When you’re young and living your best life, it’s hard to imagine what happens when it's all over. Estate planning is often overlooked for many millennials, but when you're taking the biggest steps of your life like getting married, having kids, or buying a home, an estate plan could become your best friend in protecting what's yours. Choosing where your house, car, or pets will go in the event of your death is an important decision that should be made by YOU.
What is an estate plan?
An estate plan allows you to make decisions about where and who your estate will go to in the case of your incapacity or death. Creating an estate plan is beneficial because it prepares a plan to fulfill your wishes as you would like them done. The main components that make up an estate plan are a will, power of attorney, and healthcare directive. These documents are necessary to make sure you provide instructions for any financial or medical decisions that would need to be done for you.
Are estate plans only for rich people?
No!!! This one of the most common misconceptions to estate planning. Nearly everyone has an estate that should be taken care of in the event of death or incapacity. Anything in your name from your home to your bank accounts will be part of your estate plan.
What is a will and why do millennials need one?
A will provides instructions for the distribution of your estate. This document lets you decide who will get what. You can assign your belongings to one person, divided equally (or not) to multiple people, or to no one and donate it all to an organization you are passionate about. You can also designate when they will receive assets and establish terms to your will if necessary, this is called a conditional bequest. This aspect is beneficial if you want to give everything to your children but want to make sure they are older than 18 or 21 or 30 before receiving it.
Some of your accounts like your IRA, 401(k), pension, annuity, and even life insurance will ask for a designated beneficiary account and it is SO important to have someone listed. A will is best used for assigning beneficiaries to your assets that do not list a designated beneficiary. Your bank account or crypto assets are a few important examples of accounts that do not require a listed beneficiary; however, you should consider adding Transfer on Death (TOD) to these accounts to allow the assets to pass directly to a beneficiary.
If you die without having created a will, then your assets will be distributed according to the laws of your state… but does the state really have your best interest at heart? With a will, you have the power to choose where your assets go, so use it!!
Where do I list a guardian for my children?
If you have children, a will is the document where you would list a guardian. When choosing a guardian, it is important to think about what your children’s lives would look like in their care. Do they have the same or similar values as you? Will they be able to financially and emotionally support your children throughout their lifetime? Are they at a place in their life where they can potentially raise small children? Will your children have to move somewhere far from their friends and family? These are just some questions to consider when choosing a guardian.
How can I include my pet in my estate plan? 🐕🐈⬛
As much as we love our pets like our children, they are still considered property in your estate. When you designate someone as a beneficiary of your estate, you can specify that your pet will also go to that person. Who are we kidding?! Our pets ARE like our children so we should put some serious thought into designating a pet guardian. You can include a pet care directive in your will that will list the name of the pet guardian you chose and any money or property you’d like to leave for the care of your pet.
What is a health care directive and why do millennials need one?
One of the hardest things to think about is who will make medical decisions for you in the event of your incapacitation. It is a huge weight for your loved ones to make this decision when emotions are high and it is difficult to make rational decisions. This is why a health care directive is necessary for your estate plan. A health care directive gives the person of your choice permission to make health-related decisions for you, only if you are unable to.
What is a power of attorney and why do millennials need one?
So now we know if you are incapacitated you can take care of health-related decisions, but what about everything else? Unfortunately your financial obligations do not disappear even if you are unable to handle them. You can assign a power of attorney and give them permission to handle all of your financial obligations like paying your bills, depositing checks, and handling your health insurance.
How often should I review/update my estate plan?
Your estate plan should be revisited on an annual basis to make sure your wishes, assets, and beneficiaries are up to date. A good way to remember to check your estate plan is to revisit it every year around your birthday. Big events in your life would also warrant an update of your estate plan. If you have a child that was not listed in the original plan, update it!! Buying a home, starting a business, getting married, and even getting a new pet are all reasons for updating your estate plan.
What happens to my estate plan if I move states?
If you move states, it is likely the laws that are in place for your estate plan have changed. The good news is that since you have already developed your estate plan, you do not have to start from scratch. Every state has different laws around wills, powers of attorney, and health care directives so once in your new state, you should consult with an attorney to make sure these documents are in accordance with your state.
🔥 Common question from our clients 🔥
My parents listed me as their executor. What does that mean?
The executor of an estate is stated in the will and designates who will be responsible for making sure the wishes of the deceased are being carried out. If you are listed as the executor for your parents, it is likely that they have already laid out the plans for their estate and after-death wishes so it leaves little room for questions. You will have to execute their wishes and are in charge of keeping their assets safe until they are distributed, contacting people listed in their will to make sure their inheritance is distributed correctly, and finalizing their financial affairs like canceling credit cards, paying off debt, and filing their final income tax returns.
Providing your loved ones with a plan for everything you would like to get done in the event of your death or incapacitation is the best way to ensure your wishes are met. As a millennial, you may believe you are in your prime so why do you need an estate plan? You need an estate plan because nobody knows what can happen tomorrow. The only thing we can do for ourselves and our loved ones is hope for the best AND prepare for the worst.
If you have further questions or concerns regarding estate planning, see our financial planning experts and schedule a free 30 minute consultation with us.
Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.