5 Estate Planning Basics For Millenials
2020 left Americans with a pandemic that claimed many lives, plus political unrest, underscoring that tomorrow isn’t guaranteed. Still, with all the uncertainty of the future, Caring.com estimates that 60% of Americans, including Millenials, don’t have a will.
Millennials, born between 1981 and 1996, may think that estate planning isn’t necessary. Many believe that high student loans, credit card debt, and entry-level jobs give them nothing to leave behind. The traditional thinking that estate planning is only for wealthy people couldn’t be further from the truth. Estate planning isn’t about the financial inheritance you leave behind. It’s about the security you give your family after you’ve passed. Think about all the family pressure to decide how to handle your remaining debt, funeral arrangements, and social media accounts. In terms of incapacity, leaving family members guessing and arguing about life-saving techniques can be prevented through estate planning.
Below are 5 critical estate planning tools that can secure your family’s future well-being after you have passed, despite your current tax bracket.
Table of Contents
Basics Of Estate Planning
A Will is a document that legally states your wishes after death. It is usually drafted by an attorney and specifies how and when your assets will be distributed following death. It also names who will receive those assets. This could be family (some or all members), friends, or even charitable organizations that you support. A Will also enables you to leave particular directions regarding funeral arrangements, including music you want to be played at your ceremony and instructions regarding a final resting place. You can even designate that your body can be donated to science.
A Will can also ensure that your children and pets are cared for in a specific manner. If you do not name a guardian, the court will name one for you. This person may or may not be who you would choose for your children. If left to a judge’s determination when no will is in place, family members may fight among each other for legal custody. A Will helps ensure that these issues do not arise; if you clearly state your intentions for guardianship, then they will likely be followed by a judge.
A Will can also direct how your digital assets will be handled. These include photos, movies, online funds (Paypal), social media accounts, and frequent flyer miles/credit card points.
2. Living Trust
When you create a living trust, you have complete control of your assets. You can name yourself as the trustee and move assets in and out of the trust as you please. With a living trust, you can appoint a ‘successor trustee.’ This person will take over after your death and can distribute your assets directly to the beneficiaries named in the trust without the need for court involvement.
A living trust also takes effect if you become incapacitated. The successor trustee would act according to the listed directives in the trust. They could handle financial issues, including managing properties and business assets on your behalf. And, unlike a Will, it can be done quickly. Using trusts in combination with other estate planning documents, you can pass property to your beneficiaries bypassing Nevada’s complex probate process.
3. Durable Power Of Attorney
A durable power of attorney is a signed legal document. It remains active until you revoke it or you pass away. You can authorize a person to handle your financial affairs for you if you become incapacitated or ill.
The agent in a durable power of attorney can have the power to pay your rent or mortgage, deal with your health insurance, pay your student loan debts, or even deposit your checks for you. Creating a durable power of attorney will give you peace of mind that your financial affairs can be addressed if something should happen to you.
4. Living Will/ Advanced Health Care Directives
Generally speaking, a Living Will is also known as an Advanced Health Care Directive. It’s a document that allows you to choose someone to make medical decisions for you when you personally cannot. While it’s challenging to think about being seriously ill while you are young, even young people can suddenly become sick. Having an Advanced Health Care Directive allows you to protect your treatment and end-of-life wishes.
5. Life Insurance
Life insurance is an essential financial plan for young parents who haven’t set aside enough assets to provide for their children’s future care. It accomplishes what no other planning tool can. It provides an instant source of income (and it is often tax-free). Your surviving family members can use this money to maintain their current lifestyle, pay taxes, and even carry out your wishes.