Think estate planning is just for boomers and retirees? Think again. Even young adults can benefit from taking some basic estate planning steps. Find out what estate planning steps are right for the under-30 set.
Estate Planning for Young Adults Is More Important Than Many Realize
Many people assume that estate planning just involves designating who you want to receive your money after you die. If you don’t have many assets, the thinking goes, estate planning isn’t really necessary. But that’s simply not the case. Even single adults with relatively little wealth (such as college students and recent grads) may need to take some basic estate planning steps to ensure that their wishes are followed in the event of incapacity or death. And if you’re married or have children, estate planning is a vital part of financial planning, regardless of age or wealth. Failing to take basic estate planning steps can create heartache or confusion after you’re gone. With proper estate planning you can ensure that your loved ones will be provided for, that they won’t be burdened by your debts, and that your assets go to the people that you want to receive them.
Essential Elements of an Estate Plan
- Will: A will is the foundation of most estate plans. It is a legal document that states who will inherit your assets, assume guardianship of your minor children, and more. Even if your financial assets are negligible and you have no children, you may have preferences for who receives certain possessions. If you want to make sure that your sister receives a treasured piece of family jewelry, or you want your best friend to inherit your collection of baseball cards, a will is the way to do that.
- Retirement plan beneficiary designations: If you have a 401(k) or IRA account, make sure that the beneficiary designations are up-to-date. For example, if you named a sibling or parent as a beneficiary of the plan when you set up the account, and you later get married, you will have to update your beneficiary designations; your husband or wife won’t automatically receive those assets upon your death.
- Life insurance: Life insurance is often a smart move for married couples and families with young children. Single people can often forego coverage. But even unmarried, childless adults may want life insurance if they have private student loans on which their parents are co-signers. Federal student loans are discharged upon your death, but if your parents co-signed for a private student loan, they’ll likely be responsible for that debt if you pass away unexpectedly. Life insurance, which is an integral part of financial planning, can help clear that debt and reduce their burden.
- Power of attorney: You may call mom or dad every day to chat and ask for advice, but once you’re an adult, you’re on your own, legally speaking. That means even college students should consider assigning a power of attorney to a parent or other trusted individual. If you are in an accident or otherwise incapacitated, a power of attorney will allow your designated representative to access your financial accounts and make financial decisions on your behalf.
- Health care power of attorney: If you end up in the hospital and can’t make decisions for yourself, a health care power of attorney names a person who should make choices about the treatment you receive. In addition to a health care power of attorney (sometimes called a health care proxy) you should also make sure that you have a signed HIPAA authorization form, which specifies that your health care power of attorney can access your medical records.
- Living will/health care directive: A living will is a way for you to articulate your wishes regarding the health care you’d like to receive if you can’t make decisions on your own. Typically, the document will explain what type of life-sustaining treatments you’d like to receive, such as resuscitation or tube feeding.
What About Your Digital Assets?
Today, many people live much of their life online, especially young adults. That means that it’s essential for people to plan for their digital afterlife. Google, for example, lets you set preferences for what happens to your account if you die. Facebook and other social networking sites also have provisions that allow family members to delete a loved one’s account after death. There are also services that allow you to securely store passwords so that your loved ones can access your accounts after you’re gone (of course, you can always create your own list and keep it in a safe place). You may also want to appoint a digital executor, a tech-savvy friend or relative who will be responsible for managing your digital assets after you die.
Don’t Neglect Estate Planning
Estate planning for young adults may seem tedious and unnecessary for young adults, but it’s not. It’s actually a vitally important task. Taking a few simple steps with the help of professional legal advice and guidance today can ensure that you receive the healthcare you want, that your assets pass to the people you love, and that your family is spared pain and heartache if you die. If you’re ready to talk about estate planning, financial planning, or investment planning for young adults, out team is here to guide the way.