As you graduate from college, you will likely reach some of the biggest milestones of your life, such as entering your first profession, getting married, having children, and buying your first home. Along with these milestones comes greater responsibility, including smart financial management. One important aspect of responsible money management is creating a solid estate plan. The following are a few key estate planning considerations for the young professional:
1. Plan for Incapacity: If you suffer an accident or injury that places you in the hospital and unable to manage your own finances or direct your own health care, someone must be appointed to manage your affairs for you. This can be done through the court process known as guardianship and conservatorship. However, that court process may be avoided by preparing some simple legal documents before an accident occurs, such as a health care directive and power of attorney.
A health care directive allows you to appoint a health care agent to make health care decisions on your behalf if you are incapacitated. You may also include specific instructions and preferences for your health care agent in your health care directive. Likewise, a power of attorney allows you to appoint an agent, known as your “attorney-in-fact” (who does not actually need to be an attorney), to act on your behalf in managing your finances if you become incapacitated.
2. Select a guardian for your children: Consider who would care for your minor children if something happened to you and the child’s other parent. Minnesota law provides a procedure for appointing a guardian of your children in that instance. However, by nominating a guardian in your will, you can ensure that the person or persons caring for your children after you’re gone is someone who shares your values.
3. Select a trustee or custodian to manage your children’s inheritance: Also consider who would manage your children’s inheritance if something happened to you and the child’s other parent. By nominating a custodian in your will, you can ensure someone will manage your children’s money until they turn 21. By including trust provisions in your will, you can appoint someone to manage your children’s inheritance until whatever age you determine. Without nominating a custodian or appointing a trustee, your children may receive their full inheritance when they turn 18.
4. Manage your beneficiary designations: Young professionals often purchase significant life insurance policies to provide for their loved ones. Additionally, many young professionals begin a retirement account. Life insurance benefits and retirement assets generally pass to your loved ones by “beneficiary designation”, which is usually arranged through paperwork provided by your financial advisor, employer or insurance provider. It is absolutely essential that your beneficiary designations coordinate with your overall estate plan, especially where your will includes special provisions to protect your young children (such as trust provisions). This is often best achieved if your estate planing attorney works with your financial advisor to review and tailor your beneficiary designations.
While estate planning may be far from your mind, it is just as important for young families as it is for retirees (and anyone in between). The above list includes only a few important considerations to have in mind when you undertake your estate planning. However, it is often best to work with an estate planning attorney to ensure that all of your needs are met. If you would like to learn more about estate planning, please feel free to contact one of our experienced estate planning attorneys.