Why You Should Start Estate Planning In Your 20s
Estate planning isn't just for rich or older individuals. Even young 20-somethings should start thinking about how their property will be distributed in the event of a tragedy.
In this blog, we will explore the importance of estate planning sooner than later, as well as the key components of an estate plan that you should ensure you have in your 20s and beyond.
Why Is Drawing Up A Will So Important In Your 20s?
Drawing up an estate plan is more for your loved ones than for yourself. Just like an older individual, a young, single person needs 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, Texas law will dictate who will receive your estate.
If you are not married, the law would likely choose your parents to receive your estate, if they are alive. But if they are not alive, it would be your siblings. This may not be your preference. Therefore, creating an estate plan will help ensure your wishes are met.
Proactive estate planning doesn't just ensure your assets are distributed the way you desire. It also makes the process less stressful for those left behind when you pass. In the event of your passing without a Will, a loved one would have to spend a great deal more to go through an estate administration process. If you pass away with a Will, loved ones will not have to undergo the heartache of administering your estate through costly probate processes.
The 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.
1. Statutory Durable Power Of Attorney
One key part of an estate plan is a Power of Attorney. This 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 a wide range of financial matters for you.
2. 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, or you have become incompetent.
Once you've turned 18, your parents are no longer legally authorized to act on your behalf without the Medical Power of Attorney. Medical personnel do not know who to take instructions from regarding your healthcare in such situations without a Medical Power of Attorney.
3. A Will
Even young adults should have a Will. Your Will spells out who you want to receive your assets on your death. 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.
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, Texas laws of intestacy will decide who receives your assets, however much or little that might be. This could leave key loved ones empty-handed.
If you have children, a Will is especially important to provide for guardians of their person (custody) and estate (asset management) should both parents be deceased. If you fail to do this, the process of establishing guardianships for minor children is more expensive and complicated. In addition, if you fail to provide in your Will for trusts for children to extend past age 18, the court-administered guardianship of the estate must end at age 18.
4. Beneficiary Designations
Many assets—such as bank accounts, employment benefits, life insurance, and IRAs—can be disposed of on your death by the designation of beneficiaries. It is wise to name primary and alternate beneficiaries. If you fail to designate an alternate beneficiary and the primary predeceases you, the benefits will go to your estate. Then, 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 on 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. The price range in Texas probably would be between $500 and $750 for a simple estate. 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 for your loved ones in the long run.
How To Get Started With Your Estate Plan
Estate planning in your 20s 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.
*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)
** This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal, or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.
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