Being wealthy is not a requirement for creating an estate plan. Neither is being old, retired, having a family or owning a lot of assets. If you are a Millennial, and you haven't started estate planning, here's how to get started.
Why Millennials Should Begin Estate Planning Now
If you have been avoiding estate planning, you are putting yourself at risk. If you were to become ill or die at a young age, who would you want making decisions on your behalf? Does that person legally have the right to make those decisions? Depending on your state’s laws, the person you want to make decisions may not be able to without the right documentation.
You probably don't want the courts making financial or medical decisions for you. And if you have children to take care of, it gets complicated really quickly. Who will take care of your children if you are gone? The other thing to consider is your spouse and other family members. Don’t put them in the position of having to deal with paperwork and probate when emotions are running high.
Working With an Attorney
If you're ready to get started on estate planning, you should work with an estate attorney who knows the federal and state laws that apply to your situation. They may also bring up things you didn’t consider because they are experts. Don’t try to create the documents you think you might need yourself – you may end up paying more to have them corrected. (For related reading, see: Top 3 Tips to Find an Estate Planning Lawyer.)
There is some work you can and should do before meeting with an attorney. Make a list of all your assets and what you would want done with them. This includes bank accounts, vehicles and that Beanie Baby collection you thought was going to fund your retirement. If you have children, decide who will be their guardian and who will control the finances. There are crucial conversations to be had before sitting in an attorney's office, including arguing with your spouse about whose siblings are more responsible.
Basic Estate Planning Documents
Married or single, young or old, parents of two kids or dog parents, not having estate planning documents is a mistake. These are the most basic estate planning documents for you to get started:
- The last will and testament documents how you want your assets distributed when you die. It also talks about who is in charge of settling your estate (executor) and who will take care of your children if you have them. Without this document, the state will take over handling your assets.
- If you are near death or in a persistent vegetative state, a living will communicates what type of medical care, life-sustaining or resuscitation efforts, and pain medications you wish to receive. (For related reading, see: 5 Reasons to Update Your Living Will.)
- A durable power of attorney states who can make financial decisions for you if you are no longer able to do things like pay bills or manage your assets. This person is your attorney in fact and should be someone you really trust.
- A health care proxy allows a designated person to make medical decisions for you. This person should know what your wishes are in advance should the occasion arise.
Life Insurance and Updated Beneficiaries Are Important
There are two other things to consider when planning your estate. The first is life insurance. Life insurance should be part of your financial plan and can be a good way to ensure your family can continue to live the life you intended for them if you pass away at an untimely age. For example, if your income is suddenly gone, will your spouse be able to afford to live in your house or raise your children? Procuring a certain level of financial insurance can make everyone more comfortable. There are plenty of options for insurance, and you can pick what fits your family best.
The other thing to remember is to keep your beneficiaries updated. If you don’t update the beneficiaries on your retirement accounts, all the work you did with the estate attorney is useless. Check your beneficiaries on prior and current 401(k) accounts, as well as any other retirement accounts. The beneficiaries listed in these accounts take precedent over what is in your will.
It's Never Too Early for Estate Planning
As a Millennial, you probably feel your life is just beginning, and the ending of it is too far off to even consider. Unfortunately, we never know when our time will be up; having an estate plan in place will allow you to enjoy your life knowing your family and your assets will be taken care of.
(For more from this author, see: Personal Finance Basics for Millennials.)