Estate Planning - It's Not Just for Your Parents

Estate planning is most often associated with individuals and couples who are approaching retirement or who already enjoying their golden years. Estate planning usually conjures up an image of an older wealthy couple meeting with their attorney to determine how to dispose of their wealth upon death and how to utilize tax planning strategies to minimize estate and gift taxes while maximizing the amount of wealth that passes to subsequent generations of their family. These are accurate depictions of the estate planning arena, but not a complete picture. While estate planning is not typically associated with individuals and couples in their 20s or 30s, it is important for younger people to be proactive in planning their estates.

Why would someone in their 20s or 30s, someone in the early stages of a career, in the process of starting a family and just beginning to build a nest egg for retirement, worry about estate planning? Consider the case of a young couple who recently became parents. They now have a baby in the family and possible another on the way. They are both professionals with upwardly mobile earnings potential. At this stage in their lives they are in the accumulating phase, but do not have to worry about estate taxes because their total net worth is less than the federal estate tax credit amount of $5,000,000. They may not have to worry about estate taxes yet, but they are concerned about who will take care of their children if they are struck with a tragic illness or accident that results in premature death.

This young couple may feel like they are struggling financially, but upon death, they will leave behind their retirement accounts, savings accounts, their home and life insurance proceeds. The combined value of all those assets may be substantial, potentially in excess of $1,000,000, depending on the amount of life insurance. Without estate planning, Ohio law provides that their entire estate will go to their children. However, if the children are minors (under age 18), Ohio law requires a guardianship to hold the assets for the benefit of the children. Under Ohio law, a child is entitled to receive a complete distribution of all assets from a guardianship at age 18. Even with a Custodial (Uniform Transfers to Minors Act) account, the child is entitled to withdraw the entire account balance at age 21. Using a trust, the couple can set a higher age for distribution of the assets to the children, while making sure the assets are available for the support and education of their children. Young parents who are concerned about making sure there is a safety net available to protect and provide care for their children until they become productive, self-sustaining adults will find that a Contingent Trust for Minors will better meet their objectives than a guardianship or a Custodial account.

Wealthy individuals and couples who are enjoying their golden years still need estate planning counseling. However, young individuals and couples also need to start planning their estates now to make sure their wishes for their children are followed in the event of tragedy. If you have any questions regarding estate planning please contact your Stark & Knoll attorney, for additional information.

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Phone: 330-376-3300 Fax: 330-376-6237

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