Federal Law mandates that one is deemed an “adult” upon reaching age 18. With the milestone of 18 comes certain privacy rights, ensuring that not even your parents can have access to health information or make medical decisions for you in the event of an accident or unexpected illness, unless you expressly allow them to. Upon reaching age 18, generally speaking, most 18 year olds have “stuff” that they deem of value to them, perhaps sentimental if not monetary. A lot of 18 year olds have jobs to provide them with pocket money. Without an estate plan in place, the court will have to dictate who will have control of their financial affairs upon facing an unexpected life event.
For the latter reason, it is very important to have a basic estate plan early on. A basic estate plan will ensure that State law will not dictate how your assets are passed or who will have access to your financial and medical information. A basic estate plan will dictate which of your assets should be given to whom. Assets can include everything from a bank account to your favorite jewelry. A basic estate plan can also take care of medical and financial decisions, by giving named individuals access to your financial and medical records or the ability to make decisions for you on their behalf is so needed.
Below is a checklist of essential components for a basic estate plan, one that all adults, young or old, should have in place:
- Will - A will enables you to states to whom your assets will be granted upon your passing. You can name anyone of your choice, from family members, friends to charitable organization. If you have children, within the Will you can name certain guardians for your children. (Disadvantages: Subject to Probate)
- Power of Attorney - A power of attorney enables you to designate an agent to act for you when it comes to financial, personal and private matters, in the event that you are unable to do so yourself. Your chosen agent can sign checks, contracts, income taxes etc, to the extent that you express in your Power of Attorney.
- Advance Healthcare Directive - An advance healthcare directive enables you to choose a person to make healthcare decisions for you in the event that you are unable to act for yourself. You can also document what medical care you would or would not like upon the occurrence of any specific event, when if comes to life prolonging treatment and otherwise. You can also state whether you would like to be a donor of organs.
- Beneficiary Forms - If you own a life insurance policy or a retirement account, be sure to designate specific beneficiaries. These assets pass according to your beneficiary designation, not based on instructions in your will.
- To avoid Probate and the associated costs and expenses.
- Maintain privacy.
- Second Marriage - Through a trust document you can provide income to your surviving spouse while protecting the assets for your children from a previous marriage.
- Minors - You can use a trust to ensure that your assets will be passed along to your minor children in the manner in which you expressly state. You will need to name a Trustee and specify when and why the children can have access to the assets, such as at the age of 18, 21, 25 or 30, or to pay for education and medical expenses.
- Special Needs Children - Create a special needs trust for the benefit of your special needs child for his/her lifetime. This trust can ensure that your loved one’s quality of life is protected while still ensuring he/she retains her government benefits.
- Business Ownership through a revocable trust. Owning your business through a revocable trust allows you to avoid the public exposure of probate court reporting.
- Long-term succession planning. Are you grooming someone to eventually take over when you want to retire? Are there financial assets available for him or her to purchase the business or assets from your estate?
- Emergency Succession Planning. As a business owner, you must think of a situation who will run the business in the event that you cannot. You can take this concern out of place by nominating a durable power of attorney to act for such time as you like in the realm of business succession.
- Liquidity/adequate insurance. Does the business have enough cash flow to continue if you are not available? The business may need key-man life insurance to provide sufficient liquidity.