This article is for the Millennials and older Gen-Z who are now parents. So, Boomers and Gen-X, you can keep scrolling. Okay, now that the Boomers and Gen-X are gone, let’s talk about the importance of estate planning for younger parents. (TikTokkers, how’d I do?).
Just kidding, Baby Boomers and Gen-Xers. If you have adult children who are now parents, please share this article with them!
Now is the Time to Get Started
Alright, let’s get serious. There is no better time to start your estate planning than when you are young, healthy, and of sound mind. Younger parents face different estate planning needs and challenges than those who have had a long life behind them. Whereas older parents with teenagers and/or adult children may be concerned about what will happen to their family when they pass on, younger parents are generally more focused on what is happening to their family in the present.
Most young parents I meet with and speak to find it hard to justify planning for an “estate” they have not yet established. As a young parent, you may not have an “estate”, but if you have children – especially minor children – you do need estate planning if you want to ensure your loved ones will not be stuck in court and/or an inter-family conflict if anything happens to you.
Here are a few important estate planning issues for young couples to consider as soon as they start a family:
Who is Going to Take Care of Your Kids?
The age-old question! If you pass away or become incapacitated before your children reach 18 years of age, they will need a legal guardian. To ensure your children are only ever in the care of people you want and choose, you need to name both temporary and long-term guardians for your children.
Merely identifying friends or family as the “godparent” of your child is not enough. You need to legally document your chosen guardian. As I recently discussed, naming just one person or one couple is not enough. You must name at least two to three options in case back-ups are needed.
If something happens to you and your minor child is home with a babysitter, at school, or a friend’s house, you want to also name local people, friends or family who would immediately be able to be called upon by authorities. Those trusted people need to have legal documentation on hand to step in and make immediate, short-term decisions for your children.
This is why I recommend a comprehensive Kids Protection Plan® that ensures there are no gaps, for even a minute, in the care of their young children.
Who is Going to Manage Your Children’s Inheritance?
When you pass away, the assets left to your minor children will need to be managed by someone until your children turn 18 years of age. If no one is identified for this task, the court steps in and appoints “professionals” to take over an asset supervisory and management role, which can reduce the amount of the children’s inheritance.
A court appointment is totally unnecessary and avoidable. With only a bit of prior planning, you can keep your loved ones out of the Court system and give total control to the people you know, love and trust.
What is Going to Happen to Your Things?
While you may think that you do not own a lot “things” at this young age, you would be surprised to learn you have more than you thought. Aside from traditional assets like a house/condo, bank accounts, clothes, jewelry and other personal property, you may also own other intangible assets such as life insurance, investments, and retirement accounts. These other assets may not be used by you during your lifetime, but they will most likely count towards, and increase, the value of your estate when you pass away.
Something else to consider….Do your parents have money, real estate, and personal belongings? Well, when they pass away, you may inherit what they leave behind. A sudden influx of their money and things will certainly increase your own assets.
No matter the amount of your things, large or small, you should ensure that everything you own is protected while you are living and after you pass away.
A Last Will & Testament is one way to allow you to pass on your things after your death, albeit through probate. Along with a Last Will, You should also consider preparing a Power of Attorney to allow you to appoint trusted individuals (an agent) to manage your things while you are still living but unable to do so yourself. For example, if you are injured in a car accident or hospitalized for a serious illness (*COVID-19, cough cough*), your bills still need to be paid. A Last Will does not control this situation. Instead, having a valid Power of Attorney in place will allow your designated agent to legally manage your bank accounts and other financials while you are unable to.
A Living Trust is another a great estate planning tool to ensure that your things are properly managed while you are alive AND after you pass away. It is important to understand that trusts are not just for the super wealthy. In fact, I regularly prepare trusts for families of all ages, sizes and financial means. There are a lot of benefits to creating a trust while you are young, because it can adapt to your growing family and assets, and allow you to privately pass on your things without probate court intervention.
A Power of Attorney document will also compliment a Living Trust just as it does a Last Will, because you may decide to keep certain things in your own name even though your trust owns other assets. This way, your agent can manage your personal things and your trustee can manage your trust’s things.
Learn more about the difference between a Last Will and Living Trust.
While your spouse will most likely be named your first agent, what happens if he/she is also severely injured with you or has predeceased you? Do you have back ups listed? If you are not sure, you should probably take a second look. Your estate planning documents should always have at least one or two backups listed just in case.
Proper estate planning also includes properly titling your assets and having updated beneficiary designation forms. If you own your home, you should make sure it is titled in a way that your family can maintain ownership and homestead protections if you pass away. Likewise, your bank accounts, retirement accounts and investments need to have the proper beneficiary designations to ensure those assets are passed on to the people you choose. Without these documents in place, the courts and the State of Florida have a plan for your assets, but it may not be the one you want!
Finally, if you own a business, you should also consider having a business succession plan in place that provides directions to your successor in the event of either your incapacity/absence and your death. Don’t have a business successor? Now is the time to get on that!
Who Decides What Happens to You?
If you find yourself in a situation where you cannot communicate or are otherwise incapacitated, having a person legally appointed to communicate with your medical providers ensures that your health care wishes will be carried out. Preparing written Advance Health Care Directives while you are young and healthy is the best way to accomplish this.
In the absence of health care directives, your loved ones may nevertheless be allowed to make health care decisions for you. However, without your own directions, your loved ones will be able to impose their own beliefs and directions to your medical providers, which may include procedures or medicine you did not want.
It is important to ensure your directives are clear and concise. It is equally important that your health care documents include the most updated contact information of your trusted health care surrogates. If your medical providers cannot reach your surrogate, or if you directives do not allow for virtual communication, your doctors will not know how you want to be cared for and may impose their own decisions. In order to avoid receiving medical procedures you do not want, or to avoid not receiving medical procedures you may want, you should prepare your advance health care directives before it is too late to decide on your own.
Another consideration is whether you want your body to be buried or cremated. Without providing a clear directive to your loved ones, it will be up to them what to do. Leaving this decision up to your family is very burdensome and stressful when they are already grieving. Including a provision in your Last Will or a separate health care directive document that addresses your wishes to be buried or cremated will alleviate this unnecessary burden on your loved ones when you are gone.
Summing it Up
Estate planning is a key part of growing up and showing up for the people you love. Yes, you may be young parents, but once you have become a family, you are not too young to plan ahead and make things as easy as possible for the people you love.
As your Personal Family Lawyer®, I am here to help you make the very best financial and legal decisions throughout your life…and after. Estate planning does not need to be a topic that is avoided until you are older. Rather, estate planning while you are young and healthy can give you the peace of mind, confidence, and security you desire when it comes to the future well-being of all members of your family.