Growing up (0-18)
As a minor, you cannot sign a Will, Health Care Directive, or Powers of Attorney.
However, you don’t really need to. Your parents or guardians automatically have the power to make health care, financial, and legal decisions for you. While you might own some personal property, you likely don’t own anything large enough to warrant official probate, so your inability to make a legally enforceable Will is not detrimental. Of course, you can still write a Will and hope that your parents will respect your wishes and will distribute your personal property as requested, but know that your Will cannot be enforced.
Young Adulting (18-29)
At this phase of your life, you’ve (hopefully🤞) moved out of your parent’s home and started the challenging, unsupervised, and sometimes mundane part of living called adulting. You likely have a job, own a car, are single or dating, and maybe bought a house, but probably renting. Depending on your socio-economic status, you might have opened up a retirement account and purchased a life insurance policy. You probably have student debt, a car payment, and credit card loans.
Your greatest concerns are paying your bills on time, going to work, and saving up money to travel abroad.
Unfortunately, you are also still prone to the young adults’ tendency of making risky life choices, such as texting and driving, hooking up with strangers, and binge drinking—all decisions that could potentially lead to serious injuries. Yet, unlike when you were a minor, your parents can no longer make any decisions for you. They cannot coordinate your health care or pay your bills while you are unconscious in the hospital. They cannot sue on your behalf or authorize any transactions. You might not want your parents to make those decisions, but without someone making those decisions and keeping your financial life afloat while you are hospitalized, you run the risk of racking up late fees and interest, getting evicted, losing your home, and having your car repossessed.
That’s when executing a Health Care Directive and Powers of Attorney comes in handy!
A Health Care Directive lets you name a person whom you trust to make health care decisions for you if an accident lands you in a coma or diminishes your ability to decide your own health care. You can even specify what kind of health care you would like, what your beliefs are about medicine, and what you would like to happen if you are on life support.
A Powers of Attorney lets you give a trusted family member or friend the power to make financial and legal decisions on your behalf. This way, if you were unconscious in the hospital or if your visa expired while traveling abroad and you were stuck in some other country too long, you would have a trusted person who could continue paying your bills from your account, hire a lawyer on your behalf, maybe liquidate some of your assets to cover your expenses, and much more.
By now, you are no longer your own highest priority. You have a family to care and fend for. You’ve probably purchased a life insurance for you and your partner to make sure your children are taken care of if something happened. You are probably married, bought a house, started a college savings fund for your kids.
You are taking less risks in life, but you still drive on public roads, fly in planes, go skiing, attend public events, and live in a state that has tornadoes, blizzards, and severe storms. You might eat healthy and exercise, but your body is nonetheless susceptible to the environment and your genetics that could lead to cancer, diabetes, kidney disease. You don’t think you are going to die, but you are worried about what will happen with your children if you do.
That’s where executing a Will comes in handy!
In a Will, you get to name as many individuals as you would like whom you trust to take care of your children if you and your spouse pass away. You can include certain restrictions on the guardian, such as prohibiting them from moving your children out-of-state or even moving them out of your home.
A Will can include a testamentary trust so that funds from your life insurance policy, college savings account, and the house can be used to support your children over many years, including into their adulthood. You don’t have to worry that the guardian or your children might squander the funds within a couple of years. With a trust, you can feel comfortable appointing a guardian who’ll be best at taking care of your children even if they are not the best with finances since you can then name a financially responsible person to manage and administer the trust.
A Will is wonderful because it allows you to look out for your children even when you are gone. The court could place your children with someone, but you know better who’s the best guardian for your kids.
Wealth Accumulating (35-65)
This stage of life starts at different times for everyone. You might be a 55-year old empty-nester hitting the peak of your career. You might be a 35-year old single entrepreneur whose business has finally reached its first million dollars in profits. You might even be a mature 22 year-old trust fund kid who is investing the trust principal and purchasing commercial properties. Whatever your age, at this stage in life, you are making money, buying assets, and growing your net worth.
You might even be getting close to the Minnesota taxable estate of $2.7 million, which means that if you die during this stage of life, some of your hard earned money and property will go to the state instead of your family and friends. If you manage to accumulate $11.4 million, you are now also facing federal taxes at a rate of 40%.
Let me say that again, 40% on your hard earned wealth that you have already paid a lot of taxes on including income tax, sales tax, property tax, and capital gains tax.
At this stage of life, if you’re neglecting estate planning, you might as well write a check to the government.
An estate plan looks different for everyone. It might mean creating a testamentary trust in a will for your significant other who is behind on loan payments. It might mean creating a revocable trust to keep your assets confidential during the probate process if you don’t like people knowing your business. It might mean creating an irrevocable trust to reduce your estate so as to avoid or reduce estate taxes. It might mean making a gift-giving plan for the next 30 years or changing title on property from joint to sole or from you to your spouse. And so on.
At this point you are done with working. You are cashing out your retirement accounts and enjoying the fruits of your labor. You are probably downsizing and moving to a state with better retirement perks.
Your major concern is enjoying the remainder of your life while still being careful not to spend your entire retirement savings too quickly. You or your spouse might have some health concerns and are wondering how you will afford a nursing home in the future or pay your medical bills.
Unlike in your wealth accumulating phase where your death is unlikely to be followed by your spouse’s or your children’s death, now you are thinking about the potential impact on your spouse’s or children’s estate taxes if you transfer all your wealth to them directly and they die shortly after you do.
Because of the added complexity, you might want to speak with a financial advisor and an attorney who is a hybrid of elder law and estate planning, as that attorney would be most equipped to helping you plan not only for when you die but also for how to make the most financially out of the remainder of your life.
By now, you are at death’s doors most days. If by this point you still haven’t done any estate planning, then at least just make a simple Will to relieve your children and grandchildren from the burden of having to go to court and fight over whatever assets you may own. If nothing else, write a letter to those you will be leaving behind, letting them know how much they mean to you, and why you would like them to keep certain memorable items. While this letter will not be enforceable unless it is accompanied by a properly executed Will, it will at least be closure for your family members. At this point, anything is better than nothing.
If you want to learn more how an estate plan can help you in your life today, reach out. We’d be happy to provide more information and to create a tailored plan just for you!