As part of National Estate Planning Awareness Week, we’ve posted a series of items on estate planning issues. Check out the series Introduction, the post on Beneficiary Designations, and the post on Joint Property.
This time, I am writing about estate planning for young adults, particularly those in their late teens and twenties such as college students or recent graduates. Now these people are unlikely to need sophisticated wills, trusts, or tax planning, but that doesn’t mean that they should ignore estate planning. Remember estate planning is about much more than the documents, it is about understanding your assets and having a plan for you and your assets if you become incapacitated or die.
At the very least young adults should have Powers of Attorney for both financials and health care matters and should seriously consider an advanced directive for health care (living will), because once a child turns eighteen his or her parents lose the legal ability to make decisions on the child’s behalf. If a young adult (perhaps a college student) gets into an accident and is seriously injured the parents (or another person) may not be able to make decisions about the student’s care, or possibly even get information about the student’s treatment, without a valid Health Care Power of Attorney. Also, the parents will not be able to access the student’s finances, or make financial arrangements on his or her behalf without a financial Power of Attorney.
Now, whether young adults need a Will is a more complicated issue. Having a Will is preferable, but for a young adult whose assets may total only a few thousand dollars (or less) and possibly a net worth below zero, choosing to not have a Will may not be unreasonable. However, young adults who choose not to have a Will, should at least understand what property they have, and where it would go if they were to die (i.e. the laws of intestacy). In Pennsylvania, if a person has no spouse and no descendants, the property is distributed in equal shares to the parents. If that is consistent with the young adult’s intent, perhaps choosing not to have a Will is reasonable. The key is that the person needs to understand the impact of not having a Will, and make that choice.
It is worth noting that estate administration, and the associated legal fees, tend to be somewhat higher than for intestate estates, as compared to estates where the decedent had a Will.
Also, as noted in our prior post, Beneficiary Designations on retirement accounts are important aspects of estate planning, and a young adults who have been in the work force should review these forms for any 401(k)s or other retirement assets (or less likely life insurance) they have.
If you have questions about estate planning in general, or would like to meet with us about creating, changing, or just updating your estate plan, or are interested in learning about transfer tax planning, please contact Tim White or one of our other estate planning attorneys to schedule a consultation.