Contrary to popular belief, estate planning is not a concern exclusive to older adults or those with substantial wealth. It is also an important consideration for young adults, serving as a protective measure for their assets and a means to ensure the respect of their wishes.
Estate planning involves creating legal documents that outline how you want your assets distributed after you die. It also includes making arrangements for your care if you cannot decide. The two main components of estate planning are wills and trusts.
Wills
A will, a key component of estate planning, is a legal document articulating your desired asset distribution after your passing. It allows you to name beneficiaries who will inherit your assets, including money, property and personal items. Furthermore, you can assign a guardian for any minor children you may have. Having a will ensures that your wishes are upheld and mitigates potential conflicts among your loved ones.
Another important document is a living will. A living will outline your wishes regarding medical treatment and end-of-life care. It can specify your preferences for life support, resuscitation and other medical interventions.
Trusts
A trust, an important tool in estate planning, acts as your assets’ custodian, benefiting your chosen beneficiaries. You can establish a trust to take effect during your lifetime or after your death. Trusts serve multiple purposes, including asset management, estate tax reduction and probate avoidance. Probate is the legal process of distributing a deceased person’s assets.
Other Documents
In addition to wills and trusts, young adults should consider other important documents. A durable power of attorney allows someone you trust to manage your financial affairs if you become incapacitated. This person can pay your bills, manage your bank accounts and make financial decisions on your behalf.
A healthcare proxy, also known as a medical power of attorney, lets you appoint someone to make medical decisions if you cannot. This document ensures that providers and loved ones respect your healthcare wishes, even if you cannot communicate them.
Young adults should review and update their estate planning documents regularly, especially after major life events such as marriage, the birth of a child or acquiring significant assets. Estate planning provides peace of mind, knowing that you can take care of your loved ones after passing and that they will honor your wishes.
