Halsey Schreier
July 30, 2020
Are you in your 20s or 30s and want to learn more about estate planning but don’t know where to begin? Do you want to know which essential documents should be included in your estate plan?
A common misconception is that you have to be either old or rich to have an estate plan, which is why a lot of young people avoid it. But the reality is that estate planning is important regardless of your age or wealth—even if you are young and have modest assets.
What is estate planning?
Estate planning is more than just deciding how you want to divvy up your money when you die. It also involves taking care of and protecting yourself, the people you love and the things that are important to you.
Why estate planning is important
Our 20s and 30s are often shaped by pivotal financial decisions and life events, such as graduating from college, buying a house, getting married or starting a family. While these milestones can and do make our lives fuller and more complex, they also underscore the importance of comprehensive estate planning, especially for younger adults.
Having a few essential documents in place can help ensure that you and your loved ones will be taken care of in the unlikely event something happens to you.
The essential documents you’ll want to have in your estate plan:
1) Durable power of attorney. This is a document that lets you appoint a trusted person, such as a family member, as your agent to make financial decisions on your behalf in the event that you are you are incapacitated or unable to do so for yourself.
For example, if you are travelling abroad, you might want to appoint someone to be your durable power of attorney to manage your finances for you while you are away. The agent you appoint can withdraw money from your bank account for you, pay your bills or represent you at a real estate closing.
2) Living will vs. health care proxy. A living will is a document that allows you to specify the type of future medical care and treatment you receive should you become incapacitated—for example, if you are in a car accident and are in a coma.
A living will usually applies to terminal illnesses regarding decisions related to resuscitation, ventilator use and artificial nutrition. In some states, a living will is recognized as a legally binding document, while in others it is just a statement of your wishes. This is why it is important to consult with a qualified estate planning attorney in your state of residence to help you determine if a living will makes sense for your situation.
A health care proxy differs from a living will in that it grants another person the power to make those health decisions for you. You can appoint the same person to be both your health care proxy and your durable power of attorney, or you can appoint someone different.
3) Will. A will is the foundation legal document of most estate plans. It provides written instructions for how you want to distribute any assets held in your name and lets you appoint a guardian for minor children. It will also name an executor who will be responsible for carrying out those instructions. If you do not have a will, state law determines how your assets are distributed.
4) Revocable trust. A revocable trust is a written document of instructions for how you want your assets handled after you die. You, as the grantor or creator of the trust, can amend or terminate it at any time.
Not everyone needs a trust, but for those who do, a revocable trust can be a valuable estate planning tool that can help you manage and protect assets while you are alive, and allow your beneficiaries efficient estate administration.
Every individual’s estate planning needs are different, and the processes and laws for estate planning vary by state, which is why it is important to consult with your estate attorney for advice regarding your specific situation.
By Halsey Schreier, Contributor
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