The right time for estate planning
A common misconception about estate planning is that you should only worry about it when you are old.
However, estate planning is one of the most important things you can do to protect yourself, your assets and your loved ones. While it might be uncomfortable to discuss, everyone knows that no one lives forever. As soon as you have something worth leaving to someone, or someone you want to inherit whatever you have, it is time to start thinking about estate planning.
Many financial advisers recommend starting your estate planning as soon as you have the legal capacity to enter into a contract, and to update it every three to five years after putting it in place. This is because at 18 years of age, you are responsible for your own finances and health care, and you want to ensure that every base is covered.
For most young adults, creating an estate plan (least of all a will) is the least of their concerns, which is normal. But it’s one of the most common estate planning mistakes anyone can make.
There are a few common life events that make it necessary for you to prioritise your estate plan. No matter what your age, you might want to think about starting (or updating) your estate plan during these life milestones.
- Opening a savings account – After opening a savings account, you should think where those funds would go in the event of your death. Doing so will ensure that your money will be passed on to a beneficiary of your choosing.
- Starting your first job – With your first job usually comes superannuation. Whilst the super balance may be low to begin with, many people have significant levels of insurance attached to their superannuation fund. Most funds offer the ability to make a binding nomination to either your estate, or your dependants.
- Buying a property – The purchase of a property is a sign to begin estate planning. This event is usually the first significant financial commitment for a young couple or for an unmarried individual. Since a property is one of the most valuable assets you will own at this stage of your life, it’s important to think of who you would like to leave your home to in your estate plan.
- Marriage, divorce and remarriage – Once you are married, you should consult with an estate planning solicitor to discuss what should happen to your assets (both joint and separate) if one of you were to die. This may involve drawing up a will, a trust or whatever will be necessary to protect your assets. In the event of a divorce or remarriage, experts advise you to update your plan accordingly.
- Birth of first child and each one after – One of the most obvious life milestones that should get you to start estate planning is the birth of a child. As a parent, you should place as much importance on custody arrangements for minor children as you would with the distribution of your assets. If you are married or with a longtime partner, consider having a thorough discussion as to who would be the best choice as your child or children’s guardian. Another key issue to tackle is when your children would be ready to take control of their inheritance. Additionally, you should set in place measures regarding their financial security in the event of your untimely passing.
- Inheritance of money or other assets – Receiving a significant inheritance is a common trigger for people to start or revisit their own estate plan. You should update your estate plan to reflect any additional money or assets that you received.
Estate planning is one of the most important things you can do to protect yourself, your assets and your loved ones. It is never too early to think about how you can get your affairs in order and begin considering your options. The sooner you outline your plan, the less chance there will be for problems to happen after you are gone.
Being prepared now with a comprehensive, up-to-date estate plan can provide you and your family with financial security if anything happens.
McConachie Stedman Financial Planning is an Authorised Representative of Wealth Management Matters Pty Ltd ABN 34 612 767 807 | AFSL 491619