Question: As a “millennial”, when is it a good time to start thinking about estate planning? Do I need to accumulate assets before considering planning for my future?
Answer: Estate planning is not just for the elderly or the wealthy. Estate planning at a young age can provide some of the most basic means of security that you may not realize you need.
Two documents that all adults should consider having are the power of attorney and health care proxy. A power of attorney is a document that allows you to name an agent (or agents) to make financial decisions on your behalf and assist in taking care of your daily financial obligations. The power of attorney does not strip you of your financial powers, but rather duplicates them so that your agent can act if you are incapacitated or otherwise unable to do so.
A health care proxy appoints an agent to make medical decisions on your behalf in the event a doctor deems you unable to make them for yourself. Signing a health care proxy is your way of appointing a surrogate decision maker. You will always have priority to make your own health care decisions so long as you have the capacity to communicate your wishes to your doctor.
Whether you’re traveling the world, currently in school, or embarking on a new career, unexpected events can occur that may inhibit your ability to make financial and health care decisions. For example, what if you are undergoing surgery or are involved in an accident that leaves you unconscious? What if you are out of country and need someone to access your bank account to pay an overdue bill? These documents are extremely beneficial in even some of the most common situations.
When deciding who to appoint as your agent for the power of attorney and health care proxy, you will want to choose someone you trust unequivocally, as well as someone who knows and is able to carry out your wishes with regard to financial and health matters. You do not have to choose the same agent for both documents. There are some individuals who have a gift for finances, while others are better at making health care decisions. You can name a spouse, parent, or any other adult over the age as 18 to act as your agent.
Another document to consider is a last will and testament, commonly referred to as a “will”. A will is a legal document memorializing your wishes on how you want your estate to be distributed after you die. However, a will is an extremely versatile document that goes beyond directing the distribution of assets. For example, a will can appoint a guardian for your minor children and provide that assets be distributed in trusts on their behalf.
Even if you do not have children, it may still be a good idea to create a will. Should you die without one, your assets will go to your next of kin, which could very well be a parent. What if your mom or dad is receiving means-based government aid and will lose their benefits should they receive money outright from your estate? A will can ensure that any inheritance to a parent or other beneficiary receiving government aid be deposited into a Supplemental Needs Trust for the beneficiary’s benefit, thus protecting the inheritance while still maintaining their beneficial government status.
Beyond getting the proper estate planning documents in place, it is also a good idea to connect with a financial adviser to discuss how to manage expenses and save for the future.
There is a lot to consider when deciding on an estate plan. No two individuals are alike. A great start would be to sit down with an Estate Planning attorney to discuss your options and determine which plan is right for you.