If you were born in the latter part of the 20th century, you’re part of the largest generation of Americans in history: millennials. And while millennials have diverse needs and desires, some truisms in life hold for every adult, regardless of their generation. When it comes to millennials, they need to develop a comprehensive estate plan, just like everyone else.
Estate planning isn’t exactly something most people, much less young adults, like to think about. However, that reluctance won’t change the fact that there are personal, financial, and legal aspects to estate planning that you need to think about and begin addressing as soon as possible.
What Is Estate Planning?
Most people have little personal experience with estate planning and little idea of what it is. As a general rule, estate planning is anything you do in preparation for your possible incapacitation or eventual demise. An estate plan is simply a collection of legal tools that can easily be put together at Trust & Will. This will allow you to make decisions about what you want to happen after you die or if you lose the ability to communicate or make choices on your own.
Most people who create an estate plan are older, but that doesn’t mean it’s something younger adults should put off. You never know what might happen, so every responsible adult needs to think about estate planning sooner rather than later.
Estate Planning Issues for Millennials
Millennials have several estate planning issues that older adults may not have to consider.
1. Digital Assets
One of the biggest differences in the estate planning needs of older people and millennials is the form their estate plans take. Millennials grew up with computers, cell phones, and the Internet, and their lives are inexorably intertwined with the world of digital information. As a result, they’re more likely to create a digital estate plan.
With a digital estate plan, you get to decide how all of your digital assets – such as your Facebook account, personal photos, and online bank accounts – are handled should you die. A digital estate plan lists all of the important digital assets you have and details who gets to access them, how to access them, and what happens to them after you’re gone
As your list of digital assets grows and changes, so must your plan. If, for example, you update the password on your online bank account, you’ll have to make sure your digital estate plan reflects this change. The same is true if you change your mind about what you want to happen to your assets, who you want to manage them, or anything else.
Also, many digital assets, such as social media accounts, have specific rules or procedures you have to follow if you want to pass control of them on after you die. Not only do you have to take these processes into account when you create your plan, but you’ll also have to update your plan if these rules change.
According to CNBC, about 73% of millennials own a dog, cat, or some other kind of pet. When it comes to millennials who buy homes, almost 90% of them have at least one pet and choose their home based, at least in part, on whether it’s an ideal fit for their animal companions. At the same time, few millennials have taken precautions to ensure their pets are properly cared for in the event their owner gets sick or dies.
An essential part of estate planning for pet owners is the creation of a pet plan that protects your animals if you can no longer provide care for them. Pet plans typically use a pet trust, a kind of legal entity that can own property on behalf of your pet. Through the pet trust, you can also name someone who not only manages the property but also takes care of your pet, and who can use the trust’s money to pay for any pet-related expenses.
3. Marriage & Cohabitation
Millennials are now in their 20s and 30s and well on their way to building assets, establishing careers, and raising families. At the same time, this largest generation in American history is the least likely to be married. More millennials are living with a romantic partner outside of marriage than baby boomers and Generation X ever did. Even though marriage equality is now the law of the land, more and more millennials are eschewing this tradition and opting to cohabit with a partner.
For those who choose to live together outside of marriage, the legal protections and benefits afforded to you compared with your married counterparts are nowhere near the same. Inheritance rights, tax benefits, Social Security and disability benefits, insurance benefits, and more are all available to married couples, but not to you. Even if you have a cohabitation agreement that addresses how you’ll split financial responsibilities and assets if you break up, there are other issues you’ll need to think about. Fortunately, you can use an estate plan to give yourself and your partner some of the same protections and rights that married couples have.
Take, for example, the right to make medical choices for your partner if they fall ill. If you’re married, you and your spouse have the right to make medical choices on behalf of each other should the other become incapacitated. However, if you’re living together and are not married, neither of you has that automatic right. In the event your partner becomes ill, the right to make medical choices for them may fall to their parent, sibling, or someone chosen by a court. The only way to ensure that you can make medical or financial choices for your partner, and vice versa, is by each of you creating advance directives that grant decision-making rights.
4. Retirement Plans, Bank Accounts & Transfer-on-Death Assets
Many millennials are in their 20s and 30s, and the oldest are approaching their 40s. They’re not old, but they’re not as young as they’re often made out to be. With age comes responsibility, wisdom, and assets such as retirement plans, 401(k)s, and more. And with each new asset comes additional estate planning concerns and complications. Some assets, such as brokerage and retirement accounts, are not transferred by the terms of your last will and testament. Known as transfer-on-death (TOD) assets, these assets allow you to name a beneficiary who inherits them upon your death.
In most situations, you can choose whoever you like as your TOD beneficiary. The process is relatively simple and usually involves filling out a form in which you name the person you want to inherit the asset. Should you die, your chosen beneficiary inherits the TOD without that property having to go through the probate process.
However, there are potential complications when it comes to TOD and estate planning. For example, if you have a TOD but fail to designate a beneficiary, the asset still has to go through the probate process. Similarly, if your chosen beneficiary is unable – due to age or infirmity – to inherit the TOD, this too requires a probate court’s involvement. Further, if your last will and testament provides equal inheritances, but you fail to take TODs into account when dividing your property, you may leave behind gifts that are nowhere near equal.
5. Aging Parents
You’re getting older and have to start thinking about what your future holds, and so do your parents. If they aren’t already retired, that day is fast approaching. So too is the possibility that they become sick or need help as they get older. When it comes to dealing with aging parents, there are a host of issues millennials have to consider.
- Elder Care. Getting older often means getting sick and losing abilities. With these changes can come significant changes in your parent’s ability to care for themselves. In many situations, millennial children have to care for their aging parents but aren’t prepared to do so. If your parents don’t have enough saved for private care, you may have to shoulder part of the financial burden. Even if you don’t have to pay out of your own pocket, you may have to spend time providing care for them, even if it’s only running errands or doing occasional tasks around the house.
- Inheritances. While many aging baby boomers plan to leave inheritances to their children, not all of them do, and not all of them can do so once they incur the often significant expenses associated with elder care. If you’re planning on receiving an inheritance or relying on it for your own retirement plans, you need to speak to your parents about their financial situation and what you can reasonably expect from them.
- Medical and Financial Choices. If your parent becomes ill or loses the ability to make choices, someone has to make these choices for them. Unless your parents have an estate plan of their own, there may be no clear indicator of who that person should be. If you or other family members can’t agree about medical or financial choices on their behalf, a court may have to get involved.
- Personal Choices. Beyond health care, inheritances, and last wishes, your parent may have expectations about how they wish to spend their final years or what kind of help they expect from you. Unfortunately, many of these expectations can go unvoiced, leading to stress and family conflict. It may be difficult to have a conversation with your parents about their estate planning efforts. Still, it can go a long way toward fending off potential problems that could prove catastrophic to your family relationships.
When it comes to estate planning, having children changes everything. According to the Pew Research Center, 1.2 million millennial mothers give birth every year. For every child born to those millennial parents, a host of new estate planning issues arises.
The most important of these issues is the selection and delegation of a guardian. Should you die unexpectedly or lose your ability to care for your child, someone else has to take on parenting responsibilities. If you haven’t chosen a guardian in a legally enforceable manner, such as through a valid last will and testament, a court has to choose for you. When it does, you have no way of controlling its choice. Even if you don’t die or lose capacity, you may need to transfer temporary guardianship authority to someone else if you have to travel for an extended time and aren’t able to bring your child with you.
When it comes to choosing a guardian for your child, there are several issues you’ll have to consider. While most people decide on a family member as their guardian, that may not always be the best choice, especially if you don’t have anyone in your family who’s reliable enough to care for a young child. You may have to consider whether your child needs a different guardian depending on their age. An aging parent, for example, may be capable of caring for the child now, but may not be an ideal choice when the child is an unruly teenager.
Beyond choosing a guardian, you’ll also need to provide for the financial, medical, and personal needs of your child in the event of your death. Life insurance, testamentary trusts, and other tools can all play a role, but deciding which you need, which you don’t, and how to include them in your plan takes time, which is why it’s essential to start now.
Creating a proper estate plan requires time, thought, effort, and the ability to design tools specific to your needs. As you get older and your needs and desires change, you can update these tools to suit your changing circumstances.
And while you may have a good idea of what you want to accomplish with your plan, you probably don’t have the experience or expertise needed to create a comprehensive plan on your own. State laws about estate planning differ significantly and change regularly. Talking to an experienced estate planning attorney is always be the best way to protect yourself and your loved ones.
Millennials, have you created an estate plan yet? Why or why not?