The two most frequent reasons young adults feel that estate planning is not necessary are insufficient assets and age. Young adults believe that there is plenty of time to get the appropriate estate planning documents in place, and in most cases, there is. However, life can be unpredictable, and death is not the only event estate planning contemplates. Estate planning provokes mixed feelings about death, property, marriage, and other family relationships. These feelings must be explored so that the estate plan reflects the individual’s desires, needs, and most importantly, prepares them for the unexpected.
Estate planning also conjures up thoughts of huge mansions and millions of dollars in savings. However, an “estate” is simply a collection of someone’s financial and personal assets. Providing advanced instructions for assets in the event that you can no longer control them makes sense for an estate worth $100,000,000.00 or $100.00. The document that controls these advanced instructions is known as a Will. A Will is a way of directing the distribution of your assets. This document is equally important for the young and old alike. A Will becomes more important for unmarried couples and couples with children. Specifically, Wills typically designate guardians for any minor children, which is the most important aspect of any Will.
A Will names an Executor to handle the administration of your estate, which is different from naming a guardian for any minor children. The Executor’s responsibilities include collecting assets and selling assets, if necessary, paying any bills that are due (i.e. funeral expenses), signing tax returns and distributing your remaining assets to the individuals named in your Will. If you have minor children it is important to also name a guardian of the person and the estate. A guardian of the person is responsible for making health care and education decisions for the child, whereas a guardian of the estate manages funds and pays expenses for the child, with court supervision. A guardianship ends at age eighteen by operation of law.
In addition to instructions regarding the distribution of assets at death, another major concern is disability or incapacity. The documents that deal with disability and incapacity are known as Powers of Attorney. A simple estate plan includes a Durable Power of Attorney for Property, Health Care Power of Attorney, and a Living Will.
A Power of Attorney for Property names an individual (an “agent”) to make day-to-day financial decisions in the event of incapacity or disability. Often these documents are drafted to be effective upon execution, so it is important to name a trustworthy agent. More importantly, the Power of Attorney is “durable,” meaning that it remains effective in the event that you become incapacitated.
The Health Care Power of Attorney is the single most important advanced directive contained within a simple estate plan. Unlike the Durable Power of Attorney, this is a “springing” document, meaning that it does not become effective until the individual becomes disabled or incapacitated. Only you have the power to make health care decisions for yourself. However, in the event that you are incapacitated or disabled and unable to make health care decisions, a Health Care Power of Attorney appoints an individual to make those decisions for you. This document allows you to authorize your agent to refuse or remove life-sustaining treatment (i.e., artificial hydration and nutrition) in the event that you are permanently unconscious or at the end of a terminal illness. Additionally, a complete estate plan should also include a HIPPA Release, which allows an appointed Health Care Power of Attorney access to otherwise protected medical information.
The difference between the Health Care Power of Attorney and Living Will is that a Health Care Power of Attorney authorizes an agent to make decisions for you. A Living Will is your directive to the medical community that in the event you are permanently unconscious or at the end of a terminal illness, you do not want life-sustaining treatment. These documents avoid a Terry Schiavo-type situation.
There are no “one size fits all” estate plans. Every person, couple, and/or family is different, and each needs individual attention to determine the best course of action. In the event of a tragic event, your family and friends will appreciate that an estate plan has been created, which allows them to grieve the tragedy, as opposed to having to handle financial and familial decisions that were left unattended.
Completing an estate plan can give you peace of mind that the proper steps have been taken in the event of a debilitating accident or untimely death.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.