Estate planning is generally thought of as something one does when they reach a certain age and tax bracket and as retirement is approaching. However, estate planning is much more than simply writing a will. It encompasses providing for yourself and your loved ones during life and after death. Millennials should have a basic estate plan in place in the event of an emergency or untimely death to disperse assets, and set estate and gift tax planning.
Many millennials have embarked on parenthood, caregiving and other stressful responsibilities. But they tend to view money from an entirely different perspective from preceding generations. Growing up in the shadow of the recession and under the weight of sometimes mountainous student loan debt, many millennials are responsible with their finances.
Being good with money, though, has never been enough. Part of being fiscally responsible is planning for the long term. Estate planning for millennials is not a one size fits all approach. The things millennials care about differ from their parent’s generation.
For Millennials with Young Children…
If you are a millennial and have children, they are likely minors. This leaves them vulnerable if you pass away. You do not want them left to the mercy of the court system. Anyone with minor children needs to name a guardian for their children in the event of the death or incapacity of both parents. The guardian is the person with whom the children will live. A conservator, which is the person who will manage any assets for the children which are not “funded” to the trust, should also be nominated; though if the trust is completely funded as intended, the trustee will manage all of the financial assets for the children instead.
Assuming there are two parents, the remaining parent will take on all of these roles. But what happens if something were to happen to both of you? As a young parent, often times if something tragic were to happen, there is a decent chance it may happen to you and the other parent.
Even if you do not have significant assets, you should speak to an attorney to assist you with drafting estate planning documents, including a will, durable power of attorney for finances and an advance health care directive, to make sure your children are cared for if you become incapacitated or pass away.
If you have specific wishes regarding how an inheritance should be spent and want to place restrictions on assets left to children, a trust will help you accomplish those goals. Common goals include financing education (to help avoid the necessity of student loan debt), protecting funds from use until children are old enough to make wise financial decisions, and protecting funds from children’s creditors. Depending on your goals and assets, insurance coverage should be reviewed for sufficiency.
For Millennials without Young Children…
Many millennials have opted not to have children. You may think this leaves you with nothing to worry about. Why do you need to worry about estate planning? One word: Probate. In short, probate is the court supervised process of distributing your assets after you die. If you die in California without any type of estate planning, the court is going to divide up your assets between your parents or siblings. Even if this is satisfactory to you, your family will not receive those assets for likely more than a year. And before they do, the court, the bond company, the probate referee (appraiser) and the attorneys will be paid out of the estate.
For Millennials with an Unmarried Partner…
If you have been with your partner for a long time and you want them to have legal power, an estate plan can make this happen. This can give your partner medical power of attorney in the event you’re hospitalized or put on life support. You can also give them financial power of attorney, allowing them to make financial decisions if you’re incapacitated or you pass away unexpectedly. Lastly, you can name them as a beneficiary in your life insurance to ensure they receive your payout.
For Millennials with Pets…
Millennials have adopted more pets than any prior generation and generally consider their fur babies to be members of the family. In fact, approximately 3/4 of millennials own a dog, cat or some other kind of pet. Millennials buy homes that are specifically ideal for their animal companions. At the same time, few millennials have taken precautions to ensure their pets are properly cared for in the event their owner gets sick or dies.
An essential part of estate planning for pet owners is the creation of a pet plan that protects your animals if you can no longer provide care for them. Pet plans typically use a pet trust, a kind of legal entity that can own property on behalf of your pet. Through the pet trust, you can also name someone who not only manages the property but also takes care of your pet, and who can use the trust’s money to pay for any pet-related expenses.
For Millennials with Student Loans…
Knowing the differences between federal and private student loans is imperative. Most notably, federal student loans are generally forgiven upon death whereas private lenders will pursue an estate for amounts owed by deceased borrowers. For more on how student loans can impact your estate plan, please see our recent publication on the differences between federal and private student loans.
For Millennials with Social Media Accounts…
You don’t have to be an Instagram influencer to include such assets as your Facebook, Instagram and Twitter accounts in your will. These accounts are considered a part of your estate. If you want your social media accounts and files to be dealt with in a specific way, you must list them in your trust. Unfortunately, many people never do this. You will also want to get specific as to how you want your accounts to be handled. You may want decide whether you want an official “final post,” delete the account entirely or keep it up for a certain amount of time.
For Millennials with Digital Assets…
Unlike previous generations, millennials are faced with a unique issue: tons of digital assets that need to be protected. These assets can include things like social media accounts, websites, computers, hard drives, flash drives, smartphones, tablets, files stored on the cloud and accounts with online retailers and even photos and videos. Not to mention YouTube, video gaming accounts, domain names and forums and blogs you manage.
With an estate plan, you can designate who will be responsible for which documents. It is also a good idea to have the access information for these accounts in a secure location, with those you trust knowing the location in case of your untimely death. Nominate someone in the estate planning documents to handle these assets and instruct them on your wishes on how these assets should be managed.
For Millennials Who Want to Make a Social Impact…
Millennials are known for wanting to make a difference. Discuss your social impact goals with your estate planning attorney. From establishing nonprofit organizations to directing that trust assets be invested in favorite causes, from arranging for environmentally friendly disposition of your body to benefitting favorite charities with life insurance proceeds, your estate planning attorney will be able to make both standard and creative recommendations on how you can accomplish philanthropic goals in your estate planning, even if you do not feel you currently have the resources to make a plan for an impactful gift.
What Does an Estate Plan Include?
One of the biggest differences in the estate planning needs of older people and millennials is the form their estate plans take. Millennials grew up with computers, cell phones, and the Internet, and their lives are intertwined with the world of digital information. As a result, they are more likely to create a digital estate plan.
Last Will and Testament
You probably already know that you need a will to dictate to whom your estate will go. It may seem strange to have a will in your 20s or 30s, but it is a much better idea to have one and not need it than to have something tragic happen and have your loved ones have no idea what to do, or end up fighting over what they think you would have wanted.
A fun millennial trend in Wills these days is to leave a sum of money designated to throw a party to celebrate your life.
Unlike a last will and testament, a living will focuses on what happens to you in the event that become incapacitated and unable to make decisions regarding life support and end of life wishes. You will need to designate someone to have power of medical attorney and act on your behalf if you slip into a coma or become unresponsive.
Even if you are young and in great health right now, accidents can happen. A living will protects you in the event the worst has happened and you can no longer make decisions for yourself.
There are two other things to consider when planning your estate. The first is life insurance. Life insurance should be part of your financial plan and can be a good way to ensure your family can continue to live the life you intended for them if you pass away at an untimely age. For example, if your income is suddenly gone, will your spouse be able to afford to live in your house or raise your children? Procuring a certain level of financial insurance can make everyone more comfortable. There are plenty of options for insurance, and you can pick what fits your family best.
The other thing to remember is to keep your beneficiaries updated. If you do not update the beneficiaries on your retirement accounts, all the work you did with the estate attorney is useless. Check your beneficiaries on prior and current 401(k) accounts, as well as any other retirement accounts. The beneficiaries listed in these accounts take precedent over what is in your will.
If you have children, you can name a personal guardian who would care for your children if you die while they are still minors. And you can name a financial guardian to handle their finances until they become legal adults. Also, you can provide for the care of a pet in your will.
Life Insurance Documents
If you have life insurance, you will want to make sure all documentation is readily available when you formulate your estate plan. This will make the process go quicker when you pass away, and make sure the money is readily available to help your family pay for any burial or end of life services.
If you have any outstanding debt from private lenders, your life insurance money can also be used by your beneficiaries to cover that debt, as this debt will go to your estate. The last thing you want is for your family to be stuck with a bill.
If you do not have life insurance, you should look into securing it while you are young and healthy, as your rates will be far better than if you wait.
Creating a proper estate plan requires time, thought, effort, and the ability to design tools specific to your needs. As you get older and your needs and desires change, you can update these tools to suit your changing circumstances.
And while you may have a good idea of what you want to accomplish with your plan, you probably don’t have the experience or expertise needed to create a comprehensive plan on your own. State laws about estate planning differ significantly and change regularly. Talking to an experienced estate planning attorney is always the best way to protect yourself and your loved ones.
No matter where you are in your financial life, it pays to think about estate planning.
If you would like some guidance as you go through the process, a probate lawyer can help. To schedule a meeting with an attorney from Olson Probate, please call 714-847-2500.