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When do I Need Estate Planning?

August 3, 2017

 

Many people believe that they should only start to worry about their estate planning at retirement. However, there are many life events that serve as a reminder to get your affairs in order to ensure your spouse, children, and other loved ones are taken care of for the future.  Here are six life events that should trigger consideration of putting together a new estate plan or to updating your existing one:

 

1) Marriage - Getting married not only is a time when you make a commitment to love your partner for better or worse; it is also the point at which your financial portfolios become one. In California, all income earned and property obtained (with some exceptions) after marriage is considered community property. This means that even if one spouse doesn't work or another spouse makes more money than the other, the assets and accounts held by either party are considered part of the whole. Most importantly, if your spouse passes away, everything you own will go to them. For some, this is not ideal as there may be some property that you wished would go to others, especially in blended and non-traditional families. Therefore, this is the perfect time to take stock of your financial picture, which includes talking with an estate planning attorney.

 

2) Divorce - Unfortunately when a marriage ends, there are significant financial considerations and decisions that need to be dealt with. In many cases, the couple may have had an estate plan in which they left each other all of the assets held during their marriage.  Or, there may be existing life insurance policies and retirement accounts naming their former spouse as a beneficiary. In any case, estate planning is critical at this point to ensure that assets don't end up in places you don't want them to.

 

3) Children - The birth or adoption of a child should trigger thoughts about protecting your newest and most vulnerable family members. Estate planning not only includes naming beneficiaries in case of your death, but in the case of minor children, should encompass naming successor trustees to manage the finances for health, welfare, and education long into the future. Finally, nominating future guardians is essential in making sure that your children would be cared for in the manner that you would like. 

 

4) Buying or Selling a Home - Buying or selling a home is a stressful time that involves mountains of paperwork and tedious details. It is understandable that many don't want to add estate planning to the mix. However, during this period, estate planning may be more critical than you think. Most people's net worth come from the value of their homes and the number one item that everyone should have in their trust is their house. By failing to create or update your estate plan to include your most valuable property, there is a big risk that it may be forgotten, potentially leading to a situation where the house is subject to probate upon your death. By adding estate planning to your checklist during the home purchase/sale process, you will ensure that the most valuable item in your portfolio is protected.

 

5) Inheritance - If you yourself are in the process of an estate distribution or are expecting to inherit in the very near future, now is an excellent opportunity to engage in estate planning yourself.  In many cases, this inheritance will represent a large portion of your estate and not taking the time to property evaluate how best to protect it can be problematic. Most notably, inheritances are considered separate property in California, meaning that your spouse may not stand to take or use the entirety of the assets in the case of your death. If your parents or other family members took the time to ensure that you were able to inherit from them, you should do the same for your spouse and children. 

 

6) Moving in or out of state - Are you planning on leaving California? Or are you planning on moving back after some time out of state? Do you own property? If so, conflicting laws and the character of property can greatly affect what happens to your property when you die. For example, trusts are generally governed by the laws of the state in which they were created. This can cause serious conflicts when property is located in conflicting community property / non-community property states, as your assets may change character with respect to ownership moving from one state to another. Depending upon the laws of the state that your going to and coming from, along with how and when your estate plan was prepared, you should consider proper planning with an estate planning attorney or a review if you have a plan already. 

 

 

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