Estate Planning for Young Professionals

If you’re young, unmarried and haven’t accumulated much wealth, you may think having an estate plan isn’t relevant for you. While it’s true that part of estate planning is declaring how your assets will be distributed if you pass away; it may seem pointless if you’re just getting started on your journey to building wealth. We’re here to tell you that it doesn’t matter if you haven’t saved much yet and that an estate plan is not only applicable when you pass away but also while you’re alive. Think of it as a tool to eliminate stress and confusion in the future by communicating your wishes to your loved ones in the present. And perhaps more importantly, it can dictate what happens to you (and your assets) while you are still alive.

Given the recent disturbing events in America, with Roe v Wade being overturned and talk of marriage equality being next, we are reminded that it’s more important than ever to revisit your estate plan. Here at Xena Financial Planning, we are actively monitoring the Supreme Court/state decisions that could impact our clients. There are a number of steps that we are recommending for our LGBTQ+ clients, as well as couples who expect to undergo fertility treatments. Stay tuned for a blog post devoted to that topic!

In the meantime, here are some documents and other action items to consider at this stage of your life: 

Check your beneficiaries

Good news: this is something you can do today and it only takes about five minutes. A beneficiary is an individual or trust that receives the assets upon your death. Log into all your retirement accounts (IRAs, 401(k)s, etc.) and life insurance policies (even if it’s through work!) and make sure the beneficiaries are current. Adding beneficiaries ensures your money will go to those you intend, without having to go through probate, which is both costly and slow. 

Advance Health Care Directives 

When you turn 18, your parent(s)/guardian(s) can no longer make medical decisions on your behalf. If you were to become critically ill and unable to make major health decisions for yourself, then no one would be able to legally advocate for you. This is where a living will (a type of advance health care directive) would come into play. In this document, you state which medical procedures you would or wouldn’t want, and under which conditions these apply. It might be helpful to discuss any current health conditions with your doctor and how they might influence your health in the future. 

Additionally, you would elect a health care agent who would have the ability to make health care decisions on your behalf. This is often a family member, partner or trusted friend who can ensure your wishes are carried out. 

Considerations when appointing an agent:

  • Can you trust them to carry out your wishes?
  • Are they easy to get in contact with?
  • Do they live nearby?

Additional considerations:

  • Creating an advance health care directive does not require an attorney. 
  • You can create one by going to Five Wishes or eForms.  
  • It is always a good idea to add more than one person listed in the event your primary person is unavailable. 

Durable Financial Power of Attorney

With a durable financial power of attorney, you appoint a trusted individual, called an agent, to have legal authority over your finances. In this document, you spell out what your agent is and isn’t allowed to do and when they have the authority to act on your behalf. For instance, if you were to become disabled you can grant your agent access to your bank accounts to continue paying the bills. It’s important to make sure your power of attorney is durable to ensure that the document remains in affect if, and when, you become incapacitated. 

Considerations when appointing an agent:

  • Are they organized?
  • Do you trust them to manage your financial affairs?
  • Avoid choosing someone who doesn’t have a good record of handling financial matters. 

Once the document is fully executed (signed and notarized), provide a copy to the appointed person. If your situation is fairly simple, you can create a durable power of attorney on Legal Zoom or contact an estate attorney. 

Last will and testament

A will states how your assets will be distributed after you pass away. Even if you don’t have a lot of assets chances are you may own a car, an extensive sneaker collection, or have kids/pets. If you do not have a will, the state decides what happens to your estate including your dependents. In the will you appoint an executor who will be responsible for properly executing your wishes and distributing assets accordingly. You can also establish guardianship and other wishes regarding children and pets.

Considerations when appointing an executor:

  • Do I trust this person to make sound decisions? 
  • Are they organized, emotionally stable, patient and trustworthy?
  • Will this person deal with my beneficiaries fairly and competently?

Considerations when appointing a guardian:

  • Is this person able to take on the responsibility of raising children (or pets)?
  • Do I trust this person to make sound decisions with regards to parenting? 

If your estate is complex (dependents, assets in other jurisdictions, multiple properties, etc) you should contact an estate attorney. If your situation is simple, you can create a will using Legal Zoom. 

Additional considerations

  • We strongly suggest that you use a password manager to store account logins.
  • Keep an inventory of your digital assets, investment accounts, where legal documents are stored and who has access to what. 
  • Revisit your estate plan at least every 10 years or when significant life events occur. 
  • Write out your funeral and burial wishes or discuss your preferences with your loved ones. 

Don’t wait until you’re older or have accumulated assets to create an estate plan. By planning ahead, you eliminate stress and confusion for your loved ones that will occur if you were unable to make medical and financial decisions for yourself. It’s much better to have control over what happens to you, your belongings and your dependents. So why wait and risk the chance of giving that up?