Upon graduation from college, or reaching your young twenties, you should be starting to think about setting yourself up for the future as you build your career. Opening retirement accounts and putting money aside for your later years will become routine. Along with planning for your future financially, it’s important to plan for unforeseen events that may leave your loved ones in a stressful spot should something happen to you. This is why estate planning is important to consider, even in your twenties. planning for death or disability is not always pleasant to do, but doing so now will ensure that 1) you and your loved ones will be taken care of in the event something happens to you and 2) you will have a solid baseline estate plan in place off of which to build as life goes on.
Whether single, in a committed relationship or married, at a minimum, here are the estate planning documents every young adult should have:
1. A Durable Power of Attorney for Healthcare (including HIPAA Release)
A power of attorney is a document in which one individual (the “principal”) grants another individual (the “agent”) the authority to act on his behalf, many times according to a specific list of directions. When it comes to medical decisions, a durable power of attorney, permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment. Without a valid durable power of attorney for healthcare in place, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s. However, with one, an agent is able to take any action which the principal would be permitted to take on his own behalf, ensuring that there is always a trusted individual that can make decisions for you.
2. A Durable Power of Attorney for Finances and Property
With a valid durable power of attorney for finances and property an agent should be able to access the principal’s bank accounts and financial records, pay rent, utilities and credit card bills, manage investments and loans and so on. Without one, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information. This means that if you are in the hospital for an extended period of time unable to act on your own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections.
3. Will
If you want to direct where your possessions will go if you die, then it’s important to have a will. If a person dies without a will, state law determines how the assets will be distributed. That will mean less money and more stress for the heirs—an unpleasant prospect for family members already dealing with the tragic death of a young person. Additionally, laws may not mirror your choices, meaning that, while you may want everything to go to a significant other or close friend, it’s not going to pan out that way without writing it out in a will.
4. Living Will
A living will is a legal document that a person uses to make known his or her wishes regarding life prolonging medical treatments. With a living will, you indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state. For example, you may indicate whether the use of feeding tubes or other life-prolonging equipment should be continued, or whether, at a certain point should be discontinued if there is no chance of recovery. A living will does not become effective unless you are incapacitated; until then you'll be able to say what treatments you do or don't want.
5. Authorization for Final Disposition
Leaving your loved ones specific instructions regarding funeral arrangements can drastically reduce the stress that they’ll obviously be facing should you pass away and spare them the difficulty of making those tough decisions at a painful time.
Items to consider are:
► Burial or cremation
► Contact information for a chosen funeral home, cemetery, etc.
► Details about your desired ceremonyDetails about any marker you may want
Drafting an authorization for final disposition provides details to your family and loved ones you may have never discussed with them and gives you a way to have a say in the final details of your life and leave the legacy you want to leave.
6. Appropriate beneficiary designations on retirement (and other) accounts
There are a number of things that a will won’t pass along to beneficiaries, including retirement accounts, insurance policies and other financial instruments that are governed by separate contracts between you and the provider. In order to ensure that these items go to your chosen beneficiaries if you die, it’s important to review the beneficiary designations on each account or policy. If changes are necessary you should make sure to file a new beneficiary designation form with the company.
Estate Planning Checklist for Young Adults
► Durable power of attorney for healthcare (with HIPAA release)
► Durable power of attorney for finances and property
► Last will and testament
► Living will
► Authorization for final disposition
► Appropriate beneficiary designations
Red Flags and words of caution
► State law governs powers of attorney, wills and their requirements for execution. So it’s important to familiarize yourself with these requirements BEFORE attempting to draft any of these documents on your own.
► Better yet, find an estate planning attorney that can do it for you.
► Many states, like Illinois and Wisconsin, have statutory forms that can be used to create a power of attorney. If you use them, be sure to follow the instructions very closely. Otherwise, you run the risk of the document being invalid.
► While the statutory form may accomplish much of what you need it does not contain some powers such as the power to make gifts or change beneficiary designations on a trust, so depending on the individual the extent of his assets, the statutory form may tie an agents hands in some ways.
► The requirements for making a valid will vary by state and are VERY SPECIFIC. One mistake in the drafting or execution of the document could invalidate it meaning that your wishes won’t be followed. This is not an area to mess around with DIY options. Hire an estate planning attorney to guarantee that there are no issues down the road.
► Beneficiary designation forms are usually pretty easy to fill out and are typically made readily available by insurance companies and financial institutions. If you’re unsure of the current beneficiary designations on your accounts, contact the institution or fill out a new form just to be safe.
Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com.
The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.
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