The biggest misconception about estate planning is that it’s for people that have lots and lots of money. The second biggest one is that it’s only for older people. This article will lay out why both of these are false and what estate planning really should be.
Estate planning is making sure your stuff and your medical care go the way you want. Wills, Power of Attorneys and Medical directives make up the bulk of Estate Planning.
Here’s where things get a little uncomfortable. It’s not just older people that pass away. Or become incapacitated in some way.
The following chart is from the CDC. It is from an annual report that lays out deaths in the United States. Due to the controversy over Covid-19, we are using the chart from 2019. It covers 2019 compared to 2018. If you are a numbers person you might find the whole report fascinating. It covers things like top causes of death, death by ethnic groups, etc.
For our purposes though, the chart shows that people in their 40s definitely pass away. The reality is that estate planning is something any adult should consider, but let’s drill down on why 40 somethings are in a prime position to tackle estate planning.
While Americans are having children later in life, the vast majority of parents are already parents by the time they are in their 40s. If you want to pass down your vintage car to your son or a niece, put it in writing. If you are restoring that car with the thought of giving it to your relative on a future birthday, there’s no harm in putting it in your Will now. Because if you have a freak accident between now and then, your relative might not get it.
Usually if a spouse dies, all of their things go to the other spouse. But what if there are children from a previous marriage? Or step-children that you want to treat the same as your natural children? Probate laws change. All laws can change. That’s why you need to take the time to put a Will in place. Without a Will, your heirs and family are at the mercy of whatever laws are currently on the books.
Americans in their 40s typically have a house, a car and hopefully have a retirement account. Laws regarding probate are typically based on percentages. You might not think 10% or 20% of your bank account is very much, but it might be the difference between your spouse being able to do something that you want them able to do. And you can avoid the delay of probate altogether if you set up payable-upon-death designations. Meaning your beneficiary can use the assets right away instead of at the end of the probate process. Which even with a Will, can take time. Or you can set up a Living Trust that lays out exactly when and how assets are awarded. This can all be a part of Estate Planning in Virginia.
The gig economy is in full swing and lots of 40 somethings have a side hustle or business. Do you know what will happen to your business in the event you are incapitated in some way? Business owners can have unique death benefits that include payments to employees. If your business will literally close without your presence, it might be smart to get a life insurance policy that pays your employees some amount of severance pay.
Does anybody know your exact preference about end of life or major medical issues? Have you really thought about those things yourself? Over 35k people in the US die every year in car accidents. And that’s just car accidents. Freak accidents and sudden illness are never planned.
Similar to probate, the laws regarding medical choices change. What if your child and your spouse disagree about your wishes? Or maybe you had a well thought out conversation with a buddy but because he’s not a relative, he has no legal standing. Everyone handles trauma differently. Your buddy and your spouse might get along great until emotions run high. Instead of hoping things will go the way you want, sit down with a lawyer and draft out these important documents.
Sitting down with an Estate Planning Attorney is probably cheaper than you think. And there’s no harm in calling around for rates. At our law firm, we charge $200 for an initial consultation that might be all you need to then do all this stuff on your own. There’s no legal requirement that Wills or Durable Power of Attorneys be drafted by lawyers. But there are specific rules about how things need to be done. So if you are a DIYer at heart, what’s $200 to make sure you cover your bases?
Pro Tip: To keep your legal costs down, do as much prep work as possible before you show up to the lawyer’s office. They usually bill by the hour. This means if you are spending time thinking about which of your kids should get your fishing boat, that’s costing you money. If you walk in with a list of your property and who gets what, it cuts the time (and cost) considerably. Use lawyers for their expertise, not as a potted plant while you think. Their expertise is considering things you haven’t. Come in with a detailed plan and then let them find the holes in your strategy.
While Estate Planning is honestly for each and every adult, once you are in your 40s it should become a priority. And thankfully it doesn’t take that much time. Have a few conversations with your trusted advisors and then spend an hour or two with a lawyer. You can then complete the work on your own or pay a lawyer to do the actual drafting. With this baseline in place you can revisit your plan after major life events or every 5-10 years. Updating these items can go even quicker!