Estate Planning for Millennials: Your Ultimate Guide
Nearly everyone’s heard of an estate plan or will, yet only 40% of people have a will or living trust. While many think of estate plans as something you need later in life, every adult should strive to have one, no matter their age.
But what about people in their twenties and thirties? Your finances may be stretched pretty thin, and you likely don’t have a large estate to worry about. Do you really need an estate plan?
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Why Do Millennials Need an Estate Plan?
If you’re in your twenties or thirties, you’re likely wondering why you need an estate plan in the first place. After all, you likely rent and don’t have a lot of belongings or an actual estate to worry about. Despite the name, an estate plan covers much more than your belongings — it covers nearly every financial aspect of your life.
The following are some of the primary reasons you should create an estate plan right now, as opposed to waiting.
Give Your Unmarried Partner Legal Power
If you’ve been with your partner for a long time and you want them to have legal power, an estate plan can make this happen. This can give your partner medical power of attorney in the event you’re hospitalized or put on life support. You can also give them financial power of attorney, allowing them to make financial decisions if you’re incapacitated or you pass away unexpectedly. Lastly, you can name them as a beneficiary in your life insurance to ensure they receive your payout.
Protect Your Digital Assets
Unlike previous generations, millennials are faced with a unique issue: tons of digital assets that need to be protected. These assets can include things like websites, social media accounts, content you’ve created and stored on the cloud, and even photos and videos. With an estate plan, you can designate who will be responsible for which documents. It’s also a good idea to have the access information for these accounts in a secure location, with those you trust knowing the location in case of your untimely death.
You’re Capable Now
Simply put, you’re mentally and physically capable of making an estate plan now. You never know what the future holds, so it’s entirely possible that you’ll be unable to properly make an estate plan years from now. Get ahead of the unexpected and formulate an estate plan while you’re in good health, mentally and physically. You can always revisit the plan to update beneficiaries, power of attorney, and so on.
Your Children Are Likely Minors
If you have children, they’re likely minors. This leaves them vulnerable if you pass away, as they can be at the mercy of the court system in some cases. Make sure you have designated guardians in your estate plan to ensure your children are with those you trust.
You Decide Where Your Assets Go
If you die without an estate plan or living will, your assets can be divvied up per your state’s laws. This can result in a lengthy process that sees your things go to the wrong people.
What Does an Estate Plan Include?
Estate plans are far from cut and dry, as they can vary from person to person, and there are a number of documents that can be lumped together.
Despite this, there are some common documents that should be a part of your estate plan no matter what.
Last Will and Testament
A last will and testament is an in-depth look at what will happen to your estate when you pass away. This largely focuses on any assets you may have, including finances and material objects like laptops, pets, or furniture. If you have a prized collection of baseball cards, for example, this is where you’ll state who gets them.
You may not think you have much of an estate right now, but you likely have numerous belongings, accounts, and even digital assets that require a last will and testament to direct them to the right people.
Unlike a last will and testament, a living will focuses on what happens to you in the event that you’re incapacitated and unable to make decisions regarding life support and end of life wishes. This is where you’ll designate someone to have power of medical attorney and act on your behalf if you’re in a coma or unresponsive.
Even if you’re young and in great health right now, accidents can happen. A living will protects you in the event the worst has happened and you can no longer make decisions for yourself.
Your beneficiaries will receive your life insurance payout, your assets, and finances as you see fit. When designating beneficiaries, make sure that if you designate someone with any kind of disability, their inheritance won’t disqualify them from any benefits.
Also, be aware that if you have children under 18 and they’re designated as beneficiaries, their funds can be handled by the court and given to the person in charge of your estate. To avoid this, make sure you list a custodian to handle their finances. This person will watch over their inheritance and make sure they get it when they’re legal adults.
If you don’t have any children, think about who you’d like to designate as beneficiaries. Your parents, close relatives, or even close friends can all be solid choices. Make sure you include several, as you want reinforcements in case any of the beneficiaries die before they can receive the inheritance. (These things can happen.)
If you have any children or dependents under 18, you’ll want to make sure you have guardians designated. This will prevent them from entering the system and guarantee the people you trust most are in charge.
Life Insurance Documents
If you have life insurance, you’ll want to make sure all documentation is readily available when you formulate your estate plan. This will make the process go quicker when you pass away, and make sure the money is readily available to help your family pay for any burial or end of life services.
If you have any outstanding debt from private lenders, your life insurance money can also be used by your beneficiaries to cover that debt, as this debt will go to your estate. The last thing you want is for your family to be stuck with a bill.
If you don’t have life insurance, you should look into securing it while you’re young and healthy, as your rates will be far better than if you wait.
3 Essential Documents for Building a Healthy Estate
While no two estates are exactly the same, there are some core documents that virtually every estate plan needs to have in order to be thorough and effective. Whether you have a large estate or not, the following documents will protect you and your family in a worst case scenario.
1. Health Care Power of Attorney
Much like a living will, assigning someone health care power allows someone to make medical decisions for you if you’re incapacitated and unable to make them yourself. This person will act on your behalf in all medical scenarios if you’re unconscious or in a coma, and will speak with doctors and other professionals to make decisions similar to those you would have made.
Because of the severity of this power, it’s ideal you assign this role to someone you trust dearly. Furthermore, it’s a good idea to pick someone that has a strong understanding of who you are as a person and what you would have wanted.
It’s also a good idea to leave detailed written instructions for this person. List out what your end of life wishes are, if you want to be left on life support, how long you’d like to be on life support, and so on. Speak with this person about your instructions as well to ensure they understand them.
2. Springing Power of Attorney
A springing power of attorney, also known as a conditional power of attorney, will make any business or financial decisions when certain conditions are met. You can set a number of conditions for this power, such as being incapacitated, mentally unable, or even deployed overseas in the military.
Even if you don’t have any business to worry about, this is an important designation to make. This person can be tasked with handling all of your finances, including the handling of your physical assets, your bank accounts, stocks, and any other financial responsibilities.
This is a huge responsibility, so make sure you only assign this role to someone you trust. This person has the ability to empty out your accounts in the event you’re incapacitated, so again, you don’t want to give this role to anyone but the most trusted in your circle.
3. HIPAA Release
A Health Insurance Portability and Accountability Act (HIPAA) release gives medical providers permission to deliver sensitive information to those you designate if you’re incapacitated and require medical attention. Some common people to list here are parents, siblings, and any close family or friends you’d want notified if anything happened.
Without signing a HIPAA release, some parents may even have difficulty finding out if their child has been admitted. Parents already have a lot on their minds, so take this pressure off and sign your HIPAA release!
Tips for Millennials Planning an Estate
Estate planning is an in-depth process that takes a lot of time and prep work. The following tips will help you stay on top of estate planning from beginning to end, and ensure you don’t miss anything important.
Documents for Estate Planning
- HIPAA release
- Springing power of attorney choice
- Health care power of attorney choice
- Living will
- Any healthcare documents
- Business documents (If you have any)
- Beneficiary choices
- Letter of intent
- Guardian choices
Take Inventory of Your Assets
- Checking account
- Savings account
- Retirement funds
- Life insurance
- Small personal belongings
- Digital assets
- Family heirlooms
Power of Attorney Considerations
- Level of trust
- Location of the person (closer is better)
- Their age and life experience
- The person’s qualifications
- Family dynamics