According to a recent study conducted by Princeton Survey Research Associates International, 78% of Millennials (ages 18-36) do not have an estate plan. One of the major reasons cited by Millennials for not taking the time to create even a basic Will is that they do not have any significant assets worth protecting. However, there are many reasons to engage in estate planning besides wealth preservation, such as directing assets to intended beneficiaries, designating a guardian for your children, and providing direction for your medical care during times of incapacity.
Millennials Have Assets
No matter what stage of life you are at, you have an estate and can benefit from basic estate planning. For younger clients, assets usually include a vehicle, jewelry, electronics, and home furnishings. In addition, most of us Millennials have started saving for retirement either personally or through employer-sponsored programs. And depending on your goals and personal situation, you may have already purchased a home or plan on doing so in the near future.
Unfortunately, it is equally likely that you have accumulated a significant amount of student loan debt. Indeed, ever-rising tuition and the poor job market following the recession have created a situation where your debts may exceed your assets. Nevertheless, federal student loans are generally discharged on the death of a borrower, so you may still be able to pass a large portion of your estate to family and friends.
So you’re convinced that you have assets worth transferring. How do you make sure those assets get to the right people? If you don’t have an estate plan, your assets will be automatically distributed according to the default rules under Minnesota’s intestate laws. For example, the property of a person who dies without a spouse or children surviving passes directly to their parents. For Millennials who are living with a significant other, but have yet to get married, the harsh reality is that your partner could be left with nothing if you don’t have a plan in place.
As a result, every Millennial should consider having a basic Will drawn up. Such a document will help ensure that unmarried partners and other important people are treated fairly upon your passing.
In addition to creating a Will, every Millennial should think hard about executing a durable power of attorney and healthcare directive. A Will only helps plan for the management of your property after death. A power of attorney helps plan for the management of your property during periods of incapacity while you are still alive. A durable power of attorney is an instrument that grants another person authority to access your financial accounts, update account information and records, withdraw your funds, and pay your bills.
In comparison, a healthcare directive in an instrument that appoints a designated person to make medical decisions on your behalf when you are incapacitated and facing an illness or injury. A healthcare directive spells out what kind of treatment you would like, whether that treatment includes extreme life-saving measures, and may also specify how your remains should be handled. Healthcare directives not only help your family make these decisions, but also helps avoid family disagreements regarding end-of-life decisions. In particular, if you want to grant an unmarried significant other a role in these decisions, a healthcare directive is essential.
Estate planning is not just for high net-worth individuals, the elderly, or people with children. Whether you are looking to transfer assets to specific relatives or simply make sure the right person is making decisions for you if you’re incapacitated, an estate plan can help ensure your wishes are respected and carried out. After all, the only guarantees in life are death and taxes.
This information is general in nature and should not be construed as tax or legal advice.