When you hear "estate planning" do you think of wealthy people near retirement? The truth is: estate planning is for everyone, no matter your age or your financial status.

If you have young children, estate planning is essential to name a guardian. But it’s also important if you have a spouse or other family members who are either somewhat dependent on you or who could benefit from receiving assets you leave behind.

If you’re early in your working life, you may already have more assets than you might realize. You might have a traditional or Roth IRA and a 401(k) or similar employer-sponsored plan, in addition to other financial accounts and possessions, which may even include a house. Ultimately, everything you own could end up as part of your estate.

But estate planning isn’t just about who gets what. It also involves other issues, including these two key questions:

What will happen to my children if I’m no longer around? If your surviving spouse/partner is also a parent of your children, in some cases there’s likely no issue of who will be responsible for raising them. But if this isn’t the case, and you don’t have an estate plan in place, the court system in some circumstances may decide who should become the conservator, or guardian, of your children – and this individual might not necessarily be someone you would have chosen.

Who will make important decisions on my behalf if I become incapacitated? If you were to become disabled in some way, it could cause great difficulties for your family if you haven’t named someone to make financial and medical decisions on your behalf.

Estate planning documents

Comprehensive estate planning involves several legal documents. Here are some of the most common ones:

  • Will – A will is one of the foundational documents of estate planning. Essentially, a will identifies who is going to inherit your assets and who will assume guardianship for minor children. If you don’t have a will, generally a court and state law will decide who receives your assets and who will serve as guardian of your children. Furthermore, if you don’t have a will, a long-term partner has few, if any, legal inheritance rights, even if you’ve been living together for years. However, it is important to note that a will goes through the probate process which can be a time-consuming and arduous process for your family.
  • Living trust – You can transfer your assets into a living trust, also known as a revocable living trust, and still have control of this property when you’re alive. Upon your death, the trustee you’ve named – an individual or a third party like the Edward Jones Trust Company – will be responsible for distributing your assets to your beneficiaries according to your wishes, avoiding the probate process. And a living trust allows for flexibility and control over just how you want those assets distributed. For example, you could give your children access to the money over a period of time, such as ages 25, 30 and 35. If you have a child who, for one reason or another, might never be able to manage money responsibly, you could direct the trustee to distribute funds as needed over the child’s lifetime.
  • Durable financial power of attorney – A durable financial power of attorney lets you name someone you trust to manage your finances if you were to become incapacitated or otherwise unable to make decisions for yourself. The person you’ve chosen as your “agent” or "proxy” can handle a variety of tasks, such as using your assets to pay your everyday expenses, collecting Social Security, handling transactions with banks, filing your taxes and even investing.
  • Beneficiary designations – On your insurance policies and some investment accounts, such as your 401(k) and IRA, you’ve named beneficiaries. These beneficiary designations carry considerable weight and in most cases supersede the instructions on your will. So, if you experience changes in your family situation, such as a remarriage, you may need to update these designations.
  • Durable power of attorney for health care and health directives – When you create a durable power of attorney for health care (also known as a health care proxy or health care power of attorney), you choose an agent to make medical decisions on your behalf if you can’t make them yourself. These decisions can include treatments, tests and surgeries. Many choose to add health directives/living will to state their wishes for end-of-life care. Consult with your local attorney as each state has different laws.

To create an estate plan, you’ll need to work with an attorney. You may also want to consult with your financial advisor, who can help you with the investment components of your estate planning. Hopefully, of course, you’ll have many years until any of these plans are needed, but it certainly never hurts to be prepared. And right now, while you’re in good physical and mental health, it’s a great time to get started on the estate-planning-process that can help you leave the legacy you desire.

Important information:

Edward Jones, its employees and financial advisors are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.