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3 Things Young Adults need to know about Estate Planning

When you hear "estate planning," you might picture an elderly person planning for their golden years. However, estate planning is essential for anyone over the age of 18. Whether you're a young adult just starting out on your career path, a parent with young children, or somewhere in between, having an estate plan is essential for protecting yourself and your loved ones. Below are three things that every young adult should know to protect themselves, their families, and their future.


Disclaimer: The information provided is intended for informational purposes only and should not be construed as legal advice.



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1.      Why Estate Planning Matters for Young Adults

Once you turn 18, you're officially and legally an adult. This means your parents no longer have the automatic right to make decisions on your behalf. What would happen if you were involved in a car crash and were in a coma? Your parents have no legal authority to manage your financial affairs or make medical decisions for you without a proper estate plan in place.

Although we may feel invincible in our young adult years, the reality is that tomorrow is never guaranteed to anyone. What if instead of that car crash rendering you into a coma, it resulted in the loss of your life? If you were to pass away without a Will unexpectedly, the laws of the State that you live in determine who is going to decide your funeral arrangements, who determines whether your organs are to be donated, and who automatically gets your cash and other assets. In most instances, your parents will have the decision-making authority. This can add unnecessary stress during their time of grief, especially when both parents do not agree on organ donation or funeral arrangements. You can avoid all of that by preparing an estate plan.     

If you have young children, your Will lets you name a guardian to care for them if something happens to you. Without a Will, the court will decide who gets to raise your children and it might not be the person you would have chosen. Further, all of your assets in your own name might be required to be deposited with the Court until your child turns 18. This can become a headache for the guardian, who must apply to the court each time they need money for your child. Additionally, if your assets are of significant value, your child can receive all that money when they turn 18 and spend it all rather than investing it in their future.

If you die without a Will, your estate goes through a more complicated and costly probate process. The court appoints an administrator to manage your estate, who must pay for a bond—a type of insurance policy—to protect the estate's creditors and heirs. This bond can be expensive and sometimes impossible to obtain but is an avoidable expense if proper estate planning is prepared.

Pennsylvania and New Jersey impose an inheritance tax depending on who your assets go to at death. Proper estate planning can minimize or eliminate these taxes ensuring that more of your assets go to the beneficiaries you choose rather than the state.


2.      Key Components of an Estate Plan for Young Adults:

 

Power of Attorney: This legal document allows you to designate someone to handle your financial and legal matters if you're unable to do so. Without it, your parents or loved ones would have to go through a lengthy and expensive court process to gain control over your finances.

 

Healthcare Proxy: This is a person that you appoint to make medical decisions on your behalf only if you're incapacitated. Without pre-selecting a person to make these decisions, your family might face expensive legal hurdles or disagreements about your care.

 

Living Will: This legal document outlines your wishes for medical treatment in case you cannot communicate them. It can include your preferences for life-sustaining measures (such as whether to “pull the plug” or not), organ donation, and more.

 

Last Will & Testament: This legal document decides what happens to the cash and other assets titled in your sole name when you pass away. It overrides the State statutes to allow you to pre-select the best person to gather your assets and distribute them to those you believe will need or enjoy them. Many people mistakenly believe that wills are only necessary for older adults or those with significant assets; however, a Will is vital for everyone who wants to ensure their wishes are honored after their death.

Trusts: Trusts can be a valuable legal tool for managing your assets, avoiding probate, and minimizing taxes. They can be especially beneficial if you have substantial assets or specific wishes about how your assets should be distributed.

Beneficiary Designations: Did you know that even if you have a Will, it might not control all of your assets? If you have any assets that have beneficiaries designated on them, that pre-selected beneficiary overrides the Will. Meeting with an Estate Planning attorney can help you ensure that your IRAs, other retirement accounts, life insurance policies, annuities, and other financial accounts have up-to-date beneficiary designations. Remember, these designations take precedence over your Will, so it's important to keep them current.

 

3.      Estate Planning Isn't Just About Death

An estate plan isn't just about what happens after you die; it's also about protecting yourself and your assets while you are alive. It serves as a safety net for unexpected events, such as accidents or sudden illnesses, that could leave you incapable of managing your own affairs. With a thorough estate plan, you can ensure that your financial and medical preferences are honored, giving you peace of mind knowing that your wishes will be respected no matter what life throws your way. Moreover, it allows you to designate trusted individuals to make important decisions on your behalf, safeguarding your interests and providing for your loved ones even during times of personal crisis. By proactively planning, you preserve your assets and alleviate potential burdens on your family, allowing them to focus on your health and best interests instead of comprehending complex legal and financial issues during challenging times.

 

Conclusion

Estate planning is not just for the elderly or the wealthy. No matter your age or financial situation, it is a critical process that ensures your wishes are respected and your loved ones are protected. By taking the time to create an estate plan, you're making a responsible and caring decision for your future and the future of those you care about. Don't wait until it's too late - contact us at LSS Law for a consultation and our team will guide you through the entire process.

 

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