Starting your journey into adulthood brings exciting opportunities and responsibilities. One crucial step is creating an estate plan. Even if you’re healthy and have few assets, planning now ensures your wishes are honored.
Experts like Philip Herzberg (CFP®) and Karl Schwartz (CPA) stress the importance of being prepared. Life is unpredictable, and accidents can happen at any age. An estate plan safeguards your finances and future goals.
Consider real-life scenarios. College students may need parental access to medical records, but privacy laws like HIPAA and FERPA restrict this after age 18. Core documents, such as a Healthcare Proxy and HIPAA Authorization, can bridge this gap.
Don’t fall for common misconceptions. You don’t need to own a lot to benefit from a plan. Modern considerations, like digital assets and life insurance, also play a role. Planning today protects your family and ensures your decisions are respected.
Why Estate Planning is Essential for Young Adults
Turning 18 marks a legal milestone, but it also brings unexpected challenges. As Katherine Ramsey, an ACTEC Fellow, explains,
“Once they turn 18, parents have no rights.”
This means without proper documents, yourfamilycould face legal hurdles if you’re unable to makedecisionsfor yourself.
Imagine a scenario where you’re incapacitated due to an accident or illness. Without a power of attorney, the court may appoint a guardian, delaying critical care and financial access. This process can be stressful and costly for your loved ones.
For college students, privacy laws like FERPA add another layer of complexity. Once you enroll, your parents lose access to your educational records unless you grant it. A simple document like a HIPAA Authorization can bridge this gap, ensuring your family stays informed.
Consider this case: A parent couldn’t pay bills from a UTMA account after it was retitled at age 18. Proper planning could have prevented this issue. Statistics from the Journal of Financial Planning show that accidents and illnesses are more common among young adults than many realize.
State inheritance defaults may not align with your wishes, especially in blended families. A personalized plan ensures your assets go to the right people. A financial power of attorney also prevents disputes over asset management, keeping your family united during tough times.
As experts emphasize,
“An estate plan isn’t just about death – it’s about maintaining control during crises.”
Taking small steps today can protect your future and help you buildgenerational wealthover time.
Key Documents Every Young Adult Should Have
Protecting your health and finances requires a few key documents every individual should consider. These forms ensure your wishes are respected and your loved ones are prepared for unexpected situations.
Healthcare Proxy
A healthcare proxy allows you to designate someone to make medical decisions on your behalf if you’re unable to. Choose someone trustworthy, relatively young, and nearby for in-person decisions.
HIPAA Authorization
This form grants parents or loved ones access to your medical records. It’s especially important for college students, as campus doctors may require it to discuss prescriptions or treatments.
Durable Financial Power of Attorney
A durable power attorney ensures someone can manage your finances if you’re incapacitated. For example, it allows them to pay rent or bills during recovery from an illness or accident.
Living Will
This document outlines your preferences for life support and end-of-life care. Unlike generic state forms, a personalized living will ensures your specific wishes are followed.
Preneed Guardian
For single parents with minor siblings, a preneed guardian is critical. It designates who will care for your dependents if you’re unable to.
Storing these documents securely is just as important. Consider a secure cloud service or a physical safe. Costs for attorney-drafted plans range from $300 to $1,200, while online tools offer more affordable options.
Additional Estate Planning Considerations for Young Adults
Your digital footprint and financial legacy deserve careful attention. Modern life introduces elements like social media, online accounts, and digital assets that need thoughtful planning. Addressing these ensures your loved ones can manage your information and assets seamlessly.
Digital Assets and Online Accounts
Social media profiles, email accounts, and other digital platforms are part of your legacy. Tools like Google’s Inactive Account Manager allow you to designate who can access your accounts if you’re unable to. Facebook’s Legacy Contact feature lets you choose someone to manage your profile after your death.
Phoebe Stone from WealthCounsel highlights the importance of FERPA waivers for academic records. This ensures your loved ones can access critical information if needed. For influencers or those with significant online presence, planning for account access is essential.
Beneficiary Designations
Beneficiary designations on accounts like retirement plans or life insurance override wills. This means updating these regularly is crucial. Transfer-on-death (TOD) or payable-on-death (POD) accounts ensure your assets go directly to your chosen beneficiaries, avoiding probate.
Life Insurance Policies
Term life insurance is a practical option for cosigned student loans or future insurability. It provides financial security for your loved ones if something unexpected happens. Policies can also be tailored to cover specific needs, like supporting a child or spouse.
Letter of Intent
A letter of intent outlines your wishes for pet care, funeral preferences, or other personal details. While not legally binding, it provides clarity for your loved ones. Include preferences like cremation versus burial or specific arrangements for your assets.
Remember, never include passwords in your will. Use encrypted password managers to securely share access to your accounts. Taking these steps ensures your plans are honored and your loved ones are supported.
Conclusion
Taking control of your future starts with a solid foundation. An estate plan ensures your wishes are honored and your family is protected. Core documents like a healthcare proxy and durable power of attorney provide immediate safeguards, while advanced considerations like digital assets and beneficiary designations address modern needs.
Regular updates are key. Team Hewins recommends reviewing your plan after major life events, such as marriage or moving states. ACTEC Fellows suggest biennial reviews to keep everything current. State-specific laws can affect executor requirements, so consulting a local attorney is wise.
As one expert notes, “Your first estate plan isn’t permanent – it grows as you do.” Bundle your documents with vaccine records for college move-in day to stay organized. Start now to secure your future and protect your family.