Young adults should prioritize estate planning.
Although your chances of dying increase as you get older, death can come at any age.
As my maternal grandfather would say, “The old must die and the young may die.”
Most people do not enjoy thinking about their own mortality.
I get that.
Against this backdrop, many young adults (mistakenly) assume they are immortal.
Young adult also may feel there is no time to prepare an estate plan as they are busy building careers, establishing personal goals, repaying student loans, and starting families.
According to a recent Kiplinger article titled “You’re Not Too Young for an Estate Plan: 7 Essentials for Your 20s and 30s,” young adults who have more debts than assets still need an estate plan.
What does this demographic specifically need to consider in estate planning?
What happens to student loans after the debtor-student dies depends on whether the loan was federal or private.
Federal student loans and Parent PLUS loans are typically discharged after the debtor-student dies.
This is not necessarily the case when it comes to private loans.
Although the institution may forgive the loan, it also may require repayment of the loan be paid by whoever co-signed the loan.
If the loan was made after November 20, 2018, then the Economic Growth, Regulatory Relief and Consumer Protection Act will exempt the co-signer from being held responsible.
Those who took out loans after being married may leave their spouse with the bill if they resided in a community property state or if the surviving spouse was a co-signer.
Advance Health Care Directive and Durable Power of Attorney for Healthcare Decisions.
These documents are essential for incapacity planning.
Advance Health Care Directives provide instructions to family regarding when to forego, start, continue, and stop various or all medical treatments.
If you provide instructions in the document, healthcare providers must honor these wishes.
With a Durable Power of Attorney for Healthcare Decisions, young adults can appoint an agent to serve as the healthcare decision maker should the young adult become incapacitated.
The agent will be able to talk about your medical needs with the healthcare providers and your insurance company.
Your agent will also be able to access your medical records.
General Durable Power of Attorney.
This is the “kissing cousin” to the Durable Power of Attorney for Healthcare Decisions.
Consequently, you can appoint an “attorney in fact” (an agent) to handle all of your important financial responsibilities, from paying bills and managing investments to filing tax returns.
Last Will and Testament.
While many people believe a Last Will is only important if you have significant assets like retirement accounts and homes, most people have property to distribute after they have died.
Even if young adults live alone in an apartment, they likely have a car, bank accounts, personal property, and digital assets.
With a Last Will, you can choose who will inherit possessions.
By writing a valid Last Will, you will also be able to designate an executor to oversee the distribution of your property.
A Last Will is used to choose guardians to rear your any minor children should you die unexpectedly.
Estate planning documents like a Last Will should be drafted and signed with an experienced estate planning attorney.
General Non-Probate Transfer Arrangements.
Under Kansas and Missouri non-probate transfer statutes almost every asset that can be owned can be arranged to avoid probate (and therefore using a Last Will) by beneficiary designations, pay on death, and transfer on death arrangements.
Pretty cool, yes?
Retirement Accounts and Beneficiaries.
Although the size of retirement accounts for young adults will be significantly smaller than those who have worked and saved for decades, they will still need to have beneficiary designations.
While “singles” cannot designated a “spouse,” they can and should designate a sibling, parent, or other relative.
Millennials and Gen Z often have many digital assets.
Whether for social media accounts, bank accounts, or cloud storage, young adults should create a inventory of their digital assets.
The list should include usernames, passwords, and directions for two-factor authentication if necessary.
Because a Last Will is a “public” document once filed with the probate court, this information should be kept separate and stored in a secure location where only a trusted family member has access.
You may need to find specific rules for cryptocurrency inheritance as well.
Although many young adults are not parents, they may have pets.
These furry, feathered, or scaled pets will be left vulnerable without estate planning.
Pet owners may want to include a pet guardianship clause in their Last Will or set up a Pet Trust to provide for the food, fun, and medical needs of the pet.
Although the lives of young adults can look very different from their older family members, everyone can benefit from an estate plan.
Reference: Kiplinger (Aug. 22, 2022) “You’re Not Too Young for an Estate Plan: 7 Essentials for Your 20s and 30s”