Contrary to popular opinion, I know that many young people are quite conscientious about financial issues. Primarily due to the amount of student debt we tend to carry, we are often budget conscious and spend our money wisely to avoid incurring additional debt.
It is not surprising that many millennials opt to delay their first home purchase and even marriage because they want to maintain financial flexibility. If you combine that with the typical youthful feeling of immortality, plus the long-held misconception that estate planning is just for the elderly or the fact that your balance sheet is primarily debt, you may not see the need for planning for what seems unachievable. You are definitely not alone, a recent survey by Caring.com quoted in USA Today revealed that 78% of Americans under the age of 36 do not have a will or trust in place.
Reality will often set in when you get married, buy your first home or begin to have children. For those of you who do not have a consistent savings program, the advice our parents gave us years before about the importance of saving early and regularly begins to make more sense.
The older we get, the faster we begin to realize that there are in fact many urgencies, and the estate-planning process will give you a necessary voice in what happens if you are incapacitated or pass away earlier than expected. As a young attorney myself, I have already seen acquaintances and friends die or become disabled at an early age, and it has helped me relate to young clients however farfetched this may currently seem.
Planning for the Unforeseen
Once you understand how important it is for you to take control of your future, we can begin to plan for the unforeseen as well as the expected:
- Incapacitation: No one expects to be incapacitated, but there are several documents you need. The first is a durable power of attorney (POA) that identifies who will make financial decisions on your behalf if you are unable to do so. The second is a designation of health care surrogate (including a living will) that outlines your preferences for medical care if you are unable to state these for yourself.
- Death documents: These include a last will and testament and the establishment of a trust (either revocable or testamentary).
- Beneficiary designations: For younger people, life insurance and 401(k) programs may comprise the bulk of your assets, so it is important that you keep your beneficiary designations up to date.
We also encourage parents to have a designation of health care surrogate for all their minor children, as well as a comprehensive protection plan which will include the nomination of permanent and temporary guardians.
For issues that are covered by durable POAs and designations of health care surrogate, the default for a minor is that a parent or parents make decisions on behalf of the child.
In many states, if unmarried individuals with no children die without a will, regardless of their age, the estate reverts to parents. Of course, if the individual is survived by a spouse, the estate goes to the spouse. No state allows similar treatment for a partner or significant other in the absence of a will (except in rare circumstances in which a common law marriage has been established), but all states spell out what the default is for where the assets will go.
If you are unmarried and have no children, and you want to select siblings or a significant other rather than parents as beneficiaries of your estate, you should specify that choice in the appropriate documents.
The selection of an executor or personal representative is a decision that you should make when the will is drafted. It is generally not preferable to rely on the preferences set forth in the state’s laws.
Many of my younger clients are surprised at the number of assets they actually have. It is likely they have focused only on their balance sheet, particularly if they are carrying a heavy load of student debt, so it is important for us to discuss what your assets include.
Often, you will be surprised that the bulk of your federal student debt may be discharged at the time of death. Private student debt, though, may not follow the same rules. Once the student debt has been discharged, it is more likely that the estate balance will be positive.
Assets that need to be addressed include:
- Retirement accounts:If you have participated in accounts with more than one employer and left assets in them, we need to identify them and confirm the beneficiary designations.
- Life insurance policies:This includes personally owned policies as well as policies purchased by or through an employer.
- Real estate, vehicles, boats, jewelry, electronics and home furnishings:This can be a surprisingly valuable asset group, even for the young.
- Family memorabilia:These are often quite important items, although they may not have a high degree of monetary value.
- Pets:Particularly in the case of clients with no children, specifying care for pets is important. A very small window exists after death or incapacitation to take care of a dependent pet.
- Digital assets:This is an area of growing importance. You may not want to have your aging parents manage these, and instead opt for someone more tech savvy. In any event, the estate-planning documents should address digital assets, and a complete list of accounts and passwords should be readily available.
Many of us overlook photographs when we think of digital assets, but the photographs stored on our phones and laptops may not exist anywhere else.
Most people have a number of social media accounts, and they may deal with legacy access in different ways. Facebook, for example, prompts users to specify legacy access—an approach other platforms are adopting. Another issue to consider is whether the accounts should be terminated at the time of your death, or if a spouse or sibling will want to continue to post, at least for a certain period of time.
Developing Long-Term Relationships
Estate planning can be a relatively painless process when you are in the hands of a competent and experienced estate planning attorney who is aware of the many obstacles you are facing.
My approach is to develop what will be a long-term relationship, coach the process in terms you will grasp and make it as easy as possible for you. We have created systems which allow us to update your estate planning documents as your life changes. All my clients receive complimentary yearly consultations to ensure their estate plan evolves with them. Call us today at 813-252-8667 to schedule your complimentary consultation and start taking control of your legacy.