In a youth-focused society, there is no denying that millennials—those born roughly between 1980 and 2000—are ever-focused on the "present" and the notion of "living in the moment," not contemplating the future, let alone the idea of dying. But in the year 2020, all millennials are now legal adults and need certain estate planning documents that every adult should have.
Estate planning is not just for the elderly, dying, or super wealthy—there are some estate planning documents that every individual (regardless of age or circumstance) should have. While it is no revelation that many millennials are delaying marriage and have not yet amassed the kind of wealth as individuals 10 or 20 years older, legal adults no matter how young can benefit from certain estate planning documents to help them better plan for the present.
Power of Attorney
A power of attorney is an estate planning tool that helps an individual plan for the present moment—and is effective while an individual is living. It is of the utmost importance especially for unmarried individuals. A power of attorney is split into two subcategories: (i) financial and (ii) health care.
A financial power of attorney, also known as a durable power of attorney, allows an individual to nominate another person to act as his or her attorney-in-fact or "agent." An agent has the ability to act in the individual's stead in a wide variety of financial transactions, such as withdrawing money from a bank account, selling real estate, and generally managing his or her financial affairs. The durable power of attorney becomes effective as soon as it is signed and it survives an individual's incapacity, but may be revoked at any time while an individual is living and competent.
A health care power of attorney, also known as a health care proxy, allows an individual to nominate another person to act as his or her health care agent to make medical decisions on his or her behalf if he or she is incapable of doing so. Included in the health care proxy is a declaration of wishes, also known as a "living will," which provides guidance to the health care agent. The health care proxy does not become effective until an individual is incapable of making his or her own health care decisions, and may be revoked at any time while the individual is living and competent. Without a health care proxy in place, an individual's family or spouse may argue about medical treatment in emergency situations or otherwise not have authority to make important medical decisions.
Beneficiary designations are a simple way to allow millennials to protect their financial assets without complex planning. Typically, beneficiaries are named on accounts such as 401k accounts, health savings accounts, transfer on death accounts, investment accounts and life insurance policies. Accounts with beneficiary designations, unlike other assets, will pass pursuant to the terms of those designations upon an individual's death, therefore it is important to review and make sure beneficiary designations are up to date. Doing so is an easy way for millennials to ensure their assets will go where they want them to go.
Term Life Insurance
For millennials who are young and relatively healthy, term life insurance is a relatively inexpensive way to plan for the present and the unexpected that comes with it. Term life insurance is issued for a fixed term, and is intended to fill the financial gap left by the death of an individual who is the income earner of the household. The younger an individual is when he or she applies, the lower the premium.
For most millennials, it is difficult to confront mortality and plan for death when focusing on the present; however, a little preparation and planning can provide a lot of peace of mind—not only for the present but for the future, too.