(Hint: It’s a trick question.)
Thomas was a bright young man in his mid-20s—promising and ambitious, but not greedy. Like many in his age bracket, he was more interested in experiences than in amassing wealth. Recently graduated from college, he decided to forego the job hunt for a year and see the world instead. He eventually developed a sustainable income as an Instagram influencer which allowed him to continue traveling and experiencing new things. He didn’t have a lot of assets, but he did manage to save about $10,000, along with a vintage vinyl collection that would make most music lovers drool.
He had recently proposed to his long-time live-in girlfriend; they hadn’t set a date, but they were an established couple by anyone’s estimation. Then, tragically, Thomas was killed in a freak water skiing accident. That’s when the nightmare began for his parents. Not only were they burdened with the grief of burying their son, but because he’d left no will, what few assets he had were locked in probate for nearly a year. Without a will in place, his fiancé had no claim to his belongings, so she came away with nothing even though they had lived together for two years. Once the dust settled, the money in Thomas’ bank account barely covered his burial costs, and even after liquidating his vinyl collection, his parents were left to settle about $30,000 he’d left behind in student loans.
Was it too soon for young Thomas to set up an estate plan? Not if you ask his parents—or his fiancé.
According to a survey by Caring.com, only 42 percent of American adults have some sort of estate plan in place. The numbers are even more sobering for the Millennial generation: nearly 80 percent of people between age 18-36 don’t even have a simple will. Young adults believe they have many decades to think about their end-of-life financial plan—and most of them are right.
But that isn’t really the point. It’s not about how much time we have, or even how much money. It’s about not knowing how much time we have, and it’s about what we leave behind for our loved ones—or as the case may be, what we leave behind for our loved ones to deal with if we don’t plan for the inevitable.
Why You’re Not Too Young to Make a Plan
Once you reach age 18, the government no longer considers you a minor—which means you have control over your job, your belongings and your life choices. That also means you’re old enough to decide what happens to your stuff and your money when you die. Here’s why it’s never too soon to set up at least a basic estate plan:
- You have more than you think you do. If you live on your own, you likely have an income, a bank account, a car, furniture and at least a few objects of sentimental value. All these assets will go to someone when you die, whether that happens sooner or later. Wouldn’t you rather decide who gets it?
- Probate works the same regardless of age. If you don’t specify who-gets-what when you pass on, the government will make those choices for you—and it may not be what you wanted, or what your family needs. This is true whether you are 28 or 82.
- You have other assets besides those of monetary value. Do you have a cat or dog in your apartment? Who will take care of that beloved pet if you pass on too soon? If you don’t make a plan, and no one in your family volunteers, your pet will likely be euthanized. And what about your “digital assets”—e.g., your social media accounts? The law doesn’t require these platforms to close your accounts when you die, and your family may have to jump through many hoops to get them closed unless you assign someone to handle that detail for you. These intangibles play as much into your estate plan as anything else does.
The Basics of Estate Planning for Millennials
Here’s the good news: Your estate plan doesn’t have to be complicated in order to cover your interests and protect your loved ones. Most younger adults can start with the following basic instruments in place.
- Will—This document details where you want your belongings to go when you die, as well as specifying other last wishes such as how you want your remains handled, who gets the dog, etc. If you have minor children, the will should also name a guardian. You’ll no doubt revisit and rewrite this document several times as your financial/family status evolves.
- Life Insurance—Most people think of life insurance as a way to provide for a spouse or children, but that’s not all life insurance can do. If you don’t have a family yet, even a small policy can cover your burial costs and your debts so someone else doesn’t have to pick up the tab.
- Powers of Attorney—In the event you become incapacitated and unable to function (due to an injury, for example), powers of attorney will allow someone you trust to make important decisions for you without the court’s interference. You’ll want to establish a durable financial power of attorney for financial decisions, as well as a healthcare power of attorney to empower a trusted loved one to make medical decisions on your behalf. (You’ll also need to fill out a HIPAA Authorization form so your doctors can discuss your medical needs with your healthcare POA appointee.)
As your life changes, your estate plan can evolve and adapt—but these basics should cover you and those you love in the event of the unexpected. The worst thing you can do is nothing. It’s never too soon to make a plan, and there’s no time like the present to get started.
What To Do Next:
Estate planning can be deceptively complex. Not only do state and federal laws change, but every family situation is different. Planning choices have profound tax and family relationship implications; and, not having a plan in place is worst of all.
Adam Wood offers clients a no hassle estate planning strategy meeting. During and after the meeting, Adam guides his client through a plan which will achieve his client’s goals and put his client’s fears to rest. Ultimately, he provides peace of mind for his client and client’s loved ones. Just call his office at 631-266-2200 to schedule a planning strategy meeting.