When it comes to estate planning, we get asked several questions repeatedly: (1) Do I own enough to justify the cost of an estate plan; (2) Is an estate plan really necessary; and (3) I’m young, do I need to think about estate planning now? The simple answer to all three questions is yes, yes, and yes. While most people believe estate planning is only necessary if there is a large fortune at stake, the reverse is often more true. The less you own, the more important it is to preserve your estate and ensure your wishes are carried out.
Age, whether young or old, should not, in and of itself, serve as the sole push for estate planning. We feel that a complete estate plan is essential for any individual over the age of 18. At 18, despite the fact that most parents believe their children are still children, the law views these individuals as adults. This change in “legal” status can have a profound impact on the parents’ ability to gain certain information or access to financial data should tragedy strike.
The argument that the average 18 year old does not own anything, making an estate plan pointless is false. It is a true that most 18 year olds do not own anything—before death. Let me illustrate with an all too common example. An 18 year old is severely injured in a car accident with an 18-wheeler and the other driver is at fault. As a result of the accident, the 18 year old is in a coma and unable to make medical and financial decisions for himself. Who gets to make those decisions? Most would say the parents, but this is not automatic.
Now imagine the 18-wheeler is owned by a multi-billion dollar company. In all likelihood, the 18 year olds estate just went from zero dollars to several million dollars with a lawsuit. Without a valid estate plan, the courts will rely on state statutes to divide the estate and much estate tax savings may be lost.
This situation can be easily remedied with a valid, basic estate plan. With a basic estate plan, the 18 year old would appoint statutory and medical powers of attorney, guardians, and execute a valid will that would dictate the distribution of his estate. The only certainty is that everyone will eventually die, but no one knows the time and circumstances; therefore, a basic estate plan should be executed by every “legal” adult as insurance against a certain result with uncertain circumstances.
Photo credit, Ewan Thot
