After graduating college and getting your life started, you are filled with pride, excitement and anticipation for your new career and freedom from school. Your last thought is to hire an attorney and prepare an estate plan. It is a common misconception that people only need an estate plan when they are old, on their death beds, or incredibly wealthy. Young adults may need estate plans even more – however simple the plan may be – and I walk through why.
Anticipating the Worst: Preparing for Incapacitation
Many recent graduates love to explore their newfound freedom and financial independence by traveling, moving out of their parents’ house or moving across the country to pursue their careers. A lot of people do not like to think the worst, but what would happen to you and your assets if you were incapacitated? How would your loved ones get access to your accounts and belongings? This is where documents like Durable Powers of Attorney and Health Care Proxies come into play.
These documents designate a person to make financial and medical decisions on your behalf if you are unable to make them yourself. A Durable Power of Attorney allows your designated agent to access your assets so they can handle your financial affairs if you are incapacitated. A Health Care Proxy allows your designated person to make medical decisions for you and ensure that your doctors follow your wishes.
For young adults traveling the world or moving away from home for the first time, these documents allow your parents, siblings, friends, or whoever you choose to take care of your health and financial affairs.
Inventorying and Planning for Your Digital Assets
Even if you grant someone the authority to access your assets under a Durable Power of Attorney, they need the ability to access these assets. We live in an age where everything is stored electronically. Some of us can’t remember the last time we saw a paper bank statement or check. We all have countless digital assets that we don’t even realize have built-in safeguards to prevent other people from accessing them. Online banking, Venmo, Apple Wallet, Facebook, Twitter, Snapchat – your designated agent will need your log-in credentials to access all of these accounts to handle your affairs. Many service providers for these online platforms have their own Service Agreements (you know, those long scrolls of text we always sign but never read) that require accessing your account with your log-in credentials.
There are many reasons why it is important that your designated agent can access these accounts. First, without control of your finances, they will have a harder time handling your bills and outstanding financial obligations. Second, whether we acknowledge it or not, we all live very online lives. We use these platforms to chat with friends, document important milestones, and store cherished photos, videos, and memories. There will be no way for your friends and family to access this information and memories without your log-in credentials to these platforms.
To plan for this, it is important to keep track of your digital assets and their log-in credentials in a safe place so your designated agent (or family members) can access your assets.
Other Major Assets To Consider and Protect
As a recent graduate or young adult, you may not think you have much money or property, but your assets are still worth protecting. Aside from your digital assets, your car, family heirlooms, pets, all of your personal property, and for some, their first home, are all assets that can add up to a larger value than many people realize.
For all of these assets, a Will is a quintessential tool in your estate plan. A Will allows you to avoid the “red tape” imposed by the courts at your death and distribute your belongings to any family, friends, or charities you desire. Without a Will, your assets will be stuck following the distribution laws of your state and may not end up in the hands you want them to.
If you own your own home or live with your significant other in a home only one of you owns, a Will is especially important to ensure that your partner will be able to remain in the home in the event of your incapacity or death.
For many young adults, their furry friends are their most beloved possessions. If you were in an accident or passed away, who would take care of your pet? Estate plans allow you to choose your pet’s caretaker and can even direct finances for their care. Without an estate plan solidifying these details, your family and friends will have to decide who and how to care for your pet.
Another major asset young people own is their small businesses. With the rise of platforms like Etsy, many people own and operate their small businesses right out of their living rooms. An estate plan is a great way to protect a small business that you have put so much time and resources into. It is especially important to prepare an estate plan if your small business is family-owned to ensure that it passes down to the next generation or the rest of your family.
The last major assets that are important to account for are retirement assets. As you start your career, you may have your first job that offers retirement benefits. Many of these retirement accounts allow you to designate beneficiaries who will receive the benefits upon your death. An estate planning attorney or financial advisor can help advise you on how to name beneficiaries and handle your new retirement benefits.
The Dreaded Words: Your Student Loans
The dreaded next step after graduating is handling your student loans. Whether your loans are federal, private or both, it is vital to incorporate them into an estate plan to prevent financially burdening your loved ones. In most cases, any outstanding federal student loans will be discharged if you die. However, it can be a complicated process, with tax implications, for your family to handle without the help of a professional.
Private loans, on the other hand, vary depending on the loan provider. Many private loan providers will discharge the debt upon the borrower’s death, but some providers will make a claim against the estate or the co-signer for the balance of the loan. Having an estate plan in place can help sort out these debts and take the stress of repayment off your family.
As you can see, estate plans are not only for the rich and older generations. For the many reasons listed above, having a basic estate plan can prepare for incapacity and ensure your assets pass to your family and friends at your death. It is also important to remember that estate plans can be changed. As you find your way through post-graduate life, advance in your career, and possibly start a family, you can update your estate plan as needed. The key is preparing your estate plan before you need one. . .