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. They need to develop a comprehensive estate plan just like everyone else.
Yet less than a third of American adults have a will or living trust, according to a 2021 study by Caring.com.
No one likes to think about their own eventual demise, and most younger adults rarely do. But that doesn’t change the fact that you need to think about and begin addressing the personal, financial, and legal aspects of estate planning as soon as possible.
What Is Estate Planning?
Most people have little personal experience with estate planning and little idea of what it involves. Estate planning is anything you do in preparation for your possible incapacitation or eventual death.
An estate plan is simply a collection of legal tools you can easily put together online through services like Trust & Will. They allow you to decide what you want to happen after you die or whether you lose the ability to communicate or make choices on your own.
Far too many Americans put off creating an estate plan until they’re older, but every adult should have one. To die without one — known legally as dying intestate — puts your surviving family through far more work, headaches, and legal steps than necessary.
You owe it to your loved ones to leave behind a clearer, easier legal process if you die prematurely. Fortunately, the process need not take long. Most younger adults can spend just an hour or two once per year to create and update their estate plans. The fewer assets you own, the simpler it is.
Common Estate Planning Documents
Most people don’t need extensive estate planning documents. For the average millennial, a last will and living will (two different documents) make a good start.
Still, you should understand the most common documents as a foundation for your estate plan.
Last Will or Living Trust
Everyone should have a last will and testament. It lays out your most fundamental wishes for after you die, including:
- Who should assume guardianship of your minor children, should you have any at the time of death
- Your named executor (the person responsible for distributing your estate)
- How you want your estate (assets) to be distributed
- Your funeral wishes and expense limits
- Your organ donor preferences
- Who should assume guardianship of your pets if you have any at the time of death
You may decide to use a living trust in conjunction with your last will. A living trust helps your family avoid probate court but comes with some downsides as well. Read up on last wills versus living trusts for more detail.
However, even if you use a living trust to distribute your assets, you still need a last will document for everything else.
Advance Medical Directive (Living Will)
An advance medical directive, also known as a living will, includes your medical care instructions and health care wishes should you become incapacitated.
It covers cognitive incapacities like comas, vegetative states, and brain injuries. It’s not a fun topic to dwell on, but it’s a necessary one if you want any say over what happens to you in that eventuality.
Health Care Power of Attorney
A similar but distinct document, a health care power of attorney assigns someone you know and trust to make your medical decisions for you if you become incapacitated.
While a living will sets out explicit instructions for specific situations, a medical power of attorney names a health care proxy to make decisions for other situations not covered by your living will. This person may make decisions like moving you into a long-term care facility if you need it.
Conditional Power of Attorney
A conditional power of attorney names someone to act on your behalf in non-health care-specific capacities.
For example, business owners should name someone to wrap up their business affairs should they die prematurely. Or this person might take care of other specific financial decisions and transactions on your behalf.
As with any power of attorney, you should choose someone you both entirely trust and who has the appropriate subject matter expertise.
Letter of Instruction
A letter of instruction leaves general instructions for your heirs or loved ones. While not as thorough as a last will, it could point to where your loved ones can find your last will, living will, or other estate planning documents.
It should also tell your survivors where to find other crucial documents. These might include your birth certificate, Social Security card, and financial documents.
In the modern age, it could also include passwords to important accounts or a password to one account where you store all your other passwords.
Estate Planning Issues for Millennials
All the traditional estate planning questions apply to millennials as well. Millennials sometimes also have additional needs that many older adults don’t.
Keep these topics in mind as you create and then annually update your last will and other estate planning documents.
When it comes to estate planning, having children changes everything.
Millennials have reached their peak childbearing years. According to the Pew Research Center, 1.2 million millennials 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 is the selection and delegation of a guardian. Should you die unexpectedly or lose your ability to care for your child, someone else must 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 chooses 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 can’t bring your child with you.
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.
For example, an aging parent may be capable of caring for the child now but may not be an ideal choice as the child reaches their unruly teenage years.
Beyond choosing a guardian, you also need to provide for your child’s financial, medical, and personal needs in the event of your death. Tools like life insurance and testamentary trusts can play a role, but deciding which you need, which you don’t, and how to include them in your plan takes time. That’s why you should start now.
According to CNBC, about 73% of millennials own a dog, cat, or some other kind of pet. But few millennials have taken precautions to ensure their pets are adequately cared for in the event they get sick or die.
An essential part of estate planning for pet owners is creating a pet plan that protects your animals if you can no longer provide care for them. Pet plans often incorporate 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 can use the trust’s money to pay for any pet-related expenses.
3. Marriage & Cohabitation
Millennials have reached their 20s and 30s (and a few older millennials have even reached 40), 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. Per the Pew study, more millennials live with a romantic partner outside 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.
Couples who choose to live together outside marriage don’t enjoy the legal protections and benefits afforded to their married counterparts. Loads of benefits — including inheritance rights, tax benefits, Social Security and disability benefits, and insurance benefits — come with legal marriage.
Even if you have a cohabitation agreement that addresses how you’ll split financial responsibilities and assets if you break up, these don’t cover the same extensive ground as a last will.
Fortunately, you can use an estate plan to give yourself and your partner some of the same protections and rights that married couples have.
For example, married couples have the right to make medical choices on behalf of each other should one of them become incapacitated. But if you’re living together and unmarried, neither of you has that automatic right. If 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 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. Aging Parents
As the years march you toward middle age, so too do they march your parents toward old age. If they aren’t already retired, that day is fast approaching.
Your parents may become sick or need help as they get older. When it comes to aging parents, there’s a host of issues millennials should consider.
- Elder Care. Getting older often means getting sick and losing capabilities. With these changes often come significant changes in your parents’ 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 haven’t saved enough for private care, you may have to take them into your own home or shoulder part of the financial burden of long-term care. 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 once they incur the significant expenses associated with elder care. If you expect to receive an inheritance, speak with your parents about their financial situation and their own expectations for your inheritance. But never, ever count on an inheritance for your own retirement planning.
- Medical and Financial Choices. If a parent becomes ill or loses the ability to make choices, someone has to make these choices for them. Make sure your parents have their own medical documents prepared. If you or other family members can’t agree about medical or financial choices on their behalf, a court could have to get involved.
- Personal Choices. Beyond health care, inheritances, and last wishes, your parents 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 false assumptions and conflicts that could damage your relationships.
5. Traditional & Transfer-on-Death Assets
As part of your estate plan, list every single asset you own. That includes, but isn’t limited to:
- Checking accounts
- Savings accounts
- Brokerage accounts
- Retirement accounts like traditional and Roth IRAs, 401(k)s, simplified employee pension IRAs, and savings incentive match plan for employees IRAs
- Health savings accounts
- College savings accounts, such as 529 plans and education savings accounts
- Real estate (including your primary residence and any second homes or investment properties you own)
Some assets, such as brokerage and retirement accounts, transfer immediately upon your death. Known as transfer-on-death (TOD) assets, they allow you to name a beneficiary who inherits them upon your death.
In most situations, you can choose whomever you like as your TOD beneficiary. The process 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.
If you have a TOD asset but fail to designate a beneficiary, the asset must 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 an unintentionally unequal inheritance.
6. 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, cellphones, and the Internet, their lives inexorably intertwined with the world of digital information. As a result, they’re more likely to own digital assets.
With a digital estate plan, you get to decide how all 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 the important digital assets you have and details who gets to access them, how to access them, and what happens to them after you die.
As your list of digital assets grows and changes, so must your plan. For example, if you update the password on your online bank account, you’ll have to make sure your digital estate plan reflects that change.
The same goes if you change your mind about what you want to happen to your assets, who you want to manage them, or anything else.
Bear in mind that 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 after you die. Not only do you have to take these processes into account when you create your plan, but you also have to update your plan if these rules change.
7. Organ Donor Wishes
While hospitals can use anyone’s organs, young adults’ organs tend to be far healthier — and therefore far more useful for patients who need a new organ.
As a younger adult, consider specifying that your organs should go to people who need them in the event of your death. Your body could literally save lives after you no longer need it. Along similar lines, you can donate any unused organs to scientific research.
By the same token, if you wish to avoid donation, you must specify, or the decision may be left up to a relative who may not be aware of your wishes.
8. Funeral Wishes
Like any industry, the funeral business upsells customers on the most expensive products and services they can. Unlike most industries, they sell to people at their most vulnerable and often use emotional manipulation to push grieving relatives to spend more than necessary to demonstrate their love.
If you want a lavish funeral, that’s fine. But you should be the one to plan it so you get exactly what you want, which you can do in your will.
Otherwise, don’t let your loved ones fall into that trap. In your last will, list an exact budget for your funeral along with the instructions for what you want to be done with your body.
Let your relatives and heirs use the money you leave behind to better their lives rather than throwing a lavish funeral or burying you in the Lamborghini of caskets.
You won’t be around to enjoy it. But your money could turn their lives around and help them reach their long-term goals faster.
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 and should update these tools to suit your changing circumstances.
And while you know the wishes you want to lay out, you probably don’t have the experience or expertise needed to create a comprehensive estate plan on your own. State laws about estate planning differ significantly and change regularly.
If you have relatively straightforward estate planning needs, use an online service like Trust & Will. But if you own large assets or have a high net worth, talk to an experienced estate planning attorney to protect yourself and your loved ones.