When we take vacations, we plan ahead to make sure we have a good time during the short time we are away from the hustle and bustle of life. When the clock strikes midnight at the start of the year, we think of all the good things we want to achieve and list New Year’s resolutions and plans to achieve them. We make plans throughout our lives to make sure our retirement will be as we envisioned it. But why is it that people don’t plan for a good end of life either?
Have you taken the time to think about what will happen to your possessions and your possessions after your death? There is a common misconception in Australia that estate planning is a priority that only those nearing retirement should prioritize. In reality, this is not the case. While it can be uncomfortable to argue, everyone knows that no one lives forever. With this, it is essential to realize the importance of having an appropriate estate plan to distribute your assets according to your wishes.
Just as you need to plan for retirement after entering the workforce, there are several life events that should prompt you to put in place an estate plan (or revisit the one you’ve already developed).
When is the right time to start developing your estate plan?
Since there is no guarantee of life on earth, estate planning should be done while you are of sound mind and body.
Financial advisers may recommend that you begin your estate planning because you have the legal capacity to legally enter into a contract and update it three to five years after it is in place. This is because at 18 you are responsible for your finances, health care and power of attorney and you want to make sure every base is covered.
But for most young adults, creating an estate plan (let alone a will) is the least of their worries, and that’s okay. This is one of the most common estate planning mistakes you can make.
There are a few common life events that require you to prioritize your estate plan. Regardless of your age, you may want to consider starting (or updating) your estate plan during these life stages.
- Open a savings account – After having opened a savings account, you must think about the destination of these funds in the event of death. This will ensure that your money will be transferred to a beneficiary of your choice.
- Buy a property – Buying a property is a sign to start estate planning. This event is usually the first major financial commitment for a young couple or for a single person. Since a property is one of the most valuable assets you will own at this point in your life, it is important to think about who you would like to bequeath your home to in your estate plan.
- Marriage, divorce and remarriage – Once you are married, you should consult an estate planning lawyer to discuss what should happen to your assets (both spouses and separated) if one of you dies. It involves drafting a will, trust, or whatever else you feel is necessary to protect your assets. In the event of divorce or remarriage, experts advise updating your plan accordingly.
- Birth of the first child and everyone after – One of the most obvious life stages that should lead you to start estate planning is the birth of a child. As a parent, you must give as much importance to the arrangements for custody of minor children as to the distribution of your property. If you are married or with a long-time partner, you should have an in-depth discussion about who would be the best choice as a guardian of your child (ren). Another key issue to be addressed is when your children would be ready to take control of their inheritance. In addition, you must put in place measures regarding their financial security in the event of premature death.
- Inheritance of money or other property – Receiving a large inheritance is a common trigger for people to start or revisit their own estate plan. You should update your estate plan to reflect any money or other assets you received.
When should I write important legal documents?
By paying attention to certain stages in life, you can identify the right time to write the important legal documents needed to develop a comprehensive estate plan.
When should I appoint a guardian?
As you prepare to welcome your first child, it is advisable to start thinking about who you should appoint a guardian if something should happen. New parents usually don’t want to think about it, but making it official is still crucial.
When do I have to make a will?
As mentioned, the best time to create a will is as soon as you become a legal adult (18) or go through one of the estate planning triggers mentioned. Unfortunately, more than half of Australians have not even written a valid will. Not making one can leave your loved ones in a state of confusion in the midst of a loss. A will can help prevent this scenario by allowing you to appoint a power of attorney, provide financial guidelines, and specify how your assets will be distributed.
When should I create a trust?
You can start thinking about setting up a trust when you have more assets. Trusts give you more control over where your assets will be allocated while you are still alive and after your death. It can also help you avoid probate, as well as additional taxes or fees, as your assets are inherited by your beneficiaries.
Estate planning is one of the most important things you can do to protect yourself, your property and your loved ones. It’s never too early to think about how you can get your own things in order and start considering your options. The sooner you set out your plan, the less chance there is for problems to arise after you leave.
Being prepared now with a comprehensive estate plan can provide you and your family with financial security should something go wrong. It is also important to continually update and review your estate plan as major changes occur in your life.
Estate planning is an essential part of financial planning, but the business can seem overwhelming at first glance. You do not know where to start ? You can learn more about estate planning at nestegg. Explore our website today!