Those of us who entered the world in the latter decades of the twentieth century make up the most numerous American generation in recorded history. Even though millennials are a varied generation with a wide range of wants and requirements, there are universal truths about becoming an adult that apply to all of us. They, like anybody else, need to make an extensive estate plan.
Even still, a Caring.com research from 2021 found that just 35% of American individuals really had a will or living trust in place.
Nobody likes contemplating their own mortality, especially not today’s generation of young people. But that doesn’t mean you shouldn’t give some serious thought to and start working on the emotional, financial, and legal components of estate planning right now.
What Is Estate Planning?
The majority of individuals have limited personal experience with estate planning and a limited understanding of what it entails. Estate planning is any preparation you make for your future incapacity or eventual demise.
An estate plan is essentially a collection of legal documents that may be assembled online using services such as Trust & Will. They let you determine what you want to happen after your death or if you lose the ability to speak or make decisions independently.
Too many Americans wait until they are older to create an estate plan, but every adult should have one. To die without a will, often known as dying intestate, burdens your remaining loved ones with significantly more effort, headaches, and legal hurdles than required.
If you die early, you owe it to your loved ones to leave behind a clearer, simpler legal process. Thankfully, the procedure need not be lengthy. Most younger folks may construct and update their estate plans in as little as two hours every year. The less assets you possess, the easier it is.
Typical Estate Planning Documents
The majority of individuals do not require complex wills and other estate planning instruments. To get started, the typical millennial should have both a final will and a living will (two separate papers).
Even so, familiarity with the most popular documents serves as a solid groundwork for any estate plan.
Last Will and Testament vs. Living Trust
A final will and testament is something that everyone has to have. It specifies your final wishes, including:
- Who should assume guardianship of your young children in the event of your demise?
- Your appointed executor (the person responsible for distributing your estate)
- How you would like your estate (assets) dispersed.
- Your funeral desires and financial constraints
- Your organ donation wishes
- Who should assume care of your pets upon your death, if you have any?
A living trust can be used instead of or in addition to a will. Probate court can be avoided by creating a living trust for your loved ones, but this option is not without its drawbacks. For additional information, research the differences between wills and living trusts.
Even if you have a living trust set up to handle the distribution of your assets, a final will and testament is still necessary.
Medical Power of Attorney (Living Will)
A living will or advance medical directive details your preferences and instructions for medical treatment in the event of your incapacity.
Comas, vegetative states, and brain traumas are all included in this category of cognitive incapacity. Considering this is not pleasant, but it is important if you want to have any control over your future.
Health Care Power of Attorney
A health care power of attorney, a separate but related instrument, designates a trusted friend or family member to make medical decisions on your behalf in the event of your incapacity.
A medical power of attorney designates a health care proxy to make decisions on your behalf in instances when your living will does not apply. If you require long-term care, this individual may make choices on your behalf, such as placing you there.
Power of Attorney with Restrictions
A health care power of attorney designates someone to make health care decisions on your behalf.
For instance, business owners should choose a successor who will manage the company in the event of the owner’s untimely demise. This individual might also make or handle some financial choices and transactions on your behalf.
Choose someone you can trust implicitly and who also has knowledge in the area being handled by the power of attorney.
The purpose of a letter of instruction is to provide your beneficiaries with some broad guidelines. A living will may not be as comprehensive as a final will, but it may still help your loved ones access your will and other estate planning documents if you pass away unexpectedly.
In addition, this document should direct your heirs to additional legal papers that will be needed after your death. Your financial records, social security card, and proof of live birth are examples of such items.
The current equivalent of this would be the password(s) to your various online accounts, or the password(s) to the account(s) in which you save all of your password(s).
Millennial Estate Planning Concerns
Millennials are no exception to the age group that has to consider the standard estate planning issues. Sometimes, millennials have requirements that many baby boomers don’t have.
As you draft your will and other estate planning papers, as well as as you update them every year, keep these considerations in mind.
Children completely alter the dynamics of inheritance planning. The millennial generation is currently experiencing their peak reproductive years. The annual birth rate among young adults is 1.2 million, per the Pew Research Center. As this generation continues to procreate, it will face an increasing number of estate planning challenges.
The most crucial is choosing and assigning a guardian. Someone else must assume parental obligations in the event of your untimely death or incapacity to do so.
A court will appoint a guardian for you if you haven’t done so in a legally binding manner, such as through a valid will. When that time comes, you won’t be able to influence its decision.
If you need to be away for a while and can’t take your kid with you, a temporary guardianship transfer may be necessary even if you don’t die or lose your mental faculties.
Although most individuals choose a family member to act as their guardian, this isn’t always the ideal option, especially if there is no one in the family who can be counted on to take care of a small kid. Depending on your child’s age, you may need to evaluate the necessity for a different guardian.
Such a relative may be competent to care for the child now, but may not be the best option if the youngster hits the difficult adolescent years.
If you have a minor kid, it is imperative that you make arrangements for his or her future care, including financial, medical, and personal matters, in the case of your death.
CNBC reports that around 73% of millennials have a dog, cat, or other pet. While many older generations have made plans for their dogs’ care in the case of illness or death, few millennials have done so.
Having a plan in place to ensure the safety of your pets in the event you become unable to do so is an important aspect of any comprehensive estate plan. A pet trust is a type of legal entity that may own property on behalf of your pet, and it is frequently incorporated into pet plans.
You can choose a trusted individual to not only administer the trust’s assets but also to take care of your pet and pay for any necessary pet-related bills using the trust’s funds.
- Marriage & Cohabitation
The majority of Millennials are now in their 30s and 40s (and some of the oldest Millennials are already in their 50s), and they are well on their way to accumulating wealth, launching successful professions, and starting families.
This is the largest generation in American history, yet they are also the least likely to get married. Pew research found that more millennials are living in non-marital partnerships than any previous generation.
More and more millennials are choosing cohabitation over marriage despite the fact that marriage equality is the law of the nation.
Unlike married couples, unmarried partners who want to live together have less legal protections and fewer access to benefits. Inheritance rights, tax benefits, Social Security and disability benefits, and insurance coverage are just a few of the many advantages that come with a legally recognized marriage.
When it comes to the distribution of assets and debts in the event of a breakup, no cohabitation agreement can compare to the comprehensiveness of a will.
Thankfully, you can obtain many of the legal benefits afforded to married couples through an estate plan with your spouse.
For instance, if one spouse becomes unable to make decisions about medical care, the other spouse has the legal authority to do so on their behalf. However, if you are cohabiting but not married, neither of you has such legal protection. In the event of your partner’s incapacity, a parent, sibling, or the court may be granted the authority to make decisions regarding their healthcare.
There is no way to guarantee that either of you will have the ability to make decisions regarding your partner’s health or finances unless you both establish advance directives that explicitly provide such authority.
- Aging Parents
The passage of time has your parents advancing in age at the same rate as you approach middle age. They will soon retire, if they haven’t already. As they age, your parents may have health problems or require assistance. There are several factors that millennials should think about in regards to their aging parents.
- Concern for the Elderly. The aging process is associated with a decline in health and a slowing of capacities. Your parents’ capacity for self-care may also significantly alter as a result of these shifts. Oftentimes, millennial offspring are caught caring for elderly parents while lacking the necessary experience and resources. If your parents haven’t set aside enough money for private care, you may have to take them in or pay for at least some of the costs yourself. You may have to spend time caring for them, even if you don’t have to pay money out of your own cash, by doing things like running errands and light housekeeping.
- Inheritances. Many baby boomers in their 60s and 70s have plans to leave money to their kids, but that’s not the case for everyone. Not everyone can afford to provide adequate care for an elderly loved one. It’s important to discuss your parents’ financial condition and your personal expectations for the inheritance with them if you’re counting on receiving one. However, you should never, ever depend on an inheritance as a means of funding your own retirement.
- Decisions Regarding Health Care and Money. Someone must make decisions on behalf of a parent if that parent becomes unable or unwell. Take responsibility for your parents’ health and compile their own medical records. A judge might have to step in if you and your loved ones can’t decide on important matters like their healthcare or financial management.
- A matter of individual preference. Your parents may have wishes for their final years, including how they would like to spend their inheritance and how you should handle their health care, and what type of assistance they should anticipate from you. All too often, unspoken expectations cause unnecessary strain and friction among families. Talking to your parents about their wills and trusts could be awkward. Even so, it may do a lot to protect your relationships from misunderstandings and tense situations.
- Traditional and Pass-Through Assets
The responsibilities of adulthood include the maintenance of financial assets like retirement and investment accounts. Furthermore, the complexity and importance of estate planning grows with the acquisition of new assets.
Including a complete inventory of your possessions is essential to any good estate plan. What I mean by it is, of course, not limited to:
- Accounts for checking
- Accounts for saving
- Accounts with brokers
- Accounts for retirement, such as regular and Roth IRAs, 401(k)s, simplified employee pension IRAs, and savings incentive match schemes for employee IRAs.
- Accounts for health savings
- Accounts for college savings, such as 529 plans and education savings accounts, exist.
- Real estate (including your primary residence and any second homes or investment properties you own)
When you pass away, some financial assets, such retirement and brokerage accounts, are automatically transferred to your beneficiaries. You can choose a beneficiary to receive assets that “transfer on death” (TOD) upon your passing.
Your TOD beneficiary can often be anyone you select. Filling out paperwork naming a beneficiary is the standard procedure. In the event of your death, the TOD will be transferred to the person or organization of your choice without going through probate.
If a TOD asset is owned without a beneficiary designation, the asset will go through probate. In a similar vein, if the beneficiary you’ve named cannot get the TOD because of age or disability, the probate court will need to become involved.
In addition, you may accidentally leave an uneven legacy if your will stipulates equal inheritances but you neglect to account for TODs while dividing your property.
- Digital Assets
The estate plans of elder persons and those of millennials differ greatly in important ways. Generation Y has spent their whole lives inextricably linked to the digital information universe, having grown up with computers, cellphones, and the Internet. This means they are more likely to have some form of digital wealth.
With a digital estate plan, you may specify what happens to your online accounts and other digital belongings (such your Facebook page, images, and bank details) after your death.
A digital estate plan explains all of your significant digital assets, who has access to them, how to access them, and what happens to them after your death.
You’ll need to adjust your strategy as your collection of digital possessions expands and evolves. If you change your online banking password, for instance, it’s important to update your digital estate strategy accordingly.
This also applies if your wishes regarding the disposition of your assets or the appointment of a trustee or other fiduciary change.
It’s important to remember that many types of digital assets, like social media accounts, have their own unique protocols for passing ownership after death. You’ll need to consider these steps when you formulate your strategy, and you’ll also have to revise your approach if the relevant processes undergo any changes.
- Organ Donor Wishes
Hospitals may take organs from anybody who wants to donate them, but young adults’ organs are in far better condition and are thus more beneficial to individuals in need of a transplant.
As a younger adult, you may want to think about putting in writing your wishes for the donation of your organs. When you are no longer needed, your body may still be useful to others. Likewise, if you don’t need an organ, you can give it to science.
Conversely, if you do not want your organs donated, you should make it clear so that your loved ones do not have to guess what you would have wanted.
- Funeral Wishes
The funeral service sector is no different from any other in that it seeks to make as much profit as possible from each consumer. They take advantage of individuals when they are at their most vulnerable by selling to mourning families, who are sometimes pushed to spend more than they can afford in an effort to show their devotion.
Having a big funeral is OK if it is what you wish. Still, it’s up to you to make sure your wishes are carried out, and you may do that in a will.
If you don’t want your loved ones to end up in that situation, don’t allow them. Include a detailed funeral and burial expense estimate and specific wishes for your body’s disposition in your will.
Instead of holding a grandiose funeral or burying you in the Lamborghini of caskets, your loved ones should utilize the money you give them to improve their own life.
However, you won’t be there to experience it. However, with your financial assistance, they may be able to turn their lives around and make progress toward their long-term objectives with more speed and efficiency.
A comprehensive estate plan is the result of significant introspection, planning, and the use of individualized planning techniques. These resources are updatable, therefore you should do so as your requirements and preferences evolve over time.
You have a clear idea of what you want to happen, but you lack the background and knowledge to draft a thorough estate plan. Laws pertaining to estate planning vary widely between states and are subject to frequent revision.
The online service Trust & Will is a good option for people who just want basic will and estate planning documents. However, if you have a substantial amount of assets or a high net worth, it is in your best interest to consult with an estate planning attorney.