Although many Millennials (born 1981-1996 according to the Pew Research Center and 1982-2000 according to the Census Bureau) have substantial student loan debt and other expenses such as high mortgage or rent payments compared to their income, it is still a good idea to do an estate plan and here’s why:
You may not have had the chance to build up a large estate, but you still have assets. Your bank account, your car, your IRA, 401(k), your E-Trade account, savings bonds from grandma, your TV, PlayStation, high powered computer, furniture, and other household goods are all assets that need to be taken into account when you pass away.
The majority of my clients do a Revocable Trust, which is a document that designates who gets your assets after you pass away. The major benefit of having a Revocable Trust is that, so long as you follow a few simple steps, your estate can avoid going through the Probate process upon your death. Avoiding Probate is probably the number one reason my clients to do a Revocable Trust over a simple Will. An added bonus of your estate avoiding Probate is that the distribution of your estate is entirely private; nobody will have access to how much money you had and who you decided to give your money to after you died. Probate can be expensive and very stressful on your loved ones, so avoiding that is also a huge check mark in the plus column.
All of this is to not only ensure that your current assets will be easily distributed to those you want, but it will also pave the way for the easy transfer of your future assets into your Revocable Trust. When I say transfer, I mean that your assets will be owned by your Trust. For example, your bank account will be titled, “John Smith, Trustee of the John Smith Revocable Trust of 2018.” Since your Trust will own your assets upon your death, your successor trustee will be able to immediately gain control of those assets and distribute them to your named beneficiaries without having to go through Probate Court, making it much easier and cheaper to get your assets to your loved ones. Monies and other assets you put in your Revocable Trust remain in your control during your life to use as you see fit so you are not limiting your financial options in the future by creating a Revocable Trust.
What is the advantage of doing a Revocable Trust now, while you are younger and may not have had the chance to accumulate a lot of assets? From now on, everything you buy that has any type of certificate of title or ownership, you can buy directly in the name of your Trust. If you wait to do a Trust until later in life, after you have bought a house, opened multiple bank accounts, own multiple cars, have investment accounts and retirement accounts, you will have to transfer those assets into your Trust once you execute your Trust. Your household items can all be dealt with through the use of a Bill of Sale, directing your household goods into your Revocable Trust so that you need not buy that new bed or computer in the name of your Revocable Trust. If you have a Trust now, you will avoid that extra step in having to transfer assets you already own into your Trust and you will instead be able to buy everything directly in the name of your Trust. You will be saving yourself a lot of time and money by doing it now. And let’s face it: we don’t know when it will be our time, so it’s better to have a plan than to not.
An important aspect of having an estate plan is having a Durable Power of Attorney and a Durable Power of Attorney for Healthcare (sometimes called Advanced Directives or a Healthcare Proxy). These two estate planning documents allow you to appoint a person to step into your shoes and make financial and healthcare decisions for you in the event you can’t do so yourself. If you don’t have these two documents, somebody will have to go to Court to try and get a Guardianship over you, which can be very expensive and time consuming.
Another important aspect of having a proper estate plan is making sure you have the proper amount of life insurance. There are many benefits to having one, or multiple, life insurance policies. First, you want to make sure you have enough coverage for your current financial and life situation, as well as for your future financial and life situation. You want to make sure you have the correct type of life insurance, as there are many different kinds that can suit your individual needs. You can use life insurance to make sure there is money to help take care of your minor children if something were to happen to you while they are still young. You can use life insurance to make sure your spouse can pay off any of your debts, such as your mortgage, if something were to happen to you while you still had bills to pay. You can even use life insurance to make sure your parents aren’t strapped with paying off the loan they co-signed with you to put you through college.
It is important to have a life insurance policy that is not through your work. When you have a policy through your work, most of the time you can’t take it with you if you end up leaving your job. If you have a policy through a life insurance company that is not provided by your work, you won’t have to worry about what happens to your policy if you leave your job because that policy will follow you wherever you go.
It is also beneficial to purchase a policy while you are young and healthy because you can potentially get a policy for only $20 or $30 per month. Rates are lower for young and healthy people so you can lock in a great long-term premium, perhaps 20 or more years to get your children through college or to ensure that long term goals are not thwarted by your death.
The best thing you can do is to meet with an estate planning attorney, discuss your current situation and come up with a plan. It will be well worth your time.
Andrea Nelson is an attorney at Hamblett & Kerrigan who focuses her practice in the area of estate planning, including wills, trusts, health and financial powers of attorney as well as estate administration. Attorney Nelson can be reached at [email protected].