Financial planners say that while “estate planning” may bring to mind images of wealthy families squabbling over ancestral silver, it’s not just for the rich or the elderly. It can also be beneficial for families with more modest assets and 20- and 30-somethings.
The first time many people start thinking about estate planning — which can involve something as simple as preparing a will, to as complex as setting up an irrevocable trust — is when they have children. Now’s a good time to do it, says Jessica Majeski, wealth management advisor at Northwestern Mutual. But it can also make sense to do it sooner.
In particular, it makes sense to draft durable powers of attorney and health care powers of attorney for all adults. These legal documents allow an individual to appoint another person to make financial and medical decisions on their behalf, respectively, if they become incapacitated or otherwise unable to do so.
“I have a daughter who is 19, on her 18th birthday I had her sign a health care power of attorney,” Majeski says. “These are really important documents for any adult. The biggest omission I see is that a lot of people don’t think about it. It’s fine until something happens, and then it’s not fine. is
Taking the step forward and creating a last will and testament may seem like overkill for an 18-year-old, but Majeski says estate planning is important when you start working or have assets in your name. I must think.
It also makes sense for people who have many assets, regardless of age, to create an estate plan to ease the burden on their families after they pass away. In fact, creating an estate plan that can help your family avoid probate — a costly court-supervised process that distributes a deceased person’s assets and settles their debts — or Attorney fees can actually be more effective in situations where there is only a small amount of assets to transfer.
“Sometimes it’s a small amount that goes to the beneficiaries, right? And it’s still life-changing. If someone deposited $10,000 to $20,000 into your bank account tonight, would that make you feel better?” “Life won’t change,” says Alexandra Mysore, CEO of Alex, an estate settlement platform Takes away from.”
As you age, your estate plan will grow and evolve with you — for example, it will only be completed if you’ve accumulated wealth or bought a home.
“There are two options for your property. You can either decide where you want it to go, or you can let the state you live in do it,” Majeski says. I like to do it myself.”
Basic Functions of Estate Planning
There are many new platforms aimed at helping people with their estate plans or estate settlements without an attorney, including Alex. But some of the most basic and consequential steps do not require outside help.
An example: Majeski says the simplest estate planning task isn’t necessarily creating a will. Instead, it’s simply naming beneficiaries on your financial accounts.
This includes things like a checking or savings account, 401(k), brokerage account, life insurance policy, or similar assets. Naming beneficiaries on these accounts bypasses the probate process entirely, and heirs will receive assets more quickly and with fewer potential headaches.
“I’m going to try to dispel the myth that a will is the most important estate planning document,” Majeski previously stated. good luck. “There are still reasons to have a will, but a large portion of your assets can go to you without a will.”
This is easy to do. Financial institutions typically ask clients to name a beneficiary when they sign up for an account. Users can also do this by logging into their online account. Multiple beneficiaries can be assigned to each account, and the account holder can usually choose what percentage of the assets in the account will go to each heir.
Another easy way to avoid probate is to have a joint account with someone else. If one of the account holders dies, the other will still be in possession, which can be particularly useful for a spouse or a child who is a dependent parent, for example.
For those without children or spouses, consider extended family members, friends, community organizations, or causes when drafting a will, says Jane Farrell, CEO of estate planning software Vanilla. The ones you care about.
“Just because you don’t have kids doesn’t mean you won’t be affected,” he says. “Many charities are thrilled to have beneficiaries name them in their estate plans, but most people don’t think about it.”
And even if you don’t have kids or significant assets yet, you can have pets—and more and more people are making custom arrangements for their pet care, Farrell says. say
“Many times people, if they have a pet, set aside money in their trust or will to cover the costs of caring for their pet, and like a child,” he says. Name a mentor,” he says.
