Contrary to popular belief, estate planning involves more than merely deciding who gets your money when you die. It also enables you to determine what you want to happen if you are seriously injured or incapacitated and allows you to select who can make critical decisions on your behalf.
What is Estate Planning?
A comprehensive estate plan can help ease the burden on your loved ones by making unthinkable decisions ahead of time and providing clear instructions on how to distribute your money and possessions. The more detailed your estate plan, the easier it is for your family to implement your wishes.
Some of the most common estate planning documents include:
- Last will and testament
- Financial power of attorney
- Health care proxy (also called health care power of attorney)
- Living will (also called health care directive)
- HIPPA authorization
Why Young Adults Should Start Estate Planning
As soon as you turn 18, you are considered to be a legal adult. While you may still rely on your parents for many things, the law views you as an adult who is entirely responsible for making their own decisions. On your 18th birthday, your parents lose the right to make any decisions for you.
While you might think you are too young to need an estate plan, tragedy can strike at any time. Even if you're unmarried, childless, and don't have many assets, an estate plan can protect your wishes and ease the burden on your loved ones.
If you are married or have children, estate planning is crucial, no matter how old you are. If you don't have an estate plan in place, your state's default laws will determine who gets conservatorship of your children in the case of your untimely death. With an estate plan, you can ensure that your children will be cared for, that your spouse won’t be saddled with your debts, and that your money and possession are distributed to the right people.
In addition, estate planning is not just about what happens when you die; it also involves clarifying your wishes if you become incapacitated. Estate planning enables you to decide who you want to make your financial and medical decisions and clearly document your wishes regarding medical treatments and end-of-life care.
What Documents To Include in an Estate Plan
Here are five essential estate planning documents that every young adult should have, no matter how much money is in their bank account.
Durable Power of Attorney
A financial power of attorney (POA) document allows you to appoint someone you trust to handle legal and financial issues on your behalf. If a financial POA is durable, it will remain in force after you become incapacitated or otherwise unable to make decisions for yourself.
A durable POA can either be “springing” or non-springing. A non-springing POA is immediately effective, meaning whoever you appoint can start making decisions for you as soon as the document is signed. A springing POA does not go into effect until you become incapacitated. Both springing and non-springing POA documents can grant broad authority or only give particularized authorizations for specific circumstances.
It’s important to remember that each state will have its own laws regarding POAs, and you’ll have to follow the rules of the state you live in. Fortunately, you can quickly and easily create a POA online with Law District’s simple tools. Given the importance of a financial POA and how quickly you can create one, there's no reason not to make a POA today.
Wills are the foundational documents of most estate plans. In short, a will is a legal document that identifies who will inherit your money and belongings, and assume guardianship for any minor children. Even if you don't have children or many assets, you still may want certain people to receive particular possessions.
If you do not have a will in place at the time of your death, a court will decide who receives your assets. For instance, a long-term romantic partner has limited-to-no legal inheritance rights without a will, even if you live together. Creating a will lets you pick who receives your possessions instead of a judge.
Health Care Power of Attorney or Health Care Proxy
A health care power of attorney (also called a health care proxy) allows you to give another person the right to make medical decisions on your behalf. If you are in an accident or fall gravely ill and become unable to make your own decisions, a health care power of attorney lets you pick who should make choices about the treatment you receive.
Your medical POA can be the same person you select to be your financial POA, but you can also choose someone different. You should pick someone you trust and who knows you well enough to make the right decisions for you.
Living Will or Health Care Directive
In the same vein as the health care proxy, a living will (also called a health care directive) allows you to detail particular medical preferences in advance so that if you become incapacitated or otherwise unable to communicate, your requests can be followed. Health care directives often address your wishes regarding artificial life support, resuscitation, or tube feeding in the case of terminal illness, irreversible coma, or persistent vegetative state.
While they seem similar, health care POAs and living wills fulfill two different purposes: the POA identifies WHO has the authority to make your decisions, while the living will details WHAT decisions you would like to be made. Including both documents in your estate plan allows you to ensure that your wishes are followed, and an advance directive can simplify decision-making for your health care proxy.
A HIPPA authorization is a simple document that allows your doctors to legally share information about your health care and provide medical records to the person or people authorized. This document enables your loved ones to stay informed of your condition in the case of an accident or other emergency situation.
Estate Planning Tips
Even though estate planning is vital, the idea of creating an estate plan can be overwhelming and intimidating for many young people. Here are a few tips to help you get started on your first estate plan.
- Make sure you talk to the family members you want to name as durable POA or health care proxy before finalizing your estate plan.
- Let someone you trust know where to find important documents, such as financial records, in case they are needed.
- Don’t forget to make arrangements for your digital assets, such as your Facebook page and other social networking sites.
- Ensure your estate planning documents are kept in a safe place after they are created.
- Create a list of your accounts and passwords (including the password for your computer), print the list, and keep it in a safe place.
- Once you've created an estate plan, review it each year to ensure no updates are necessary.
If you’re a young adult, estate planning may seem dull and unnecessary, but it’s actually essential to ensuring your loved ones are cared for, and your wishes are followed. It can also spare your family from legal issues resulting from your sudden death that can make an unbearably tragic situation even worse.