or life event, but rather by the complex web of personal circumstances, goals, and assets that make up each individual's life.?

As we've discussed, there are compelling reasons to start this process earlier than you might think, from flexibility in asset allocation to mitigating the burden of taxes and ensuring guardianship for minors.

Including estate planning in your overall financial plan isn't just a wise move for those in later life stages; it's a savvy decision you can make at any age.?

Sadly, far too many people overlook this essential planning, often believing it's something to be deferred for a future that seems distant.?

The truth is, it's never too premature to lay the groundwork for a financially secure future. Taking that initial step, no matter when, sets a positive precedent and creates a stable foundation for both your financial future and that of those you hold dear.

Disclaimer:

Landsberg Bennett is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Advisory services are offered through Hightower Advisors, LLC. All information referenced herein is from sources believed to be reliable. Landsberg Bennett and Hightower Advisors, LLC have not independently verified the accuracy or completeness of the information contained in this document. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates make no representations or warranties, express or implied, as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates assume no liability for any action made or taken in reliance on or relating in any way to the information. This document and the materials contained herein were created for informational purposes only; the opinions expressed are solely those of the author(s), and do not represent those of Hightower Advisors, LLC or any of its affiliates. Landsberg Bennett and Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax or legal advice. Clients are urged to consult their tax and/or legal advisor for related questions.