Estate Planning as a Young Adult

Estate planning is a decision that protects your wishes and your loved ones. It can help you prepare for the future, accounting for events that you might not see coming. Unfortunately, only 24% of Americans have a will, and most of those people are over the age of 55. 

Estate planning is often low on the list of priorities for many young people, as it is often seen as something that will matter much further down the road. However, there are a wide range of reasons that estate planning as a young adult matters. 

The Benefits of Estate Planning as a Young Adult

There are many benefits of planning what happens to your assets from a younger age. These include:

  • Ensuring your wishes are respected: Having a plan in place ensures that your wishes will be carried out exactly as you intended.

  • Protecting your assets and your loved ones: Wherever your assets may stand as a young adult, it is still important to protect what you have and to make plans for the future. You can also ensure that your loved ones and dependents are looked after.

  • Giving you peace of mind: Planning ahead can help ease your anxiety and give you a sense of comfort about the future.

Unexpected Events

In the case of unexpected accidents and events, your circumstances can change rapidly. Estate planning is one of the best ways to secure your assets and prepare you for any curveballs that life may throw your way.

Illness

However young you may be, illnesses can still creep up on you. Though we all hope for good health throughout our lives, unexpected illnesses can occur and progress rapidly. Estate planning will help you be prepared for severe illnesses that interfere with your life and plans.

Some people are able to start estate planning after a diagnosis, but due to the potential of fast-acting conditions, it is important to plan for the future while you are still in good health. This gives you the luxury of time to make decisions for your assets.

Accidents

Accidents, by their very nature, are sudden. Preventable injuries are the third leading cause of death in the USA and are the leading cause of death during the prime of life. The most common type of accident is motor vehicle collisions. 

No matter how safely you try to live your life, you can never predict when an accident will occur. Crafting a plan will help you be prepared in the case of unforeseen circumstances. 

Incapacity

Both illnesses and accidents can leave people incapacitated in serious cases. This can occur when one is unconscious for a long period of time, suffers a traumatic brain injury, or develops an illness.

Incapacity estate planning ensures that, no matter what, your wishes will be respected concerning your family, your assets, and your own care.

Loved Ones and Assets

Many people start estate planning when they get married or start a family, because it is the best way to make sure that your loved ones are looked after if something happens to you. If you already have a plan in place, bear in mind that changes to your familial status can affect your estate plan. 

Examples of these changes include:

  • Marriage: You may wish to include your spouse in your will or trust.

  • Divorce: You can make changes involving your former spouse. 

  • Birth or adoption: These events bring about a new family member to consider.

Taxes

Estate planning comes bundled with some significant tax implications that you should talk to your attorneys about. This ensures that you are always tax-compliant and helps to clarify how your estate and beneficiaries will be affected by taxes. 

Estate taxes are generally imposed on asset transfers at the end of life, though you can transfer a set amount of assets without being taxed. Usually, the estate is responsible for paying this tax.

If you give money or property to other people while you are alive, you may be responsible for gift taxes. You can make smaller gifts each year without paying taxes, but larger gifts reduce your lifetime estate and gift tax exemption. 

If a beneficiary is two or more generations younger than the donor, the transfer may incur generation-skipping transfer taxes. 

Finally, income taxes also impact your estate planning process. You will want to make sure to discuss how you can reduce tax burdens on your estate as a whole and your beneficiaries.

Essential Documents

Your estate plan should include a number of important documents, including:

  • A living will: If you become terminally ill, this allows you to dictate how you want to be treated. 

  • Guardianship declaration: If you have children, you can determine who takes care of them if they are still minors.

  • Health care directives: These allow you to express your wishes about end-of-life care.

  • HIPAA release forms: These give permission to appointed agents to access your medical information if you are incapacitated. 

  • Power of attorney:  You can appoint an individual to make financial decisions on your behalf if you’re incapacitated. You can also get a healthcare power of attorney for medical decisions.

  • The last will and testament: This documents your wishes about how your assets will be handled.

  • Trusts: These allow you to potentially reduce tax requirements and put aside protected assets for beneficiaries. 

Help from our Experts at MKP Law

Although it is not easy to consider the unexpected, it is important to plan for the future. Our legal experts at MKP Law are ready to help you with all of your estate planning needs, no matter what assets you have at this time. 

Get in touch today to find out how we can help you start estate planning and give you peace of mind about the future.