Surveys that are conducted to gain an understanding of the estate planning preparedness of people in the United States are not encouraging. Year after year, about two-thirds of Americans do not have estate plans in place.
There is another factor that enters the picture for people that do have plans. In many if not most cases, this is not a one and done endeavor. Estate planning should be viewed as an ongoing process, because revisions will probably be necessary as time goes on.
Stages of Life
Young adults that are in their 20s through 40s are the least prepared as you might expect. That makes sense on the one hand because of life expectancies. On the other hand, these are the people that are the parents of minor children.
When you have youngsters depending on you, estate planning is an absolute must. You have to name a guardian for the children in a will. In addition, you have to consider the empowerment of an adult to handle assets on behalf of children.
A living trust is a good alternative to a simple will as an asset transfer vehicle. You act as the trustee while you are living, and you name someone to succeed you after your passing. This individual or entity could administer the trust on behalf of minor beneficiaries.
There is also a testamentary trust that can be contained within a will. It would become active after your passing to provide asset management for a minor child, but requires probate.
After your children are grown, your concerns are naturally going to shift. Along the way, you may be in a very different financial position. The plan that you created years ago will not reflect the current circumstances, so a revision will be necessary.
Additions and Subtractions to the Family
When there are additions to the family that have estate plan implications, adjustments will be needed. This also applies to subtractions, and it extends beyond beneficiary designations.
For instance, let’s say that you name your younger brother as the trustee of your living trust. If he dies before his time unexpectedly, you have to change the trustee designation. With this in mind, you should actually name alternate beneficiaries and administrators when you are devising your estate plan.
Changes in Marital Status
There are general reasons for revisions, and there are also specific events that can change the playing field. Without question, a change in marital status is one of them. Beneficiary designations will usually be adjusted, and there can be other concerns.
If you are getting remarried as a parent, you can take steps to protect your children’s inheritances. A commonly used solution is the qualified terminable interest property trust.
First, you fund the trust, and you name a trustee. Your spouse will be the first beneficiary, and your children will be the successors. If you die first, your spouse will receive distributions of income that is generated by the trust.
When you are drawing up the trust, you can give the trustee the latitude to provide discretionary distributions of the principal as well. Your surviving spouse could also use property that is owned by the trust.
They would be provided for appropriately, but they would not be able to change the terms. After the death of your surviving spouse, your children would become the sole beneficiaries of the qualified terminable interest property trust.
Take Action Today!
Action is required if you are going through life with an outdated estate plan. And of course, if you do not have any plan at all, there is an added level of urgency.
We can gain an understanding of your situation, make recommendations, and help you devise a plan that is ideal for you and your family. You can call us at 818-937-2335 to set up a consultation at our Burbank, CA estate planning office, and you can use our contact form to send us a message.