Why Estate Planning is not Just for the Wealthy and Elderly
In a youth-focused society, it is difficult to contemplate aging, let alone dying. Many young people assume, incorrectly, that estate planning is just for the elderly or the very wealthy. There are four reasons why everyone - regardless of their age - should consider having at least some estate planning documents prepared.
Powers of Attorney
Estate planning is not just death planning. Powers of attorney are estate planning documents that help take care of you while you are living. They are split into two categories, healthcare and financial, and they have very different purposes. A financial power of attorney allows you to nominate another person to act as your agent to manage your financial affairs when you are unable to do so. You can grant your agent broad power over all accounts, limit that authority to only one account, allow your agent to act for a specified period of time or for an extended period of time. We often see these put in place when kids go to college or when you need authority to act for your spouse during a certain transaction. On the other hand, a healthcare power of attorney allows someone else to make medical decisions on your behalf if you are incapable of making them. Without a healthcare power of attorney, your spouse and your parents might argue about medical treatment. Likely the most famous U.S. case regarding health care decision making is the Terri Schiavo case. Terri Schiavo remained in an irreversible persistent vegetative state for nearly 15 years, while her spouse and her parents engaged in a lengthy legal battle regarding her medical care. Powers of attorney are critical documents, especially if you are not married.
When you have young children, your life is not about you anymore. And, while no parent wants to think about dying and leaving a minor child behind, you must. In the event that you die as the parent of a minor child, your will allows you to nominate someone to be the guardian of your minor children. Not only can you nominate one guardian, you can also select an alternate guardian. Without making your preferences known, your children might be placed with people who you would not have chosen or possibly be placed into the state's care. Creating a will allows you to have a conversation with the people whom you intend to nominate as guardian to determine if they have the ability to care for your children and would respect and follow your parenting style and wishes.
Ensuring that your beneficiary designations are up to date is an easy way to ensure that your assets will go where you want them to go when you are gone. Beneficiary designations are especially important if you are single or are married but don't intend to leave all of your assets to your spouse. The latter is often the case in blended families. Since Arizona is a community property state many named beneficiary designations will default to your spouse. If you want to name someone other than your spouse, you may need to get your spouse's consent. Frequently people name their spouse as primary beneficiary and their minor children as contingent beneficiaries. Without an estate plan, however, naming a minor child as a beneficiary may not protect their financial interests; instead it could have the opposite outcome. Typically, beneficiaries are named on accounts such as 401k accounts, health savings accounts, bank accounts, investment accounts and life insurance policies. It is good to review named beneficiaries periodically.
Term Life Insurance
If you are young and relatively healthy, term life insurance is relatively inexpensive. Term life insurance is issued for a fixed term, usually 10, 20, or 30 years. It is intended to fill the financial gap left by the death of an income-earning member of your household. Generally speaking, the younger you are when you apply, the lower the premium. Group life insurance may also be available through your employer and may allow you to purchase additional coverage for you and your spouse at reasonable premium amounts. Confirm, however, whether the policy is portable if you change employers.
"Adulting" is hard. And, while no one likes to think about the end, a little preparation can provide a lot of peace of mind.
About the Author: Stephanie Fierro is an estate planning and business law attorney at the Phoenix law firm of Jaburg Wilk. She assists individuals with their estate plans and business clients with corporate transactions and business planning. Stephanie can be reached at 602.248.1000.
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