Estate planning isn't just for rich or older individuals. Even young, asset-poor 20-somethings should start thinking about how their property will be distributed in the event of a tragedy. Drawing up an estate plan is not as much an action you need to take for yourself, but one you should take for your loved ones.
Just like an older individual, a young, single person has as much need for a will to designate who would receive anything in the event of his or her death. Whether you have a little or a lot, without a will, the State of Texas will assume your parents should receive your estate. This may not be your preference. Therefore, creating an estate plan will help ensure your wishes are met.
In addition, in the event of your passing, a loved one would also have to spend a great deal of money to go through an estate administration process. If you draw up a will, you could prevent your parents from enduring this stressful, expensive situation.
4 Key Components Of An Estate Plan
Estate planning includes more than drawing up a will. Here are four key components of an estate plan.
Statutory Durable Power Of Attorney
One key part of an estate plan is a power of attorney. This essentially allows you to name a decision-maker, called an "agent", to act on your behalf if you are unable to act for yourself. If you become incapacitated, the power of attorney would let the person you name as your agent handle financial matters for you.
Medical Power Of Attorney
Another key document is a medical or healthcare power of attorney. This names an agent to act on your behalf to make decisions concerning your medical treatment if you are in an accident and are unable to speak for yourself. Once you’ve turned 18, your parents are no longer legally authorized to act on your behalf without the power of attorney.
Even young adults should have a will. You would name the person who is responsible for distributing your estate, the "executor". You would want this to be someone you trust to carry out your wishes. Your will spells out who you want to receive your assets on your death. You may wish to leave property to a significant other, niece or nephew, or a more distant relative or friend. If you die and do not have a will in place, the State of Texas will decide who receives your assets, however much or little that might be. This could leave key loved ones empty-handed.
Many assets, such as bank accounts, employment benefits, life insurance, and IRAs, can be disposed of on your death by designation of beneficiaries. It is wise to name primary and alternate beneficiaries. If you fail to designate an alternate beneficiary, and the primary pre-deceases you, the benefits would go to your estate. Then, a probate or administration would be required to distribute the benefits. This could be a costly mistake.
How Much Does A Will Cost?
As a 20-something, it’s understandable to not want to spend an arm and a leg for an estate plan. These few key components outlined above are not expensive to have drawn up by an attorney and are included in most basic estate planning packages. Don’t be afraid to call several lawyers to price a package.
Overall, the money spent taking care of these details will be money, stress and time saved in the long run.
How To Get Started With Your Estate Plan
Estate planning in your 20's seems like the last thing you need to do, but getting started early is smart. If you are ready to build an estate plan that protects your assets and the people you love, set up a free initial consultation with Adair M. Buckner.