“No one can confidently say that he will still be living tomorrow.” -Euripides
Although the youth are regarded as the leaders of tomorrow, death comes at any age, meaning it is as near to the young as it is to the old. Often, the field of estate planning is viewed as an area of practice reserved to elderly clients. However, while older clients have lived longer lives to accumulate more assets, have more family, and therefore protect a potentially larger estate than a younger individual, young people potentially have just as much to lose.
The millenial generation, credited as individuals aged 18-35, along with baby boomers, make up the largest segment of the US population. As this group of people moves further into adulthood and constitute larger segments of the working population, they accumulate personal responsibilities such as marriage, parenthood, homeownership, and household financial decisions.
Additionally, many millenials and other younger individuals (35-50) often find themselves caught in the sandwich generation– caring for their elderly family members, including parents and grandparents, along with minor children. Therefore, in spite of accumulation of property or liquid assets, family obligations loom large, begging the question, what would happen in the event of their deaths, or, are they prepared for the worst case scenario?
According to research, likely not. A recent Gallup poll revealed that only 44% of Americans reported having a will, but just 14% of Americans under 30 reported having a will, and only 35% aged 30-49 reported the same. Further, life insurance is a tool that can be used to create an estate and pay a death benefit to named beneficiaries. Yet, according to a 2015 Insurance Barometer Study, 43% of Americans do not own a policy, with a whopping 70% of individuals under 25 reporting that they did not own a policy. To put a face to these numbers and demonstrate the fragility of youth, I offer an example from my own family: my cousin, who was murdered at age 23, leaving behind a minor daughter under age 5.
So in light of such responsibility, what can you do to prepare for the time when you will not be around to shoulder the load? This is where estate planning not only comes in handy, but becomes a young person’s best defense against the uncertain and unexpected.
First, identify your heirs at law- most commonly spouses and children, and second, identify your assets. Who would get what? Additionally, who would you choose to administer your estate, or in other words, follow your wishes and make distributions? Choose wisely. While family is usually the most common choice, you must consider whether the individuals named are equipped with the skills and temperament to follow your guidelines, protect your assets, and make wise legal and financial decisions.
Next, choose how your estate would be administered, traditionally through three means- by will, by trust, or by state law. Wills are the most common and popular, as well as the simplest means, but individuals with larger assets may want to consider a trust for privacy and tax purposes. Dying intestate- or without a will- means your estate will follow state law, which may not be harmful, but may fail to follow your intents. In this respect, it is more beneficial to use a will or trust to better reflect your wishes and choose the individuals you wish to include in your plan.
Most significantly, the biggest need for young people with young families is naming of a guardian for minor children. This is something that can only be done in a will or separate guardianship form. A trust can never name a guardian, nor can dying intestate. Additionally, a conservator can be named to make financial decisions for the support and maintenance of minor children, as they do not have the legal capacity to make such decisions for themselves.
Finally, research wisely and consider investing in a life insurance policy to protect beneficiaries in the event of death. It can be used as a useful and inexpensive tool, particularly for younger people with family obligations, as rates are based on age and health, which is most favorable for younger individuals. Most importantly, life insurance will restore loss of income, giving your family financial protection to pay for continued costs and expenses.
In closing, these are a few basic ways to prepare for the worst case scenario, and while there are many resources available to learn more about this topic, it can be overwhelming and time consuming to go at it alone. Consulting with an estate planning attorney about the best options for your circumstances will save time and provide maximum value for minimal cost, while protecting your assets, family, and legacy. Life is precious. Enjoy every moment, and do not fail to plan for loved ones who will remain after your end.