Estate Planning for Young Professionals: Don’t Wait to Start Planning
Discussing one’s death can be an awkward and uncomfortable experience at any age. It is a topic that most individuals avoid at all costs, especially young adults, as if the mere discussion of one’s future demise will somehow bring it about. While it may not be pleasant dinner conversation, discussions of what will and should happen in the event of death should take place sooner rather than later.
Most young professionals do not feel a sense of urgency when it comes to estate planning, and believe that they have all of the time in the world. Many young professionals also do not have much of an estate to speak of, maybe some bank accounts, some property if they are lucky, and likely a lot of student debt. Many individuals with few assets do not see the need for any type of estate plan. However, such an outlook is shortsighted and fails to take into account assets that will be acquired in the future. Early estate planning can protect the estate an individual does have, maximize the value and income of both their current and future assets, and also ensure seamless transfer of assets to loved ones in the event of death.
One option for young adults is to designate beneficiaries on any investment and/or bank accounts they hold. This is a relatively simple process done through the financial institution, and the individual will need the relevant information for the intended beneficiary. By designating a beneficiary, it will keep the account out of probate, meaning that in the event of the individual’s death, the account will automatically transfer to the beneficiary of that account. The account beneficiary only has a right to the account upon the account holder’s death, and thus is prevented from withdrawing funds while the account holder is still alive.
Another option for young adults is to make a will, in addition to designating beneficiaries on bank and/or investment accounts. A will’s complexity will vary depending on whether the person has any dependents, the size of the estate, the number of beneficiaries, etc. A will assists in governing the devise of assets that do not already have designated beneficiaries, such as real property and interests in businesses, and can help streamline the probate process, which can be complex and expensive. It is important to note that a will does not override the devise of assets that have beneficiary designations. Also, wills are technical legal documents that require very specific formalities to be effective, i.e., for the probate court to accept and honor the terms of the will.
Finally, since many young adults have student loan debt, a small life insurance policy may be useful for estate planning purposes. Federal student loans are usually discharged upon the death of the individual, but private loans may not always be discharged. The insurance policy can be applied to pay off the student loan debt if the individual passes away before the debt is paid off. Obtaining an insurance policy is particularly important if a parent or loved one co-signed a private loan because the debt may shift after the individual’s death. If the co-signor is designated as the beneficiary on the insurance policy, the insurance money will be paid to the co-signor upon the individual’s death and cover the remainder of the debt.
This article is meant to briefly discuss a few options that young professionals have for estate planning, but by no means covers all of the available options or the many complexities and legal issues that must be taken into account for an estate plan to function properly. Young professionals who are interested in estate planning should not hesitate to contact the attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist with your estate planning needs.