As a twenty-something, I know that most of my peers haven’t given much thought to estate planning. They may be wondering if they need to do any estate planning at all. Some might not even be sure what estate planning means!
What is estate planning?
Estate planning means arranging your assets to achieve your goals – during life, as well as after death. Most people in their twenties don’t spend much time thinking about death, but that doesn’t mean they aren’t engaging in estate planning. Did you designate a beneficiary for a 401(k) or life insurance policy when you started that first “real” job after graduation? Have you added a partner or spouse to a bank account? If so, you’ve begun estate planning without even realizing it!
Beyond the transfer of assets, estate planning can also include giving authority to others to act on your behalf, make arrangements for your medical care, direct disposition of your remains, provide for the care of minor children, minimize tax consequences, and more. Not only will creating your estate plan give you a sense of confidence that your instructions will be followed, it will also ease the burden on your loved ones who can be sure that they are complying with your wishes.
Why do people in their twenties need to worry about estate planning?
Young people often avoid estate planning because “I don’t have an estate.” Your estate consists of everything you own, and when you really think about it, you might own more than you realize. Do you have a bank account? A car? A house? Stocks? Life insurance? Retirement accounts? Do you hope to have these things soon?
Another excuse young people give for avoiding estate planning is because “I’m young and healthy, nothing will happen to me.” In reality, being young doesn’t mean you’re invincible. Look up the cases of Karen Ann Quinlan, Nancy Cruzan, Terri Schiavo, or Bobbi Kristina Brown, and you’ll see how the unexpected death or incapacity of a young person can throw a family into chaos.
Why kind of estate planning do people in their twenties need to do?
First, you need a general, durable power of attorney (DPOA). This authorizes a someone you trust to do your business for you. Common uses of a DPOA include authorizing your attorney in fact to access your banking information, talk to your insurance company, make changes to retirement policies, borrow money, and sell assets, to name just a few. Think of all of the reasons you might suddenly be unable to sign your name, and you’ll see why we consider this to be the most important piece of anyone’s estate plan.
Next, you need a healthcare power of attorney (HCPOA). This authorizes your “healthcare agent” to make healthcare decisions for you when you cannot. You can also provide instructions regarding specific medical procedures, organ donation, autopsy, and disposition of your remains.
Another part of many people’s estate plans is a will. A lot of clients tell us that the reason they’ve come to our office is because they need a will. However, many twenty-somethings can create a plan that takes care of their entire estate without ever executing a will. If all of your assets are such that ownership can be passed by title (for example, by owing a house, car, or bank account jointly with right of survivorship) or by beneficiary designation (life insurance, 401(k), IRA, etc.), a will is probably unnecessary.
There are some situations where young people can benefit from a will. If you have substantial valuable assets that will not pass by title, such as jewelry, art, or antiques, you may want to execute a will to make sure those items pass to the people you choose. More commonly, people in their twenties execute wills when they have young children. Parents can use a will to select guardians of minor children and may decide to set up a trust to provide for their care.
Can I do my estate planning on my own?
The real question isn’t “can you,” but “should you?” The rise of services like LegalZoom have emboldened tech-savvy millennials to draft their own estate planning documents. These lower-cost options can be appealing, but “do-it-yourself” documents often cause problems that require more time and money to fix than a visit with a lawyer would have.
Companies that provide “do-it-yourself” legal services don’t give you personal attention and they don’t explain strategy. These companies often do not keep up with changes in the law in every jurisdiction. They do not review your documents to ensure that they are internally consistent and that everything has been properly phrased so that your wishes will be carried out. They cannot make suggestions of non-legal steps you might take or alternative ways to develop your estate plan.
In other words, a “fill-in-the-blank” will is only as good as the person filling in the blanks. LegalZoom, one of the most popular “do-it-yourself” legal service providers, once estimated that “80% of people who fill in blank forms to create legal forms do so incorrectly.” When these documents are used, they often cause confusion and fighting among families and may even be outright rejected by a court.
How can I start estate planning?
The first step in estate planning is listing what you own. Your list should include how the assets are owned (individually or jointly), and what they are worth. Next, decide what you want your estate plan to accomplish. Are you worried about taking care of a particular family member? Do you want to make charitable contributions? Do you want to make sure certain assets go to a certain person? Do you want to avoid probate and keep your estate private?
Once you figure out what you have and where you want it to go, you should meet with an estate planning attorney who will help you create a strategy for your estate plan that will best meet your goals. An attorney can also give you advice on non-legal steps you might take to organize your estate. After you have set up your estate plan, you should review it every few years, or whenever you have a major life change, to ensure it still reflects your wishes.
This is information, not legal advice. We are offering some general information on a topic that may be of interest. This is not legal advice. Your circumstances will be different from anyone else’s. If you have questions about a specific issue or asset, please call our office and make an appointment for a consultation. We will be very happy to work with you.