Make an Estate Plan, No Matter How Young or Broke You Are

Kate Dore

When you‘re young and living paycheck-to-paycheck, it can be hard to see the need for an estate plan. But estate planning is a lot more than who inherits your Ikea couches and record collection. While no one likes to talk about it—much less think about it—things happen. Not having a plan can leave your loved ones vulnerable to complicated legal situations and financial messes. If this sounds like you, make 2019 the year you finally get your plan together. It doesn’t take much time—or money—and you’ll rest easy the rest of the year knowing you have those that matter most covered.

Everyone needs a health care proxy

First, start by deciding who you trust to make health care decisions on your behalf. Once documented, that person will essentially become your health care proxy if you’re ever in an emergency. “Every single person should have a health care proxy,” says Rebecca Neale, a Massachusetts-based attorney and owner of Bedford Family Lawyer.

Once you’ve chosen who you want to act on your behalf, sit down and discuss your wishes with them. Make sure they know the answers to tricky questions like emergency surgeries, after care, and your wishes on resuscitation. From there, the forms you’ll both need to sign vary by state.

It’s also a good idea to keep a copy of your health care proxy document at home where the people you live with can find it in case your proxy contact isn’t immediately available. Let’s say you lived with a roommate and were in a car accident requiring emergency surgery. If you were unconscious, someone else would need to sign a form to allow the procedure. Your roommate could find your health care proxy, including your person’s contact info, and give it to the hospital, saving valuable time.

Power of attorney could be important

A power of attorney essentially gives someone access to the financial side of your estate, letting them do all sorts of things like write checks to pay your rent, sign legal documents required for things like closing on a home, or access your bank account. While that level of access sounds a little scary, a power of attorney document can be written to your specifications. You can limit access, determine which kinds of decisions your power of attorney can make, or even specify a time frame after which the power of attorney should expire.

Typically, a power of attorney springs into action if you become incapacitated, but you can also have your power of attorney step in for certain things whenever you want—for example if you spend a year overseas without access to your online bank accounts. It depends on how you draft the document.

If you’re on the fence about giving that much power to anyone, Neale says that may be OK, a power of attorney isn’t always the right fit.

“Most millennials handle banking and paperwork online. It may be more useful to give someone a log in to your digital password manager,” she points out. You will want to be sure a trusted person has access in the case of an emergency.

However, if you’re starting to accumulate assets that might need managed—like a car or a home—a power of attorney could be the best idea. “The more assets you have, the more important a power of attorney is,” Neale says.

Keep your beneficiaries up-to-date

When you are considering your assets (or lack thereof), it’s easy to overlook your retirement funds. Be sure to take the time to round up every account, as well as their balances and other key info before you start officially building your estate plan. But you may not need an official document, like a will, to leave those accounts to someone in the event of your death.

“If you have a 401(k) or individual retirement account, you don’t need a will to leave it to someone,” Neale says. All you need to do is select a beneficiary. Most companies will automatically prompt you to assign a beneficiary when you open an account.

If you’re not sure whether you assigned a beneficiary, check with your company’s HR department or the provider themselves.

Consider your children

While you may be able to get around having an official will if you’re single, if you have children, estate planning gets more complicated. A will could include your wishes for guardianship. It’s important to make your preferences known, even if your state makes the final call.

Also, you need to think about how your children may inherit your stuff. If your kids are under 18, your state may establish a trust for them if you haven’t made official arrangements. They could have access to the funds for basic support and receive the full remaining balance at 18. “Most parents prefer to have control over how their children receive the money,” says Neale. In cases like these, setting up a trust yourself may be more appropriate.

Consider a term life insurance policy

Life insurance isn’t the right fit for everyone, but buying a term life insurance policy when you are young and healthy may have two key benefits. Firstly, your premiums might be lower. And secondly, you’ll have the reassurance of knowing your loved ones are covered if anything happens. “You can rest easy knowing loved ones won’t have to cover your funeral or burial expenses,” Neale says. It’s fine to hold off on springing for life insurance, but Neale suggests not waiting too long if you’re shooting for the best rates—having a child may impact your eligibility and monthly premiums.

If you’re not sure if you need life insurance, talking with a qualified financial planner can help you sort out the details.

Get help putting it all together

If you want, you can absolutely put your own estate plan together, but it will take a little—ahem—planning. Some documents vary state to state and it is a good idea to get everything notarized.

If you decide to DIY, Neale does have one rule of thumb: stay away from websites like LegalZoom, which won’t give you tailored advice. Some allow you to edit the wording which, if you don’t know what you’re doing, can lead to major errors down the road.

If you’re not totally comfortable planning or filling everything out, it may make sense to hire an attorney—and you can find one for a pretty reasonable cost. Like any service, the price tag will vary based on where you live. Neale says a basic package with a health care proxy, power of attorney, and will may set you back $300 to $800.

If that feels like too much, she has some good news: many places offer free health care proxy forms on their state legal aid website. These sites can also be great sources for free and accurate information. “It’s hard to know which websites are reliable. Be sure you’re looking at a site that has information about your state. If it’s your state’s Legal Aid site, you can trust the information,” Neale says.

When it comes to choosing an estate planning attorney, don’t rely on Google or online directories. “If you know a local attorney, ask them for a referral. Even if they specialize in a different area, they may know someone you can rely on,” Neale recommends.

Documents like a health care proxy, power of attorney, and a will are only part of the equation. Life insurance can also help loved ones cover your final expenses. “If you are supporting a family, it will offer so much peace of mind,” Neale adds.

While, none of us like to think about this stuff, a solid estate plan can be put together in just a few days and then you’re done! That kind of makes this one of the easiest New Year’s resolutions you can do, no?