When do you really need to start thinking about your estate plan? When many people think about “estate planning,” they think about it in terms of age. Estate planning is often associated with retirement, prolonged illness, or preparing for passing. For that reason, it's not something that is talked about often outside of post-retirement communities. However, estate planning is necessary at any age. In fact, estate planning has almost nothing to do with where you are in your life.
Do Young People Need Estate Plans?
Yes! Estate planning is a process of putting together contingency plans for anything that might lie ahead. This includes the possibility of illness, injury, and death — and those can occur at any time, not just as we get older. At any phase of life, certain risks become more prominent than others and therefore estate plans can function in different ways. For example, a college student who is leaving home for the first time may become ill or injured while away at college. For them, an estate plan isn't as focused on transferring assets to heirs. It is far more important that a college student's estate plan authorizes parents or other trusted adults to step in to help make medical decisions and provide financial support if need be. Parents of young children also will want the ability to choose medical and financial decision-makers, but they are likely far more concerned about guardianship and who will be permitted to care for their children if they are unable to do so. New homeowners might worry about who will step in to take care of the home if they become ill or how the home will transfer to loved ones if they pass away. Retirees might worry about how their retirement accounts or life savings will transfer to family members, friends, and charities. Although different parts of an estate plan are emphasized at different phases of life, one thing remains constant: we all need a contingency plan in place, no matter our age.
What's Included in an Estate Plan?
For those of you wondering how one little estate plan could possibly serve all of these functions for all of these individuals, it's important to know one thing: an estate plan is so much more than just a “simple Will.” An estate plan is a comprehensive set of documents that allows you to communicate your wishes for any circumstance that may lie ahead. In general, a typical estate plan includes
- A legally-binding and fully-executed Will. A Will allows an individual to 1) state how they want their assets to be distributed after they die, 2) name an individual they want overseeing the distribution of their assets, and 3) identify guardians for their minor children. For many, many people, the Will they have drafted has not been properly executed, which means it does not have a legally binding effect.
- Power of Attorney. This legal document allows an individual to name a trusted person to make financial decisions on their behalf if they are unable to do so. Power of Attorney is particularly important to ensure that, if an individual falls ill or becomes injured, his or her bills get paid and business remains operational.
- Advance Healthcare Directive. This is a collection of documents that expresses an individual's healthcare wishes. It includes a Living Will that identifies the individual's end-of-life preferences, and it includes a Healthcare Proxy designation, which allows the individual to name a trusted person who is empowered to make medical decisions on his or her behalf.
- HIPAA Authorization. This release allows an individual to name a trusted person or persons who are entitled to discuss his or her medical condition with healthcare providers. Without a HIPAA Authorization, parents of adult children, nonmarital partners, and other important family members are not able to discuss an individual's medical condition or treatment options with healthcare providers.
- Revocable Living Trust. Not all estate plans need to include a revocable living trust, but they are a great tool to help keep your estate out of probate. Not sure what that means? Check out our blog post on why a revocable trust might be right for you.
Don't Wait to Complete Your Estate Plan
When it comes to estate planning, age is just a number. It doesn't have any bearing on when or whether you will need a particular part of your estate plan. Think of estate planning as a safety net. You may not need it right away, but it's best to have it there when you need it. If you don't yet have an estate plan, or if you have an older estate plan that you're not sure is up to date, give The Tyra Law Firm a call. We will work with you to make sure you have the right plan in place as soon as possible. We are here to help!