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?

Creating (or Revisiting) Estate Planning Documents During COVID

Estate planning is one of those topics that most people avoid at all costs. It ranks right up there with getting a root canal in terms of things to look forward to. I’m here to tell you that a) it’s really not that bad and b) the pandemic is a great reminder to review things you never thought you’d need (except in the worst case scenario, which looks an awful lot like present day).

First and foremost, I want to define what estate planning is. Much of the time, when I bring up the topic, a client says “Oh I don’t have enough money to worry about estate planning” or even “I don’t have any dependents so it doesn’t make any difference.” Both of these responses are based on a fundamental misunderstanding of the term estate planning. Essentially, it refers to a series of documents and directives that tell the world how you want your affairs managed; but the kicker is that many of these apply while you are still alive. In fact, the two documents I encourage all unmarried adults to get above all others is a health care power of attorney and a living will (aka medical directives).

Imagine you get in a car accident and are unconscious. You’re rushed to the hospital where they determine you need a life-saving (but risky) surgery to survive. Who gets to make the decision if you are unconscious? What happens next? If you are married, your spouse is able to make such a decision on your behalf. But what if your spouse is also in the accident and unable to perform this critical duty? You can see how easily things get complicated. And if you’re unmarried, it can be even worse. Can your parents make the decision? Does your partner have any say in the matter?

As unpleasant as you might think this topic is, I can assure you it is far more unpleasant dealing with an unexpected illness or death when documents have not been drawn up. I’m surely dating myself here, but if you remember the YEARS that Terry Schiavo was on life-support while her family battled about how to proceed, you’ll know how bad it can get when you haven’t clearly stated your wishes. I like to think of estate planning as a gift to your loved ones, which makes it easier for them in a time of extreme stress, to know what you would want.

I plan to write more on the topic in coming months, but a very quick overview of the types of documents you likely need and what they pertain to.

  • The will- most people are broadly familiar with what this document does. It tells people what happens to your assets if you pass away. This includes everything from your home to your bank account and even your pet(s). Perhaps most importantly for anyone with children, this is the document where you name a guardian for any minor children, should you and your spouse both pass away. If you do not have a guardian named, the courts will decide for you (this rarely leads to the best outcome). One important note here: 401(k), IRA and other retirement accounts as well as life insurance pass by beneficiary designation not through the will.
  • Powers of attorney (POAs)- as mentioned above, you may name an “agent” who can make health care and/or financial decisions on your behalf. You may have one person designated to be a health care POA and another person as your financial POA. 
  • Medical directives/living will- this is a document that states types of medical treatments or interventions that you do/do not want. For instance, a common one is to say you do not want to be placed on life support.

The current global pandemic is a very timely reminder to confirm that you have some of these basic documents in place. If you’ve already completed some or all of the above, how long has it been since you reviewed them? If your health care POA has since moved to Australia, they probably need to be replaced with someone local (if possible). I also recommend reviewing beneficiary designations periodically to ensure they still align with your wishes. 

My goal with this topic is for all of us to start to have these conversations and normalize the process. While talking about worst-case scenarios can be a bit morbid, the sense of relief you get once you’ve gotten these things in place is hard to quantify. My top takeaway for readers: if you have minor children get something in place for guardianship ASAP. You can always revise or fine-tune later but this is one you don’t want to wait on. If you are single (or not!), I strongly recommend getting a health care POA/living will in place. Don’t let the perfect be the enemy of the good. You’ll sleep better at night knowing you’ve made a step in the right direction.