Once your child turns 18, they are defined under the law as adults.
Conscientious professionals know that it is a misconception that you have to be old or rich to have an estate plan. Often, having an estate plan is part and parcel of accumulating wealth. In the past, this would have signaled the need for an estate plan. However, estate plans have great benefits for young adults. An estate plan gives young adults peace of mind, reduces family conflicts, and protects assets.
Capacity issues are often overlooked. Let’s face it, it is simply tragic when a child suffers a capacity challenge prior to a parent. This is something only spoken about in hushed tones. However, the written law does not take into account that this was not supposed to have happened, only that it did. When the child is 18, the parent can no longer rely on “being the parent” to make decisions for the young adult who now is in need.
In this modern era, with complicated tax schemes, a frenetic economy, and blended families, it is quite necessary to have an estate plan at an earlier stage than was needed in the past. For example, daycare, K-12, and college expenses are much greater than they used to be. Therefore these expenses need to be considered much earlier if you plan on having kids. Even if you don’t want to support siblings or other people dear to you, staggering tuition costs in conjunction with a 529 plan can save a bundle in taxes. Who wouldn’t rather dedicate money to education or any other thing of value to your household than Uncle Sam?
Why Should Young Adults Begin Their Estate Plan?
Some people think they should wait until they have significant wealth or kids. There are many reasons why young adults should engage in estate planning before those indicators. To begin with, you simply have no right or guarantee that you will live to retirement age. You should plan now to avoid your state’s intestacy laws. When you pass away without a will or other estate planning documents in place, your assets are distributed according to California intestacy laws. This may not be consistent with your goals and could create unnecessary legal issues and delay for your loved ones. It also means more costs to administer and less to your family, friends, charity. Estate planning lets you decide how your assets should be distributed after your death. You can take comfort that your loved ones will be provided for.
You should be interested in protecting your health and financial interests. Estate planning allows you to specify your wishes regarding health care and financial decisions if you become incapacitated. This can help ensure that your preferences are protected and that your loved ones are not forced to make difficult decisions. If you have young children, estate planning can help to ensure that they are taken care of by someone whom you trust in the event that you and their other parent or caretaker are unable to look after them.
Estate planning helps minimize estate taxes and ensure that more of your assets are passed on to your beneficiaries. Even if you do not have significant assets now, you may acquire them in the future. It is better to be prepared now, that way you won’t have to worry about your estate plan when you are busy with work, revenue is flowing, or when you are retired. It is far easier to add future assets to a plan already in place, then to set aside the additional time to get the work started.
What Should Young Adults Include in Their Estate Plan?
There are several documents that you can include in your estate plan. The cornerstone for many estates is the will. If you are just starting out, a will is perfectly fine. A will is a legal document that will be used to pass along your assets after you die. As your assets increase, you will want to have a revocable trust in place and then you will want a pour-over will that dictates what happens to things that do not make it into trust. A trust is a legal relationship created by a contract, the trust document, which places power in a trustee to hold title and distribute property and assets to beneficiaries of the trust. The person who sets up and funds the trust is called the settlor and the person you turn to act in your stead is called a trustee.
If you have children, you want to dictate who will be their guardian. This is called a Nomination of Guardian of the Person and a Nomination of Guardian of the Estate—your voice and direction concerning the raising of your minor children.
There are documents that can help in case you are incapacitated, either temporarily or permanently. The Advanced Health Care Directive allows you to specify your wishes regarding medical treatment in advance of incapacitation. A Durable Power Of Attorney allows someone to make important financial decisions on your behalf if you become unable to make them yourself.
If you own a business, you need a business succession plan that indicates how your business should be handled after your death. Within other contracts or agreements, you should be sure that your beneficiary designations are made and updated, since they may fall outside of your will or trust. Finally, a letter of instruction can detail to your loved ones and heirs how you want your affairs handled after you pass.
What Are the Long-Term Benefits of Starting to Plan Young?
The greatest long-term benefit is the comfort of knowing that you have made responsible decisions and minimized the negative impact of failing to act. Learning about an effective estate plan and putting that plan into place when you are younger will help to guarantee the success of the plan when you are older. Estate planning is an important tool for young adults to protect their interests and rights during their lifetime. It can give them greater control, reduce conflicts, and provide them peace of mind. It will later guarantee that their wishes are carried out in the event of incapacity or death.
You can learn more about the Law Offices of David R. Schneider and read past blog posts at www.drs-law.com.