4 Important Financial Documents 20-Somethings Don’t Want to Think About, but Should.
The majority of young people aren’t thinking about wills or estate planning, or any financial documents at all, really—they don’t think it’s necessary to worry about these things at this stage of their lives. However, all adults—no matter their age, should start some estate plan.
Young adults aren’t in need of anything overly complex—just a foundation that they can build with a few basic documents. We’ll go over the key pieces of paperwork that can help jumpstart estate planning for younger clients—or client’s adult children:
Health Care Advance Directives
Often, it’s surprising for clients to learn that no one has the legal right to make medical decisions on someone else’s behalf without direct authorization. These instructions are often outlined in advance directives. These specific documents allow people to name other parties that are authorized to make medical decisions on their behalf—in the event that a doctor determines that the client cannot make them on their own.
Every state has different laws about how to create these advance directives, and many states have sample forms that are available online for free.
Most young people might not see the need for these documents—but remind them, in the event of an accident or sudden medical event, without an advance directive, families may argue over a particular treatment or course of action, and this could cause the matter to end up in court.
2.) Durable Powers of Attorney
These are documents that give a named individual the authority—known as an attorney-in-fact, to make legal and financial decisions on your client’s behalf.
Once again, this is one of those ‘what if?’ documents and your younger clients may not think they need one. It’s essential that they give serious thoughts to these, however,…if for one simple reason:
These documents are meant, specifically, to allow access to assets in case of incapacitation, and they are often effective immediately upon signing. Due to the powers granted, assets that end up in the hands of the wrong person can be mismanaged or stolen.
It’s important that they only name a trusted individual.
Without a will, when a person dies, state law takes over and dictate who receives assets. Single individuals without children will typically have their assets go to their parents.
Some clients may have no problem with this. If they aren’t, a will is a necessary document to list out beneficiaries and who will inherit what.
Also, once a client has a child, future guardians for the child should be named in the will.
4.) Beneficiary Designations
Most young adults’ most valuable property are invested in work-related assets—group term life insurance or 401(k) plans, specifically. These asset types are typically disbursed by beneficiary designations rather than by will.
Most young people aren’t aware of this—even if they are, often they don’t get around to filling out forms.