Estate Planning Tips for People Under 40
But I'm too young to worry about a will or life insurance!" Every attorney who works in estate planning has heard these words more than once from clients still in the first half of their lives. But the future is unpredictable and younger couples — especially those who are starting families — have the same need to set up a basic estate plan as older people. Here's what you need to think about to get your personal affairs in order.
Act Now, Don't Wait for Wealth
Estate planning isn't just for wealthy people, so you're just procrastinating if you say you'll worry about it when you build up more savings. You'll need an estate plan even if you don't have many assets. In fact, the fewer assets you have, the more important it is to consider elements like life insurance.
Planning for the future, including thinking about what will happen to your loved ones after your death, is a responsible, loving act. If you have a child or spouse who are financially dependent on you, you really cannot afford to ignore your estate plan. You'll want to consider a will, life insurance and a power of attorney — and that's just for starters.
Prepare a Last Will
According to attorney Kip Micuda with the Scottsdale, Arizona, firm of Hildebrand Law, both wills and life insurance are essential for people under the age of 40. Think of a will as a road map outlining how your property will be distributed when you die. This has obvious value if you have a lot of assets. If you don't have much money, every little bit counts.
You don't have to spend thousands of dollars getting something fancy written up. Sit down with an attorney and tell her what you have, who you want to leave it to, and that you want it to be simple. When you craft the will, don't forget to name a trusted friend of family member as the executor to help shepherd your estate through the court-supervised process called probate.
Insure Your Family's Future
The less money you have, the more important life insurance becomes. If you died tomorrow, would your family have enough income to continue to live as they do now?
"In most cases, a younger person may not own sufficient assets to ensure that his or her family is financially protected," Micuda says. "As a person's assets increase, the supplemental security of life insurance decreases and may be eliminated entirely."
So what kind of life insurance should you consider? Many choose the less expensive option of a term policy for a set number of years, according to Micuda. This works well for young people who will probably have more assets in 20 years than they do at 35.
Consider a Durable Power of Attorney
An estate plan is not just something you need in case you die. What happens if you become incapacitated or severely disabled? It's easy to think that incapacity results only from age-related issues, but a car or sports accident can also result in an inability to make legal decisions. You need a durable power of attorney if such an event should occur.
A durable power of attorney doesn't have much to do with lawyers. It's a form you sign in front of witnesses and a notary naming someone to act in your place in case you are incapacitated. A financial power of attorney gives the person you name the authority to handle your money, pay your bills and deal with your assets. You can set any limits you like, as long as you spell them out clearly.
A medical power of attorney is also a good idea. It gives someone you trust the authority to make health care decisions on your behalf in case you are incapacitated.
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