Why An Estate Plan Matters When You’re 21

Many 21-year-olds have virtually no assets. Just out of college, looking for a job, doubling or tripling up in small apartments in big cities, eating ramen for lunch and dinner… So why would such a young adult need to be thinking about estate planning? 

When people consider estate planning, they often mistakenly assume it’s only for high-net-worth individuals or those who have amassed a lot of money and many assets. But that is definitely not the case. If you’re a young person or the parent of a young adult, you’ll likely be surprised by the importance of an estate plan at any age, regardless of the value of your estate. A Long Island estate planning lawyer can help you get started. 

What Is Estate Planning?

Estate planning is the process of anticipating and managing a person’s estate – or net worth – in preparation for future incapacity or death. Estate planning has a number of elements, including creating wills, trusts, powers of attorney, medical directives, and beneficiary designations.

It’s important to address these aspects of estate planning, whether you are young and relatively asset-free, or a retired professional who has accumulated a significant estate. Here are some important components in a comprehensive estate plan that are particularly important for young people.

Wills 

What It Is: A will is a legally binding document that has several functions. First, it sets forth who will inherit from you. Even if you only have limited assets, you surely have some belongings that you value –  a special book, a faithful dog, a cooking pot you inherited from your grandmother. Your will should also state who will manage, or be the executor of, your estate when you die.  

Why You Need It: If you die without a will, your belongings will be distributed according to your state’s intestate succession laws. This may not be how you want your assets distributed at all.  

Trusts

What It Is: Many people are familiar with trusts, but again, mistakenly believe they are for the wealthy and famous. A trust is a legal instrument that allows the trust creator to give to another party, known as the trustee, the authority to hold title to and manage property or assets for the benefit of a third party. There are two major types of trusts: revocable and irrevocable. A revocable trust allows you to control the assets you’ve put into the trust, with the freedom to change the terms at any time. By contrast, an irrevocable trust may not, except subject to certain limitations, be changed. Other types of trusts include living or testamentary, and funded or unfunded. 

Why You Need It: There are many reasons to consider creating a trust early in life. Establishing a trust can help safeguard your assets from various threats. Whether from lawsuits, creditors, or other unforeseen circumstances, having a trust offers a layer of security. Similarly, if you become incapacitated or unable to manage your assets or affairs, a trust can appoint a trustee, ensuring your financial wellbeing remains intact. Trusts also allow you to avoid probate, which means there’s less time and effort on the part of your heirs to complete probate of your estate. 

Power of Attorney 

What It Is: A power of attorney is legal authorization to act and operate on behalf of another.    The person to whom you give a power of attorney is designated to step in and manage your affairs if you become incapacitated or die. The person should be a trusted family member, friend or professional acquaintance whom you feel confident can manage your financial and other affairs as you would want them to.

Why You Need It: Even if you’re only in your 20’s, life can change quickly. Accidents or sudden illness can happen to anyone, at any time. And even if you’re healthy, you might be studying abroad or working in another state. Granting someone you trust with a power of attorney ensures that:

• Your bills are paid
• Healthcare decisions are made
• You can meet your financial and other obligations and responsibilities if you cannot take action

Health Care Proxy

What It Is: A health care proxy is a legal document that allows a person, the principal, to appoint an agent to make medical decisions if they are not competent to do so. A health care proxy allows your agent to:

• Speak with your doctors
• Access your medical records
• Make treatment decisions for you
• Advocate for you

Why You Need It: When you turn 18 years old, you legally become an adult. Under New York state law, parents no longer can step in if you are unconscious or incapacitated. Parents no longer have automatic access to their child’s medical records or the authority to make health care decisions.

Beneficiary Designations 

What It Is: A beneficiary designation is an instruction regarding who is to inherit specific assets, such as life insurance policies, payable-on-death accounts, retirement accounts, and other types of documents. Beneficiary designations bypass probate.  

Why You Need It: Even if you have few assets in your estate, you want to do whatever you can to honor your wishes while making the process easier on those who will inherit from you. 

Living Will

What It Is: A living will allows you to express your wishes about end-of-life care, and is an important part of advance care planning. It’s one of the most common types of advance directives. It tells doctors how you want to be treated if you can’t make your own decisions about emergency treatment. A living will can communicate your preferences about CPR, ventilators, artificial nutrition, and hydration.  

Why You Need It: Most people have strong feelings about end-of-life care; if you do, it’s important to document them in a living will.

Contact a Long Island Estate Planning Attorney at Davidow, Davidow, Siegel & Stern, LLP

For young adults, estate planning is about empowerment. It doesn’t start at the time of retirement and end with a will. Having a health care proxy and some of the other legal documents explained above, is a simple and powerful way to protect yourself and ensure that your wishes are carried out. Contact us today to see how we can help you with your estate planning.

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