As a legal adult aged 18 or over, you are responsible for managing your assets and debts, which constitute your estate. Although most young adults have a long life ahead of them, unexpected events can occur, leaving you incapacitated or even resulting in loss of life.
Accidents and illnesses can happen to anyone at any age, and as a responsible adult, you want to be prepared. This means taking the time to create an estate plan.
If you’re single, have no children, and have limited assets, an estate plan could be a relatively simple affair. Once you start adding assets like a home, a business, retirement accounts, or an investment portfolio, or you marry or have children, your estate will become more complicated.
What should you include in your estate plan and why? Here are several key estate planning documents young adults should consider.
1. Last Will and Testament
This is the first and most basic document to create when it comes to estate planning. A will is essentially a set of directions for what you want to happen when you pass. It could include instructions for the distribution of assets and payment of debts, helping shorten the probate process.
Although a spouse typically inherits all marital assets, there might be certain, perhaps sentimental, items you want to go to other loved ones. You may want to leave non-marital assets to other family members or donate them to charity. You can specify these wishes in your will.
A last will and testament is especially important if you’re single, as there may not be a clear beneficiary, and you don’t want to leave remaining family members to fight over your estate. Your will can also specify guardianship wishes for minor children if the other parent has also passed.
2. Durable Power of Attorney
Estate planning isn’t only about how your assets should be managed after your death. It can also impact estate management during your lifetime, particularly if you become incapacitated and incapable of making decisions.
A durable power of attorney is a legal document that assigns another person the authority to make financial decisions regarding your estate on your behalf. This person is typically a trusted family member or a professional, such as an attorney, who will act in your best interests.
A durable power of attorney may become effective immediately or only after you’re incapacitated, and you can allow for broad powers or specify the types of financial decisions that person can make.
3. Advanced Health Care Directive
Also called a living will, an advanced health care directive specifies your wishes regarding health care should you become incapacitated. It often includes a medical power of attorney, similar to a financial power of attorney. This document assigns a trusted person to make healthcare decisions on your behalf.
It’s a good idea to include a HIPAA authorization form with your advanced health care directive. This will ensure that family members and health care providers understand who you want to have access to your medical records and who is allowed to communicate with medical providers.
4. Trusts
If your assets are limited, a trust may not be worthwhile. However, if you own a home or any money accounts of value (bank, investment, etc.), you should consider a trust that avoids probate altogether and passes assets directly to beneficiaries.
Don’t Wait Until It’s Too Late
No one knows what can happen tomorrow. While it’s not fun to think about potentially passing at a young age, that shouldn’t stop you from preparing an estate plan to ensure your loved ones are cared for in your absence.
OC Wills & Trust Attorneys provide comprehensive estate planning services in Orange County, CA. Contact us today to learn more.
