Estate planning is not just for seniors. Ideally, as soon as you turn eighteen you should have some version of an estate plan because your parents are no longer automatically able to make decisions or act on your behalf. There are several reasons to create a power of attorney for finances once you turn eighteen. For example, the military helps service members create powers of attorney so that if they are overseas or unreachable, family members, or agents at home can help them pay their bills and oversee their finances. What about going away to college? If you go to college out of state, you might want a power of attorney for your parents to be able to access your money while you are gone. Powers of attorney can be general or limited, so they can be used for all kinds of financial needs.
Beyond the scope of conveniences above, there is always the issue of incapacity. Everyone, at any age, in any circumstance, can become incapacitated. It can be permanent such as a stroke, severe illness, or dementia; or it can be temporary such as a minor stroke, illness, hospital stays, trips abroad where circumstances delay your return, or an injury. A basic incapacity plan includes a power of attorney for finances, an advanced health care directive for medical decisions, and an accompanying HIPAA waiver so your health care agent can make informed decisions.
Once you have children, you will need estate planning documents that name both temporary and permanent guardians for your children. Not only can you choose who would raise your children, but you can include in your estate planning documents a letter of intent that is a set of guidelines for your chosen guardians to help them raise your children the way you would raise them.
If you own assets of any kind, you should have a will or a trust to direct where those assets go when you die. With a trust, you can have more control over how the assets are distributed. Also, a trust in California can avoid probate, whereas a will does not. A will also does not control distributions of accounts that have beneficiary designations such as life insurance, retirement accounts, and bank accounts. A good estate plan will take all of this into account and provide instructions for every asset. For example, if you have young children and have a will and a life insurance policy that goes to the kids, the kids cannot access that money until they are eighteen. A guardian ad litem may be appointed by the court to access the money to help raise the kids, but once they are eighteen, that money is theirs. This means that you could have very young adults inherit hundreds of thousands in life insurance proceeds, and this may or may not be the desired result.
There are various ways to create an estate plan and it is definitely not one size fits all. The plans vary depending on age, circumstances, finances and goals. An estate plan is always customizable to your situation. It is important to keep updating your plan accordingly. Don’t wait until it’s too late and you are in crisis, get your estate plan in order today.