Estate planning is designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your specific estate planning needs.

Consider a few scenarios:

  • You have a small estate, and your only concern is that certain people receive specific family heirlooms. A simple will is probably all you’ll need.
  • You have a large estate, and your primary goal is to minimize any potential estate tax impact. Here, you’ll need to use more sophisticated techniques in your estate plan, such as a trust.
  • You inherit complex assets at a difficult time, and you need to make sure they’re managed responsibly while you get your affairs in order.

Do you know what financial strategies are best? If not, you should consider estate planning.

To help you better understand what estate planning might mean for you, I’ve put together some guidance for people in different stages of life. Everyone’s needs are different, but with just a little information, you can learn enough about your options to work with a professional and set yourself on the path that’s right for you.

Estate Planning for New Adults Turning 18

You might think that 18 seems a little young to kick off the estate planning process. But no one can predict the future, and incapacity through injury or illness can strike anyone at any time. Because of this, all adults over 18 should consider having: 

  • A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. 
  • An advance medical directive: The three main types of advance medical directives are (1) a living will, (2) a durable power of attorney for health care also known as a health-care proxy, and (3) a Do Not Resuscitate (DNR) order. Be aware that not all states allow each kind of medical directive, so make sure you select one that will be effective for you.

Young and Single Adult Estate Planning Tips

Speaking generally, young and single people often haven’t built much of an estate to complicate matters. They’re typically newer to the workforce and haven’t had the time or assets to make major investments and purchases. But if you have some material possessions, like a car, an inheritance, or property, you should at least work with a professional to draft a legal will. If you don’t, you won’t be able to control what happens to those possessions in the event of your death or incapacity. Those assets will likely go to your parents, and that might not be what you want.

A will allows you to leave your possessions to anyone you choose — whether it’s your sibling, best friend, significant other, or favorite charity.

Estate Planning Considerations for Unmarried Couples

So, you’ve decided to be together forever — but it’s not quite paperwork official. While it might seem obvious that you’d want your life partner as your beneficiary, that won’t be possible unless you have a legal will. According to state law, only your closest relatives can inherit your property. Because your partner isn’t legally your relative, they may end up with nothing if you pass away suddenly without time to address their status.

There are other options available for certain situations. If, for example, you share certain property — such as a house or car — you might consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically.

Married Couples Seeking Estate Planning

It might be a mistake to assume your estate will automatically transfer to your spouse if you pass away suddenly without an estate plan in place. States each have laws regarding the distribution of assets, and your spouse might end up sharing your estate with other family members. Community property states dictate that each spouse owns half of all assets and income — and each designates what will happen to their half. Estate planning will help you both ensure the assets you hold go exactly where you want them.

In the past, if married couples wanted to take advantage of their combined federal estate tax exclusions, they had to do careful estate planning — such as the creation of a credit shelter. That changed in 2011. Now, the executor of a deceased spouse’s estate can transfer any unused estate tax exclusion amount to the surviving spouse without such complicated planning.

While it might be tempting to use these portability rules for estate tax avoidance (by using outright bequests to your spouse instead of traditional trust planning, for example), you should resist relying upon them for the sole purpose of their tax advantages. A credit shelter trust created upon the death of your first spouse may still be advantageous for several reasons: 

  • Portability may be lost if the surviving spouse remarries and is later widowed again
  • The trust can protect any appreciation of assets from estate taxes incurred at the second spouse’s death
  • The trust can protect assets from the reach of the surviving spouse’s creditors 
  • Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses

Married couples with one spouse who isn’t a U.S. citizen have different planning concerns. Non-citizen spouses cannot receive the marital deduction — although in 2022, a $164,000 annual exclusion is allowed. If you meet certain requirements, a transfer to a qualified domestic trust (QDOT) will qualify for the marital deduction.

Estate Planning for Families with Children

If you’re married and have children, you and your spouse should each have your own will. Your wills are vital because you can each name a guardian for your minor children if both of you die simultaneously. If you fail to name a guardian in your will, a court may not appoint the person you would have selected.

Also, without a will, some states dictate that at your death some of your property will go to your children and not to your spouse — and that can pose additional complications. If minor children inherit your assets directly, the surviving parent will need court permission to manage the money for them.

You may also want to consult an attorney about establishing a trust to manage your children’s assets if both you and your spouse die at the same time. Life insurance is another important decision as your surviving spouse may not be able to support the family on their own and may need to replace your earnings, not to mention plan for minor children’s education.

Estate Planning for Blended Families

If either you or your spouse has children from a previous marriage, a simple will most likely would be insufficient. It opens the possibility that your biological children could be cut out of your spouse’s estate down the road. If you leave everything to your spouse, they would be under no obligation to your children. Please refer to your state’s specific laws for married couples.

Consider a Marital Trust that will allow your assets to pass to your surviving spouse, while at the same time earmarking specific assets for the children upon their death. This plan allows both spouses to be involved in any decision making and includes all the children in the family. A good practice is to take time with your current or former spouse to ensure each child is properly taken care of in your estate plan.

Outright Ownership is an estate plan structured to transfer all assets to the surviving spouse without a trust for the children involved.

Family Trusts see all assets going into a combined Trust following the death of the first spouse. The primary benefit to this structure is it allows the surviving parent to determine how to distribute the assets for each child.

An Immediate Bequest is another option that does not involve trusts since you would leave assets to each child in your actual will. In cases where you might want a child to inherit items directly, it can be the best choice.

Pre-Retiree Estate Planning Tips

If you’re in your 40s or 50s, you may be feeling comfortable. You’ve accumulated some wealth and you may be thinking about retirement. At this point, estate planning begins to overlap with retirement planning. Neither of these is more important than the other — caring for yourself in old age is every bit as worthwhile as providing for your beneficiaries when you die.

Although Social Security may still be viable when you retire, those benefits alone may not provide enough income for your retirement years. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA). That way you’ll be better positioned to remain comfortable for decades to come. It is strongly recommended that you work with a Financial Advisor to create a customized retirement plan. This will help provide a roadmap for you to consider your retirement goals and help determine what steps you can take now to put you on the right track.

Estate Planning for the Wealthy and Worried

Depending on the size of your estate, you may need to be concerned about estate taxes.

In December 2017, the Tax Cuts and Jobs Act doubled the gift and estate tax basic exclusion amount and the generationskipping transfer (GST) tax exemption to $11,180,000. After 2025, they are scheduled to revert to their pre-2018 levels.

For 2022, $12,060,000 is effectively excluded from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40%.

Similarly, the GST tax is imposed upon wealth transfers made to grandchildren (and beyond). For 2022, the GST tax exemption is also $12,060,000 with a top tax rate of 40%.

Whether your estate will be subject to state death taxes depends upon its size and the tax laws in effect in the state where you primarily live.

Estate Planning for Older or Adults With Declining Health

If you haven’t worked with a professional on a will, now is the time. Similarly, if it’s been a while since you’ve looked it over, take a look to make sure it’s up to date. Also strongly consider setting up a revocable living trust along with a durable power of attorney and a health care directive. See our “Ensuring Continuity in the Face of Incapacity” article for more information on powers of attorney and advanced health directives.

Talk with your family about your wishes and make sure they have copies of your important papers — or know where to find them when they need them.

Reviewing Your Estate Plan

Reviewing your estate plan will give you peace of mind and alert you to any other potential changes that might be necessary. Although there’s no set-instone rule about how often you should review your estate plan, you should conduct a review:

  • After major life events
  • Following annual changes to the tax code or other significant economic shifts 
  • At least every five years

Other reasons you should do a periodic review include:

  • Your marital status changes (many states have laws that revoke part or all your will if you marry or get divorced) or your children’s marital statuses change
  • You added to your family through birth, adoption, or marriage
  • Your spouse or a family member died, is ill, or incapacitated
  • Your spouse, your parents, or other family member is now dependent on you
  • There’s a substantial change in the value of your assets or in your plans for their use
  • You receive a sizable inheritance or gift 
  • Your income level or requirements have changed 
  • You are retiring 
  • You make a change in your estate plan (e.g., you created a trust or executed a codicil to your will)

A Note on Trusts

While trusts offer numerous advantages, it’s essential to understand your options. Using trusts involves a complex web of tax rules and regulations, and there are up-front costs and ongoing administrative fees to consider. No matter your life stage, you should seek the counsel of an experienced estate planning professional, as well as your legal and tax advisers, to make sure that your strategies are aligned with your goals.