Estate planning is vital for families, regardless of age or wealth. Understanding how to draft a will and assess life insurance needs can make a significant difference in your loved ones' future.
My daughter posed a tough question when she was eight: “What happens if you die?” Facing such topics isn’t easy, but having an estate plan prepared helped us assure her and her brother that they’d have support.
We discussed various scenarios based on their ages, along with finances, ensuring they’d be able to stay in our home, attend the same schools, and have funds set aside for college. Our goal is to be there for them, even when we can’t physically be present.
Making the Most of a Difficult Topic
As parents, we must prepare our children for life without us, a reality that can come unexpectedly. My estate plan is designed to provide for them, even as I hope it never becomes necessary.
Unfortunately, many families neglect this responsibility, often out of discomfort with mortality or the belief that tragedy won’t strike them. A Gallup poll found that only 46% of Americans have a will, with even fewer engaging in comprehensive estate planning.
Among my clients, those who experienced the early loss of a parent are usually the most committed to planning. They’ve faced the chaos of sudden loss and want to ensure their children avoid similar trauma.
Everyone should take a cue from them.
Estate Planning: For Everyone
When many think of estate planning, they picture wealthy retirees distributing assets. However, it’s a practical necessity for anyone, regardless of age or income.
The average life expectancy in the U.S. is around 76 years, with men living approximately 75 years and women about 80 years. While the chances of a 30- or 40-year-old passing away early are low, they’re not nonexistent. We’ve all heard tragic stories of sudden health issues.
These incidents may be infrequent, yet they serve as a reminder that we must prepare for the unexpected. I always recommend starting estate planning after the birth of your first child. If you’ve missed that window, don’t hesitate—begin planning for your family’s current situation.
Begin with the Essentials
Every family should have at least a will, a legal document outlining guardianship for minors and distribution of assets. Without a will, a court will decide these matters, often favoring next of kin, which isn’t always the optimal choice. A will allows you to select a guardian who you believe will care for your children best. Discuss this choice openly with them beforehand.
Hiring an estate planning attorney is advisable for drafting a will. Costs vary by location, typically ranging from a few hundred dollars. Some local or state bar associations and non-profit legal firms offer free estate planning forms. Services like Trust & Will and LegalZoom provide more comprehensive documentation, including trusts, for an affordable price.
As a blended family, we sought an estate planning attorney to address our unique needs, resulting in a detailed will and several trusts for our children's expenses, costing us $1,100.
Importance of Life Insurance
Alongside a will, obtaining life insurance is essential. The younger you are when you purchase it, the more reasonable the rates. For instance, a 30-year-old can acquire a $1 million policy for 20 years at around $43 monthly, while at 40, the cost rises to $61. Typically, men pay higher premiums, and those with health conditions incur even greater costs.
Think a $1 million policy seems excessive? Consider how much your family would require in your absence, and the total will likely exceed that sum. I generally recommend a policy worth five to ten times your salary. Special circumstances, like a child with special needs or significant debt, may necessitate a higher coverage amount.
Utilize an online calculator to determine your life insurance needs.
Adapt to Life Changes
Estate planning can be challenging due to the unpredictability of life’s events. It's essential to remain adaptable. We review our estate plan every few years to ensure it aligns with our current situation. I suggest updating your plan at least every five years or after major life events like births, marriages, divorces, or deaths.
Given the age gap in our family, we envision scenarios where our son may be old enough to care for his sister. However, we don’t want to place undue burdens on him, so our estate documents provide for an alternative guardian. Our trusts ensure there are sufficient funds to support that arrangement.
We also want our planning to extend beyond childhood. With education being a priority, our trusts will cover college expenses and reward good academic performance. Additionally, provisions are in place for helping with a home down payment or starting a business. We aim to support them throughout their lives.
Planning is an Act of Love
Though no amount of planning can truly ease the pain of loss, having these arrangements can provide comfort. I strive to maintain my health and make sensible choices, yet some factors remain beyond my control. My daughter, at nine, understands this reality. Knowing we’ve prepared a plan alleviates her fears and calms mine.
