If you are young, you most likely aren’t thinking about incapacity, death, or estate planning documents. However, 18-year-olds are legal adults, and your decisions matter. As you go through life and accumulate wealth and have people depend on you, it is a good idea to know how you can protect yourself and your family with simple estate planning tools.
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What if You Are in an Accident?
Who will speak for you if you are so severely injured in an accident that you can’t communicate your health care wishes? Most healthcare providers will consult your next of kin, such as your parents or grandparents. But what if you don’t want them to know your medical information or make decisions for you? You may prefer a friend or significant other to serve as your health care proxy, have access to your medical records, and make medical decisions on your behalf. For example, if you are pregnant or HIV positive and do not want your family to know. Or they have a different view of modern medicine, and you don’t want them calling the shots on your medical care and treatment options.
With a health care directive, you can name someone as your health care power of attorney to speak for you. As part of that, you can include a living will or advance directive detailing what life-prolonging measures you would want (or do not want) if you have an end-stage or terminal condition. If you have strong feelings about organ donation or funeral arrangements, you can include them in your directives.
You can also control who can access your medical records with a HIPAA authorization. The 1996 Health Insurance Portability and Accountability Act (HIPAA) prohibits health care providers from releasing your medical information without your prior authorization. If you are a young adult, your parents may not be able to get your health care information without your consent. So, for example, if you are in a car accident in another state, a hospital may refuse to communicate with your parents or loved ones without a HIPAA waiver.
What if You Are Incapacitated?
If you are incapacitated, meaning you can’t mentally or physically manage your affairs, who will do that for you? A financial power of attorney gives legal authority to someone you name to handle your financial decisions. Your agent has the legal right to act in your place to pay bills, make credit card payments, deposit checks into your bank account, and make financial transactions for you. You can even allow your agent to handle your social media accounts and digital assets. However, they may also bind you to contracts or loans, so it is critical to name someone you absolutely trust and who can handle money. Your agent has a fiduciary duty to act in your best interests. Failure to do so may result in civil or criminal penalties.
You may want a financial power of attorney if you can’t make financial decisions for yourself. If you became incapacitated without a power of attorney, your family would have to go to court and petition to become your legal guardian or conservator.
Even college students studying abroad may want to name someone to manage their financial life while they are out of the country as a convenience.
What if You Want To Share Your College Information?
Under the Family Educational Rights and Privacy Act (FERPA), college-aged children must give permission to their school to share their academic information. That’s right. Even if your parents pay for your college, they cannot access your educational records or grades. To allow them to communicate with your school, you complete a FERPA form. Contact your school to complete a FERPA form authorizing someone to get your academic records.
What if You Die Prematurely?
Although unlikely, if you were to die as a young adult, you may leave a financial mess behind. However, there are ways to make it easier for your loved ones.
Make a Last Will and Testament
A last will and testament is a legal document outlining your instructions for:
- Who will handle administering your will (your personal representative or executor)
- Who will inherit your personal property (your possessions such as vehicles, furniture, etc.)
- Who will care for your pets or children, if you have any
If you die without a will, you are “intestate,” and a probate court follows state intestacy laws to distribute your property to your family members. But what if you have a significant other? The only way to provide for them is by naming them as a beneficiary in your will. And you have a say in who cares for your pets or children.
If you have cryptocurrency assets, that is personal property, so it goes through probate. When you have a will, it reduces the time and money spent in probate court handling your estate.
Check Beneficiary Designations
However, certain assets do not pass in your will, such as bank accounts and insurance policies. The easiest way to make sure your money goes to who you want is to name them as a designated beneficiary. When you open a bank or CD account, they may ask who should receive the money if you die. These beneficiary designations control, so if you put in your will that your brother is to receive your CD account but name your sister as the beneficiary on that account, she will receive that account upon your death. These non-probate accounts may include:
- Bank and CD accounts
- Investment accounts (stocks, bonds, mutual funds)
- Retirement accounts such as IRAs and 401(k) plans
- Insurance policies and annuities
- Property in a trust
If you fail to name a beneficiary (or your beneficiary dies before you do), the asset goes into your probate estate. That is why it is a good idea to name a backup or contingent beneficiary if your primary beneficiary is unable to receive the asset.
It’s Never Too Early to Start Estate Planning
At this point in your life, you may not have to worry about estate taxes, but you should consider how estate planning can give you and your family peace of mind throughout your life. It doesn’t have to be complicated or time-consuming because you can choose between many online self-help estate planning resources. However, you may want to contact an estate planning attorney for legal advice if you have a complicated estate.
