PLANNING THE ESTATE FOR YOUNG PROFESSIONALS: 10 THINGS TO DO RIGHT NOW
By: Randall A. Denha, J.D., LL.M.
As of the time of this writing, there is still uncertainty in Congress on what will become of our current tax rates, exemptions and deductions. As such, I’ve decided to keep this month’s article to less “tax”-ing matters and more to-do matters.
Oftentimes, estate planning is considered by those that are elderly, infirm or have an estate to plan because of wealth or inheritance. However, I thought it could be good to touch on estate planning for another group of people- young professionals. This segment doesn’t often consider estate planning at this life stage, however, everyone circumstances are different. Youth isn’t a reason to put off things like making a will or executing a power of attorney- rather it should be seen as an opportunity to do some simple planning before life gets more complicated.
With that said, here are ten things that any young professional can do now in order to create a safety net for his or her loved ones.
1. Plan for the unexpected- Accidents don’t discriminate.
The fact is that we only feel invincible. Accidents happen everyday, everyone is at risk including even the healthiest, youngest and most vibrant among us. Unfortunately, most people neither anticipate nor plan for an accident to happen. The fact that young people face so few health problems in the first place make this group a less likely group to contemplate what would happen if they weren’t able to act for themselves. For example, what would happen if you were in a car accident on the way home from work and subsequently feel into a coma for days? Who would make medical decisions on your behalf? If you are a homeowner, who would be able to access your checking account to pay your mortgage? While the chances of this sort of thing happening are small, the consequences of a catastrophic accident are very real.
Powers of Attorney for Healthcare and Finances are simple documents to execute and can name an individual that will be legally permitted to make healthcare decisions on your behalf (in your best interests, of course) and handle your financial affairs to ensure that everything is taken care of if something happens.
2. Name a Guardian for your children, both born and unborn.
If you have children, it’s incredibly important for you to name an individual who will raise them if you are no longer around. Of course, if you’re married, your spouse (especially if he/she is the birth parent of your children) will almost certainly take on that role. However; what should happen in the event that both of you die at the same time? Who will care for your children then?
Most couples at some point or another probably have these conversations with loved ones and assume that the chosen person will just “take care of it”. However; the stark reality is that many times this is not the case. Typically, in absence of a written agreement otherwise, a court will appoint a guardian. As with many things in the law, the process may not always be quick, especially if there are two sets of loving in-laws that both would like responsibility for the children. By naming a guardian in a valid will, you can ensure that your wishes will be honored.
3. Control your personal property and whom you want it to go to.
As I’ve said many times, the term “estate planning” can be incredibly misleading. It covers a vast array of planning techniques. And, while most people assume it involves massive sums of money, the truth is, at its most basic level, estate planning is simply about making wishes known in a way recognized by the law. The term “estate” really refers to anything you own, and not just that stash of money hidden in your mattress. Remember that bank accounts, retirement accounts, insurance, furniture, jewelry, vehicles, clothing, housing, etc. need to go somewhere when you die. In the absence of a valid directive, these things all pass either a) according to how they are titled (in the case of homes, some vehicles, certain benefits and insurance proceeds) or b) according to state laws of intestacy. Intestacy statutes attempt to mirror how the average person would likely wish to pass his or her belongings, however; everyone is obviously unique and individual considerations may point to a different dispositive scheme. Property passing by intestacy simply may not go where you want it to go. Drafting and executing a valid will is an easy way to set forth who you would like to receive your things in the event you die. After all, it’s your stuff. Remember that you if you fail to plan, the state will instead plan for you. How comfortable does that make you feel?
4. Have a pet? Put an appropriate plan in place for its care.
This is an easy area to miss. If you’re a pet owner, you know how attached your pets can get to you, and vice versa. But, what should happen to them in the event you’re not there anymore? In the same light parents should appoint a guardian for their children, it is wise for pet owners to appoint a pet guardian. There are a few ways this can be done. The best option is to use a Pet Trust. If the “Queen of Mean” a/k/a Leona Helmsley provided for her pet using one of these then so can you. This document can name the pet guardian (just like the will) and can hold funds for the pet’s care. It is valid during your life and after your death without the need for court involvement. This approach ensures that the person that will be caring for your pets will have ample funding at their disposal to do so immediately upon your death or disability.
5. Organize important documents and write down where they can be found.
From mortgage documents to tax records to wills and social security cards, there is paper for everything. Oftentimes for even the most organized among us at least some of these things end up in different places. After your death, chances are that your loved ones will be scrambling trying to figure out how to gather everything. But, there’s a simple way to make that task much easier on them so it doesn’t add to the immense stress they’re already facing over losing you. Simply compiling all information and documentation in one location is an easy way to ensure that loved ones will have everything they may need in order to wrap up your affairs efficiently.
6. It may not be pleasant, but consider end of life treatment.
Most people remember the Terri Schaivo case, but for those that don’t, Terri was a 26 year-old woman who collapsed in her home in 1990 from heart failure that led to subsequent brain damage due to the lack of oxygen. She died in 2005 after life support was discontinued. Her death followed numerous court battles over whether or not life-support should be discontinued. Her husband insisted that she had voiced her desire never to live in such conditions, while her parents fought to keep her sustained by artificial means. Eventually, the court sided with her husband and life-support was discontinued.
Terri’s error is a sad one that tore the family apart rather than uniting them to celebrate her life. Terri had never signed any advanced directive setting forth her wishes when it came to life-sustaining treatment in the event she was ever in a persistent vegetative state. Had she executed an advanced directive, called a Living Will in many states, her family would have definitively known her wishes rather than fighting about what she may have wanted for 15 years.
By executing a Living Will, you can clearly state your desires when it comes to feeding tubes and other life-sustaining procedures in the event you are in a persistent vegetative state or have a terminal condition where death is imminent and would only be prolonged by such procedures. A valid Living Will is legally enforceable and prevents a Terri Schiavo situation from arising. Most importantly, it leaves the decision in your hands even through you won’t be able to make the decision once you find yourself in that situation.
7. Consider funeral arrangements.
Thinking about death is an unpleasant and uncomfortable. However, doing so enables you to have the most possible control over the one thing in life that is certain (aside from paying taxes.) Many people, especially young people, don’t discuss their wishes regarding funeral arrangements because death is far from their minds. But, however uncomfortable it may seem, there is no guarantee that you’ll live to see 80 or 90 years of age. Thinking about how you would like to be remembered and discussing that with family ensures that they are able to make choices that you would approve of. Should you be buried or cremated? Is there a special outfit you would like to be wearing? Where would you like your final resting place to be? These aren’t easy topics to consider, but the decisions will have to be made sometime. You might as well be the one to make them.
8. Ensure that proper beneficiaries are named on retirement accounts and life insurance policies.
Retirement accounts, 401(k)s, IRAs, and life insurance almost always pass to the beneficiaries named on the account. Many employers offer some sort of retirement planning as an additional benefit, but young professionals don’t always put much thought into naming the beneficiaries on the policy. In the event you die and the policy lists you as the beneficiary, the proceeds are going to be included in your estate which may have unintended consequences. However, by changing the beneficiary designations, you can pass these assets to loved ones in a tax efficient manner. The exact procedures vary by institution and sometimes employer, but typically filling out the institution’s form will do the trick. So, if you have recently gotten married, had a child, or realized your ailing parents would be appreciative of the proceeds of a retirement account or life insurance policy; it’s wise to contact the financial institution and ensure your beneficiary designations reflect those wishes.
9. Own a home? Ensure real estate is titled to reflect your goals.
Real estate can be held in various forms. Have you been recently married? Divorced? Inherited? It may be time to re-title the ownership of the home. Whatever the decision, it’s important to transfer the property in a legal manner and recording a deed with the Register of Deeds in the county in which the property is located. However, it is highly advisable to work with an attorney if you are contemplating such a change due to certain implications involved- tax and otherwise.
10. Ensure that any casual conversations with friends or family find their way to the proper paper.
Casual conversations with family and friends can be great to give them a glimpse into your wishes in the event you die, but that’s about it. The law is a cruel mistress, and without the proper writings in place and formalities followed your wishes may not be given any credence. Its important to engage an attorney with experience in the areas of trusts and estates and making cetain that your wishes are exactly noted. Tackling death now gives you the most freedom to enjoy life even when faced with your own mortality.
THIS ARTICLE MAY NOT BE USED FOR PENALTY PROTECTION. THE MATERIAL IS BASED UPON GENERAL TAX RULES AND FOR INFORMATION PURPOSES ONLY. IT IS NOT INTENDED AS LEGAL OR TAX ADVICE AND TAXPAYERS SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS AS TO THEIR SPECIFIC SITUATION.
