We all know that planning for the future is a smart and responsible course of action, but it is hard to appreciate its true importance when it is so far away. Even so, going through life without an estate plan is needlessly risky. The stakes get even higher if you are a young parent without an estate plan.
The best time to get into estate planning is today. In this article, we will highlight why you need to establish a concrete strategy for your estate. We will also detail estate planning tools and methods you can use to secure your family’s future.
The Reasons Why Your Young Family Needs an Estate Plan
When you are young, the world is your oyster. You feel like you can take on anything the world throws at you and come out stronger on the other side.
That mindset changes when kids enter the picture. Suddenly, your children become the most important part of your life. Protecting them from all of life’s challenges becomes your priority.
Estate planning helps you accomplish those goals. Why is estate planning so helpful to young families? The answers to that question are detailed below.
Early Estate Planning Helps You Set Aside Long-Term Assets for Your Children
It is never too early to start setting aside assets for your children to use when they are older. Through estate planning, you can safeguard and effectively preserve bank accounts, stocks, real estate properties, and numerous other assets. These assets can accumulate value and yield greater returns for your children.
No matter what unexpected events occur, you can rest assured that the assets you have set aside for your children are safe.
Planning your estate now also allows you to save money on the investments you intend to leave behind for your kids. You can pour resources into relatively low-risk investments knowing they will enjoy stable growth for decades. There is no need to seek out high-risk assets because you are trying to boost your child’s accounts as quickly as possible.
Early Estate Planning Creates a Financial Safety Net for Your Children
One harsh reality of life is that we can all be struck down by tragic accidents and unforeseen developments. Regardless of how cautious you are, one unfortunate turn of events can still spell tragedy for you.
Recent statistics show that young adults have acknowledged that reality. They have also taken steps to protect themselves and their loved ones better. According to a survey conducted by Caring.com, 63% more young adults now have estate planning documents compared to 2020. Caring.com adds that young adults are now nearly as likely as middle-aged adults to have a will.
The uptick shows that many young parents have become more aware of potential threats in their everyday lives. In response, they are taking measures to protect their children. You should consider following in their footsteps.
Your untimely passing can leave your young kids in a tough spot financially. Make sure your children never end up in that difficult situation by setting up a contingency plan today. Purchase a life insurance policy that will give your children and their caretakers’ resources to work with if you pass away unexpectedly.
With that safety net in place, you can enjoy peace of mind knowing that your passing will not financially burden your children.
Early Estate Planning Allows You to Dedicate More Time to the Process
Most careers are not demanding during the early years. You must dedicate yourself fully to your work while at the office, but you can leave it behind after work hours. As you advance through your field and take on more responsibilities, your career will likely demand more time. Striking a proper work-life balance can mitigate that potential problem, but you will still commit more to your career than you previously did.
Given how demanding careers can become later on, it makes sense to take care of essential matters while you are getting started. You can include estate planning in those essential matters.
Working on estate planning now allows you to dedicate more time to it. You can schedule more meetings with your estate planning attorney and determine the best way to manage your assets.
Dedicating more time to estate planning early on also simplifies matters for you in the future. You can change elements of your estate strategy faster because existing plans are in place. Starting from scratch would not be necessary.
Early Estate Planning Gives You Time to Study Your Options
Commonly available estate planning tools include wills and trusts. You can also use various types of wills and trusts to safeguard your estate. We will get more into the specifics of those estate planning tools later in this article, but we can already say that you have plenty of options to consider.
The challenge is identifying the estate planning tool that suits your situation best. In some cases, people benefit greatly from using both wills and trusts.
This is another instance wherein early estate planning benefits young parents. Because you are tackling this endeavor so early, you can take the time to study the available options. The pressure to set a plan in place is reduced because you and your partner are likely still in good health.
You will be glad you took the time to study your estate planning options carefully when you see their positive impact on your assets.
Early Estate Planning Grants You an Opportunity to Educate Your Children
You are creating an estate planning strategy to ensure that the right assets end up in the hands of your intended recipients. Working on that estate plan lets you detail your line of thinking to your kids.
Tell them about the estate planning instruments you used and why they help grow assets. Discuss the assets you intend to leave behind and your reasoning for distributing them the way you did.
It is good to have those conversations with your kids because it gets them invested in the process. They can better understand the reward and responsibility you are leaving to them. That should give them more reason to act with greater care.
Those conversations are critical if you plan to give your children power of attorney. Explain how you want them to wield that legal right when making healthcare or financial decisions.
The knowledge you pass down during those conversations can also help your kids when it is their turn to get their estate plans in order.
Early Estate Planning Mitigates the Effects of Taxation
Taxes are typically imposed on sizable estates. You must account for estate taxes and their impact on the assets you leave behind.
Mitigating the effects of taxation is possible if you have an estate plan. Partner with an estate planning attorney and devise a plan that minimizes the tax obligations of your heirs. Going through that ensures that your children will benefit as much as possible from the assets you leave behind.
Early Estate Planning Accelerates the Transfer of Assets
The accidental death of a breadwinner can weigh heavily on a young family. With young kids to care for, the surviving parent may be unable to seek employment or pay for child care that could allow them to pursue job openings. A young family trapped in that situation may fall into a financial hole they cannot escape. They need a quick payout from your estate.
Unfortunately, New York State laws may prevent your family from accessing the assets in your estate immediately after your passing. Because of the probate process, your family may need to wait several months before they can use the assets you left behind. They may not be able to wait that long.
Estate planning can save your family from that dire situation. Use estate planning tools to avoid probate and ensure your assets are transferred to your beneficiaries immediately.
The Estate Planning Tools You Should Consider Using
The benefits of early estate planning are undeniable. After learning about its benefits, you may wonder how to start the process.
The first step typically involves reaching out to an estate planning attorney. Proper estate planning requires dealing with various legal matters, so it is wise to have an expert guide you through the process.
Soon after hiring an attorney, you must focus on the available estate planning tools. You will need to decide which tools you want to use.
Let’s discuss the available options below.
Last Wills and Testaments
The last will and testament are probably the estate planning tools most people know best. Many folks generally know a will’s purpose, even if they have never drafted one.
Simply put, the will is a document that details your final wishes. It is a document that may name guardians for the young children you are leaving behind. You can also instruct your heirs to fulfill financial obligations if you have outstanding debts.
Still, wills are used most often to detail the distributions of an estate’s assets. Through your will, you can clearly state which assets go to which beneficiaries. Whether you are discussing financial assets or real estate properties, you can specify how you want them distributed to your beneficiaries.
Drafting a will is not that difficult in New York State. For a will to be deemed legitimate in New York State, the person creating it must be of sound mind and at least eighteen years of age. You should also sign your will in front of two witnesses to ensure legal challenges do not bring it down.
With a will created, you can feel at ease knowing you have a concrete estate plan.
Next up, you should consider forming a trust if you intend to transfer ownership of your assets to your heirs. The main purpose of a trust is to hold assets. The trustor transfers ownership of their assets to the trust, where they will be held until specific conditions are met. Once the conditions are met, the assets in the trust will be distributed to their rightful owners as decided by the trustor.
Trusts are the legal instruments people typically use to bypass probate. You should use this estate planning tool to transfer assets to your heirs as soon as possible while minimizing tax obligations. These trusts also help keep your assets and their status private. Only the people directly involved with the trust will learn about its contents and the instructions you leave behind.
Establishing a trust is highly recommended if you still have a young family because it can be easily changed. Certain developments in your personal life may prompt you to reconsider the decisions you have made regarding your assets and even your selected guardians. Now that you have had more time to examine the situation better, you realize that you have made some mistakes. Implementing those changes should be a relatively straightforward process as long as you have a good lawyer.
Powers of Attorney
Power of attorney is another tool you can wield for estate planning purposes. However, it differs from wills and trusts in the sense that it is not utilized for asset distribution. Instead, you give someone power of attorney if you want them to control your finances and/or your medical care.
Once you grant someone power of attorney, you give them the authority to make decisions on your behalf. The power of attorney’s authority is determined by the contents of the documents you create. You can give another individual almost complete control over your assets or limit their rights considerably.
Sorting out power of attorney during estate planning is important if you want to grow your assets as early as possible. Choose your spouse, a relative, or one of your relatives as your agent and give them authority to finalize deals that can boost your asset pool.
Do not shy away from drafting a power of attorney document early because it can still be revoked if circumstances change.
You cannot afford to put estate planning on hold for too long. Waiting too long to create a concrete plan can put your family at risk. Contact us at the Alber Law Group today, and let’s start working on your estate plan!