Apr 05 2019

30 Somethings Need Estate Plans Too

By Attorney Allison Poirier / In Estate Planning

A common misconception about estate planning is that it is only for those who are old and rich. For this reason, most people think estate planning should go hand-in-hand with retirement planning, and younger individuals with fewer assets move estate planning all the way down to the bottom of their to-do list. However, preparing an estate plan can make just as much sense for a 30 year old as it does for someone on the verge of retirement, and here’s why.

Who Gets the Assets You Do Have?
The best way to ensure your assets, as limited as they may be, pass to who you intend is to prepare a Will. If you die without a Will, your assets will pass according to “intestacy laws.” Intestacy laws are the state’s default rules for what happens to your things if you die without a Will. The laws provide that your assets will pass to your closest living family members, but this may not achieve the results you had intended. For example, if you are married and have children, according to the intestacy laws all your assets pass to your spouse and children. If you own a house, this means your two year old and your spouse are now the joint owners of your house. Preparing a Will can avoid problems like this. It allows you to direct where any assets that you own in your own name (i.e. house, bank accounts, etc.) will pass if something happens to you. 

Who Will Look After Your Children? 
For those with limited assets, a more important function of a Will may be to name a guardian for your children in the event you and your child’s other parent pass away.
If you do not prepare a Will and appoint a guardian, it is left to the probate court to decide who gets your children. Do you really want a judge picking a guardian at random, like a sibling who you haven’t spoken to in years? Or your in-laws who live 2,000 miles away so that your child has to move across the country during his senior year of high school? And don’t you want to avoid having family members going to court to fight over who gets custody of your children? All of this potential drama can be avoided by having your wishes set forth in your Will.

Also keep in mind that it may be practical to appoint a “standby guardian.” The guardian appointed under your Will has legal custody of your children upon your death, but what if you can’t act as your child’s guardian during your lifetime? A standby guardian is someone who you can appoint to serve as guardian for your minor children in the event you become mentally or physically incapacitated, or in the event you need to leave your children for a period of time. For example, you need to go on a weeklong trip to New York for work and decide to leave your six year old child with your mother. What if your child gets hurt and requires medical attention? The doctors may not allow your mother to consent to such medical treatment as she is not your child’s legal guardian. However, if your mother has been designated as your child’s standby guardian, she would be able to make these types of decisions for your child.

What About Assets That Do Not Pass Under Your Will?
Preparing a Will is an excellent first step in implementing your estate plan. However, it is important to be aware everything that you own will not necessarily pass under your Will. Certain assets pass separate and apart from your Will, such as any asset with a beneficiary designation. The most common types of beneficiary designated assets are retirement accounts (ex. IRA, 401k, etc.) and life insurance policies.

Take the time to review who is named as the beneficiaries of these types of assets to ensure they are going to the people you intend to have them. For example, if you started your 401k at your job while you were unmarried or before you had children, you may have named your parents or siblings as beneficiaries, or you may have not named any beneficiaries at all. It only takes a few minutes to fill out a new beneficiary designation form to make sure your beneficiary designations mirror the provisions you have set forth in your Will.

What If Your Assets Are Passing To Minor Children?
So if you’ve now “seen the light” and prepared a will and updated your beneficiary designations, you’re covered right? Maybe yes, and maybe no. Additional considerations need to be taken if you have young children or other young beneficiaries who may be inheriting from you.  What happens if your spouse has predeceased you (or passed away at the same time as you) and all your assets pass to your minor children? Do you really want your house or the $50,000 in your 401k passing to a two year old? One way to ensure this doesn’t happen is to set up a trust. Instead of passing directly to your children, the money will go into an account to be managed by someone who you’ve chosen (a “trustee”). The trustee will then oversee the assets for the children until they are old enough to do it for themselves. In the meantime, the trustee will have the ability to spend the money on your children’s behalf for school, housing, clothing, or any other purpose that the trustee deems to be appropriate.

What If You Are Incapacitated During Your Lifetime?
Hey, I get it. You’re young, healthy, and to a certain extent this may make you feel invulnerable. The truth is, accidents and illnesses affect people of every age group. Even more true is that life still goes on. Bills will still need to be paid, tax returns will still need to be filed, and doctors will still need to consult with you about your health and potential courses of treatment. If you’re unable to handle these tasks yourself, someone else will need to step in and serve as your substitute decision maker. By planning ahead, you can have a say in who these decision makers will be.

The two primary documents that appoint your decision makers are a Power of Attorney and a Health Care Directive. A Power of Attorney (“POA”) chooses someone to handle any and all financial matters, while the Health Care Directive (“HCD”) chooses someone to handle any and all medical matters. A HCD can also express your wishes about the type of medical treatment you want or do not want to receive at end of life (a.k.a. Living Will). For example, if you’re in a car accident, do you want to be kept alive by ventilators and feeding tubes? Preparing a Living Will can answer these types of questions and not leave your loved ones to guess what you would have wanted.

Please be aware that if something happens to you and you do not have a POA or HCD, your spouse is not the default decision maker. Instead, it falls to the probate court to choose someone to act on your behalf. The court may still choose to appoint your spouse, but that result is not guaranteed. Rather than leave it up to the courts, plan now and make sure you have a say in the matter.

Strapped For Cash But Want To Make Sure Your Family Is Financially Secure? 
To circle back to where I started at the beginning of this article, one of the leading reasons younger individuals do not prepare an estate planning is because they have very few assets. Student loans, mortgages, car payments, and other debts may mean there’s not a lot left to transfer into your savings or retirement account at the end of the day. So how do you make sure your family is protected financially if you’re gone and you were unable to accumulate assets during your lifetime? A simple answer may be life insurance.

Life insurance can be a much needed source of income for your spouse and children upon your death. It can be used to pay off a mortgage, pay your children’s school tuition, pay off credit card debt, or even just to help with the payment of the regular monthly bills. And the good news is, life insurance is cheap! For a few hundred bucks a year, you can make sure your family is financially secure after your passing.

Should My Email Account Be A Part Of My Estate Plan? 
Yes. Most people don’t think about what’s going to happen to their email or Twitter accounts when they pass away, but it is something that needs to be considered. Given the large amount of information people store on their computers and online, a well thought out estate plan should include plans for how to handle these “digital assets” upon your death.

For example, if you get all your bills, bank statements, and other important documents emailed to you instead of mailed, you need to make sure your loved ones can access this information if something happens to you. Keeping a list of all usernames and passwords where you have accounts, and making sure your loved ones know where you keep the list, can help.

Can’t I Just Get These Documents Online?
“Why go to a lawyer when I can just go to” For one simple reason:  preparing these kinds of documents without an in-depth understanding of estate planning may do more harm than good. For example, would you take medication based on a self-diagnosis from WebMd without first consulting a doctor? Sitting down and meeting with a lawyer ensures that your estate plan accomplishes exactly what you want it do and that it is specifically tailored to your needs. 

For more information on estate planning for young couples and families, watch Attorney Allison Poirier's YouTube video, Estate Planning for 30 Somethings

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