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Estate planning for educators at every age.

There’s an idea out there that estate planning is “something you get around to” in your 50s or 60s.  That’s like saying eating healthy or exercising regularly is something that’s only needed when you’re older – rather short-sighted, and asking for trouble. There are many reasons why estate planning makes sense as early as your twenties.  Accidents can happen at any age; and it makes good sense to complete essential estate planning earlier in life when you are more likely to be of sound mind and body.

The 20s – in a lower pay grid, paying off student loans

Why start estate planning in your 20s, when you may not have accumulated much in the way of assets?  Because an estate plan is so much more than distributing your assets – it’s about how major decisions would be made if something happened to you.   “You may not need to make many decisions as a young adult, but making those decisions will lay groundwork for the more complex planning that will come later”, Sandra Walsh, Financial Advisor, Educators Financial Group says.  During your 20s, you should:

  • Gather a team of professional consultants – an attorney, accountant, and advisor – whose advice you trust and who you think you could work with for a long period of time.
  • Establish who will have your Enduring or Continuing Power of Attorney, i.e. who will act for you if you become mentally incapable of managing your financial property.
  • Establish who will be your Power of Attorney for Personal Care. This person will make decisions about your medical treatment if you are unable to do so. (After you turn 18, your parents are no longer automatically able to do this.)
  • Understand your retirement income sources – your valuable Teacher’s pension, your Registered Retirement Savings Plan (RRSP) (and how they should complement each other), and other sources of retirement savings.

The 30s — moving up pay grids, buying a home, starting a family

This is often the beginning of the ‘accumulation years’, and the time when even if you feel like you haven’t accumulated a large amount of assets, you still need to start planning your estate.  You should be talking to a professional about:

  • Writing a will. When you begin to accumulate more, or have dependents, a will becomes crucial.  An important decision is who will be the executor of your will – the trusted individual who would make sure your wishes are carried out the way you want. If you have a spouse and children, you’ll want to name the person who you would trust to care for your children in case both you and your spouse were to die, and who you would want to manage trusts established for the benefit of minor or disabled children.
  • A trust is a legal device that states that your assets are transferred into the ownership of a designated trustee, who will manage those assets. Trusts are frequently used when passing assets on to minor children or children with disabilities.
  • Reviewing beneficiary designations on your financial accounts, and ensuring they complement those in your will.
  • Insurance. Life Insurance for you and your spouse can be more affordable if you purchase it earlier, when you’re in good health, so consider it now. Look at purchasing disability insurance as well, which can protect your loved ones if you become disabled and can no longer provide for your family.
  • Updating any healthcare or financial powers of attorney if necessary.

The 40s and 50s – higher income, higher expenses 

You love your job in the education field…but you’re also beginning to think about what you’ll do during retirement. You’re approaching, or are in, your peak earning years, but your expenses can also be high.  Perhaps you’ve purchased a bigger home or cottage, or are saving for your children’s post-secondary education.  In addition to your estate plan from previous decades, you should be completing the following items:

  • Long-term care insurance. Typically, long-term care insurance rates are lower for those under 60 years of age, and the earlier you enrol in a policy, the better.  As you age, the likelihood of getting rejected for long-term care insurance increases.
  • Allocating funds to help pay health-related costs for aging parents.
  • Ensuring the bequests you leave your heirs are as tax-efficient as possible.

The 60s – benefit from your planning!

Maybe you’ve already retired (many educators enjoy a longer-than-usual retirement), but miss the school and the kids, and are now an occasional worker.  Regardless, by this age it’s best if you’ve clearly communicated how you wish your loved ones to deal with your assets. That allows you to focus on updating and refining.  You should also:

  • Put together a list of trusted advisors such as an attorney, financial planner, and tax professional, and review this with your family in case you become ill, and your children or family need guidance and advice in handling your affairs.
  • Include provisions in your will for trusts for grandchildren, and forgive debts from family members.

Revisit your plan at specific times

Because your priorities will change throughout your life, you should schedule an estate plan review every three to five years, or whenever any of the below takes place:

  • You acquire or dispose of significant assets
  • Your tax position changes
  • You get married, separated or divorced
  • You have or adopt a child
  • Your child reaches the age of majority
  • You, a child or a parent becomes seriously ill or disabled
  • One of your beneficiaries passes away

Check out our other estate planning articles in The Learning Centre:

ESTATE PLANNING: It’s not what you know, it’s whom you know.

ESTATE PLANNING: Powers of Attorney, Guardians and Trustees

ESTATE PLANNING: Don’t forget the most important document… your “In case of emergency” file

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