An estate plan is like insurance, it’s better to have it and not need it than need it and not have it. However, according to a survey by Caring.com, an astounding 78% of Millennials don’t have a will in place. You may be wondering whether you need an estate plan. If you’re over 18, the answer is “yes” across the board. It doesn’t matter if you have kids or not, if you’re married or not, if you’re wealthy or if you have a mound of student loan debt. Everyone needs an estate plan. It can be scary to face your own morbidity, especially at a young age, but having an estate plan in place is a necessity to protect yourself and your loved ones. Let’s discuss the four main documents that make up an estate plan and why each one is important.
A Last Will and Testament is the legal document that provides instructions on how you would like to distribute any property or assets you own after your death. Keep in mind, your will only applies to assets that do not have a beneficiary designation. As well, it allows you to designate an executor (the person in charge of distributing your estate). If you have minor children or even cherished pets, this document will also allow you to name a legal guardian for them. If you don’t have a Last Will and Testament, a judge (based on your state’s laws) will decide how your assets are distributed and what happens to your children and/or pets.
A Financial or General Durable Power of Attorney is different from a will because it is only in effect while you are still living. If you become incapacitated and are unable to handle your financial affairs on your own, having this document in place ahead of time will allow your designated representative, called the attorney-in-fact, to step in and manage your affairs on your behalf. This means they can help make sure your lights are kept on at home or your child’s tuition is paid on time when you’re unable to manage your bank account yourself. When you create this document, you have the power to choose when it goes into effect, whether that’s at a specific point in time or only if you are deemed incapacitated under a doctor’s care. Without this document, someone will have to go to court to have a judge assign a person to be your representative.
A Healthcare Representation may also be called a Healthcare Power of Attorney. This document’s purpose is to designate a representative to make medical decisions on your behalf should you become incapacitated and unable to make decisions on your own.
The purpose of your Living Will is to ensure that if you become terminally ill and need to be on life support to keep you alive, you have written wishes as to whether you would like to be kept alive with artificial food and hydration.
Keep in mind, once you turn 18, your parents can no longer legally serve as a power of attorney or a healthcare representative, unless you’ve signed legal documents indicating this is what you want. Your spouse can’t automatically serve in that role either, unless the documents are in place ahead of time. If you have a big life change, like the birth of a child, a divorce, or you’ve moved out of state it’s usually best to update your documents (and named beneficiaries) as soon as possible. As you consider who to name as an executor, guardian to your children or pets, or as a healthcare power of attorney, make sure you choose someone you trust. These can be all the same person, or you can name different people. Make your wishes known to whomever you choose, so they’re not caught off guard in what could be an already difficult situation.