Estate Planning at Different Life Stages

The 25th high school reunion is often the first sobering reminder of the aging process. As we circulate, we find ourselves comparing our professional achievements with those of our classmates, and wondering if we appear as much older to them as they may to us.

Although the biological clocks of some people seem to tick at a slower rate, all of the clocks eventually wind down. By the 50th high school reunion, we have generally moved beyond one-upmanship, mellowed, and accepted the inevitability of the aging process. We have also entered what is known as the legacy phase of life, when we begin to think about how the possessions we have accumulated and the values that define us will be transmitted.

Of course, even before we start focusing on legacy, we will have been providing for our families and helping the institutions of our community through volunteer service and contributions. The level and type of contribution depends on our stage of life, just as the components of our investment portfolio evolve as we grow older.

We may think of estate planning as something to be done when we reach the later, legacy phase of life. Indeed, it is very important then, but it should begin much earlier. Here is a summary of what might be appropriate at different stages of life.

Estate Planning Under Age 50

The years between ages 18 and 50 are the center of life when we complete our formal education, launch a career, marry, have children, purchase a home, and probably assume maximum financial responsibility. Beginning in our 30s, we are also more likely to become involved in the community and begin to serve on boards.

Because our net worth is still probably quite modest, and we have not yet exited from our immortality complex, we tend to postpone estate planning during these years. That is a mistake, for we need to provide for the care of dependents, properly dispose of the property we do own, and arrange for management of our affairs in the event of a disability resulting from an accident or illness. At the very least, we should have a simple will, power of attorney, a medical directive, and adequate insurance with proper beneficiary designations.  

Estate Planning Between Age 50 and 60

During this decade educational expenses for children will likely have come to an end, but elderly parents may require a financial subsidy. These tend to be our peak earning years when we significantly increase our estate value. It is also the time when we achieve recognition in our profession and assume leadership roles in community organizations.

The simple will that may have sufficed at a younger age is no longer adequate, for there may be adult children in different circumstances, grandchildren, and perhaps a divorce and remarriage. It is now necessary to have a more complex estate plan that may include one or more trusts as well as a will and the basic documents mentioned above. Also, steps to minimize taxes at the end of life will likely be part of that plan. 

Estate Planning Between Age 61 and 75

Most of us will retire during this period, and retirement planning will start intensifying at about age 60. Our net worth will likely have continued to grow, and we may own real estate in different places, a significant investment portfolio, and valuable items of tangible personal property. Some grandparents, who are able, will be subsidizing grandchildren’s education. We will likely convert our RRSP to an RRIF and begin mandatory withdrawals no later than age 71.

This is the stage of life when we should be prepared to spend considerable time developing a comprehensive estate plan that will include a succession plan if we own a business. The plan may contain trust arrangements for certain beneficiaries, tax strategies, and contingency provisions. It will certainly necessitate a review of beneficiary arrangements to make sure they are coordinated with provisions in the will. Earlier versions of the estate plan may have included provisions for charities, but particularly at this stage of life, we will want to think about organizations that embody our values and through which we can make a positive difference. There are many tax-advantaged ways of arranging these charitable legacies, and our office would be pleased to discuss them with you.

Estate Planning at Age 76 and older

Usually, though not always, the accumulation period of life will have ended, and investment/retirement assets will be gradually depleted. Selling the family home and moving to a retirement home often occurs during this period. Providing for long-term care, if needed, also becomes a concern. Sadly, it is a time of letting go of many cherished activities, but it can be an extremely satisfying stage of life: enriched by wisdom, a growing family, and life-long relationships.

Normally, a comprehensive estate plan will have been developed by this stage of life, but the will and other estate planning documents should be periodically reviewed and updated. Some beneficiaries may no longer be living, tax laws may have changed, family circumstances may be different, or we simply may have changed our minds about people and institutions we want to benefit.

Hayflick also observed that “time is nature’s way of keeping everything from happening at once.”  Each stage of adult life, like each season, has its own beauty and opportunities, and at every stage there is a need for estate planning. No adult is too young to create a plan nor too old to review a plan.