We’re millennials. We’re too young, and too poor for estate planning, right? WRONG!
Why Millennials (especially H.E.N.R.Y.s™) need estate planning
Millennials definitely need to be thinking about estate planning. Many of you are probably thinking, “But I don’t have an estate, why would I need estate planning? Isn’t that something only old people do?” You do have an estate. You need to plan for it. And estate planning is for everyone, though Millennials seem to be a bit slow on the uptake about how important it is.
First, let’s explain how much is actually included in an estate, and why yours is probably bigger than you think.
What is an estate?
When HENRYs and future HENRYs work with us, they quickly realize that they have more assets than they think. Here are some of the things that make up your estate:
That’s home furnishings, computers, electronics, jewelry, vehicles, and real estate. When you start to total it up, it can add up pretty quick.
In much of the US if you die without a spouse, regardless of your age, all your stuff, accounts, and assets revert to your parents.
If you’ve opted in to your company’s 401(k), have a Roth or Traditional IRA, or other form of retirement account, those are all assets and are part of your estate.
LIFE INSURANCE POLICIES
If you have life insurance that you’ve purchased personally or that you’ve been given by an employer, add it to the list of things in your estate.
Yep! Your beloved fur babies are also part of your estate. This goes for dogs, cats, even hedgehogs. We’re not just talking about animals with high monetary value like horses and livestock. It’s super important that you consider what happens to your furry bestie if something bad happens to you. You can name a caretaker, multiple alternates, and designate money for your pet in your estate plan. Many states default to kill shelters if no one is designated, which we don’t think any pet parent would want.
If you have children, naming guardians for your kids is super important to prevent fighting over who is the guardian in court. You can also keep money in a trust for children if both parents are gone, through a Will. Otherwise your children inherit at 21, when it could be pushed to a later age. The guardian caretaker and trustee money manager can be, and often are, different people.
You probably have a pretty big digital footprint. Do you really want your parents going through all of your files and digital life if something unexpected happens? Try to imagine the most embarrassing thing you ever sent through Facebook Messenger, Twitter DMs, or Instagram messaging during college. Who would you feel comfortable seeing that?
It’s important to include accounts and passwords, stored securely, as part of your estate planning. Your digital assets are assets, and part of your estate. Most accounts like gmail, Facebook and other social media now allow you to designate what will happen to your account when you pass. Make sure you avail yourself of the option to set those up.
These are the items that are both priceless and can be seen as value-less to someone without your history with them. Though the monetary price on some of these items may not be high, it is still important to factor them into your estate planning. If they hold value for you it is worth considering what you’d like to happen to them if you aren’t there to make the decision.
Don’t rely on the defaults
Many people don’t realize that there are defaults set in place if you die or are incapacitated. In much of the US if you die without a spouse, regardless of your age, all your stuff, accounts, and assets revert to your parents. Some people may be cool with that, others, not so much.
If you’re married, the vast majority of the time the default for your assets and accounts is going to revert to your spouse. However, if you’re not married and you don’t want your estate to default to your parents, you need to get some paperwork in place. Many of our clients would rather have their estate go to a significant other, sibling, or even a friend, rather than reverting pack to their parents, but they often don’t understand what they need to do to make this happen.
Partners, Significant Others, and Spouses
Many millennials only start thinking about estate planning when they get married. But Millennials are often shunning traditional relationship structures and milestones and opting for committed relationships that aren’t even Facebook official, nevermind signing paperwork at the courthouse. If you and your partner opt for commitment without legal arrangement, it can be super important to make sure you have some paperwork in place that gives each other access to important accounts and rights to make decisions for one another should you or your SO end up incapacitated.
Making plans for the worst
At this point you should understand the importance of estate planning. Here is what you actually need to do, and the documents you should have in place to protect your estate. It’s important to ensure the decision power and money get to the people you want to pass things on to and empower with decisions about your care.
DURABLE POWER OF ATTORNEY (POA) AND LIVING WILL (ADVANCE HEALTH CARE DIRECTIVE) AND HEALTHCARE PROXY
These are three documents you should have in place in case you are ever incapacitated and can’t make decisions for yourself.
A Durable Power of Attorney (POA) designates who can make financial decisions on your behalf if you can’t.
A Living Will dictates your wishes for your health and end-of-life care if you aren’t able to communicate. It may sound morbid, but this is the document where you specify whether or not you want extreme measures taken to keep you alive.
A Healthcare Proxy designates who can make medical decisions on your behalf.
Make sure that whoever you designate knows your preferences and will be prepared to speak for you honestly, regardless of the circumstances.
Don’t underestimate the responsibility of any of these designations. Make sure the person you choose is ready for the level of uncomfortable choices they may need to make on your behalf. This should go without saying, but always check with someone before assuming they will be up for making decisions for you in a time of extreme need, stress, and sadness.
LAST WILL AND TESTAMENT
This one you probably know about. If you die, you need a will to dictate to whom your estate will go. It may seem kinda dark to have a will in your 20s or 30s, but it’s a much better idea to have one and not need it than to have something tragic happen and have your loved ones have no idea what to do, or end up fighting over what they think you would have wanted. We feel the same way about prenups; better to have one and not need it than need it and not have done it because it didn’t feel romantic. As they say, you have to love yourself before you can love someone else. And, if the time ever comes that you need it, a prenup is probably the most romantic thing you can do for yourself.
A joyful trend in Wills these days is leaving a sum of money designated to throw a party to celebrate your life. Talk about making the best of a bad situation and ensuring the expenses of your end-of-life celebration aren’t passed on to your loved ones.
If putting a Will together sounds like too much or is too expensive for you right now, make sure you have beneficiaries designated for all bank and investment accounts.
Bank accounts, life insurance, and retirement accounts have designated beneficiaries. If you have any you’ve probably chosen someone for each account. However, many people forget to update these as their life circumstances change. That 401(k) you signed up for when you were 22 at your first job probably designated Mom or Dad, is that who you still want as the beneficiary of that account? How embarrassing would it be if you accidentally left your ex as a beneficiary on an account and your new partner found out? #truestory
Keep an eye out for our upcoming piece on how you can begin estate planning, but until then, one of the best first steps is talking with a financial pro like the ones at Stash Wealth #shamelessplug.