PERSONAL FINANCE: MILLENNIALS – PLANNING FOR UNCERTAINTY

It’s hard to predict what the future will bring when you’re young. Where will you be in 5 years? 10? 20? Will you be married? Have children? Living in the same city? Regardless, from a financial standpoint, it’s vital to plan for tomorrow today, and develop a working estate strategy that provides a sound blueprint for managing and distributing your wealth. Doubly so for Millennials, 9 out of 10 of whom want to feel financially empowered – but only 39% are getting professional advice when it comes to investment planning, let alone with such important affairs.

Key Parts of an Estate Strategy

An estate strategy – which defines what happens to you and your assets if you should pass on or become incapacitated – isn’t just for the wealthy. It’s for those wanting to have a solid plan in place for the future. If an estate strategy hasn’t been established, decisions surrounding your finances, healthcare, children, and assets may be made by state courts – and at significant cost. Noting its importance to you and your family’s well-being, building an effective estate strategy is a matter best handled with the help of financial advisors and legal professionals, who can help you create a working plan for tomorrow, and achieve your individual goals.

Estate strategies don’t have to be complex either – some merely consist of a written will. Others may include more customized elements that define your medical care will be overseen or who will make decisions for you should you become incapacitated. No two plans are the same, but some documents you may wish to consider when building an estate strategy include a will (which explains how property will be distributed and children cared for upon death); a living trust (a place to store your assets that a trustee can manage if you become incapacitated, and can provide significant cost savings on death); and power of attorney (which enables someone else to make decisions on your behalf if you can’t decide for yourself due to illness, injury, etc.).

You may also wish to create a health care directive (to define how medical care will be handled) and designate which beneficiaries will receive investments or insurance proceeds upon your passing.

Why You Need a Will

Reasons to get started building your estate strategy today are manifold. Consider: According to a recent survey by Caring.com, 60% of Americans do not have a will – the basic legal document that determines how their assets will be divided up upon death. And while few people may depend on you financially today, what about when you’re older? Children and loved ones (including aging parents) may all need assistance.

In addition to setting aside stocks, bonds, and cash for these individuals, creating a will and supporting estate strategy further allows you how to determine how assets such as personal property, real estate, etc. will be divided upon death. It also allows you to determine who will receives valuables that are in your possession, e.g. collectibles, automobiles, season tickets, etc. as opposed to leaving it to the state to decide who receives which assets.

Note that your will should also state how substantial expenses – e.g. taxes, sums due to creditors, funeral expenses, etc. – will be paid, and name an executor to carry out your wishes, so the burden does not fall on your family.

Establishing a Living Trust

Likewise, you may also wish to join the 20% of Americans who, according to LegalZoom, have set up a living trust – effectively a safety deposit box for your wealth and holdings.

A living trust is a legal document that places your assets into a trust for your benefit during your lifetime (and allows you designate a trustee to manage them in case you’re ever sidelined by injury, illness, etc.), then transfers these assets to beneficiaries that you’ve named upon death. Happily, you can appoint yourself a trustee to manage trust assets yourself while you remain hale and hearty, though a successor must be named in case you’re ever incapacitated.  

Setting up a trust not only allows you to avoid probate (court proceedings which take place following death and include paying off debts/taxes, appraising property, distribution of property, etc.), and associated hassles. Doing so can save your family thousands of dollars, and put money in their hands faster, as Nolo says the probate process can often tie up property for months, and cost up to 5% of an estate’s value.

Similarly, having a trust in place can help you cut down on debate, protect your private information from going on the public record as part of the court process, and forces you to develop a sound, working plan for all assets. A trust not only helps you minimize friction and ensure that your wishes are carried out if you become ill or incapacitated without court involvement. It also helps keep you from accidentally overlooking a loved one or expense.

Begin Building Your Estate Strategy Today

The more investments you can put away today, and the more you can give these assets time to compound and grow, the more you can provide those that you care most about with greater peace of mind and stability. Similarly, the more proactively you work to put an estate strategy in place, the more readily you can ensure they’ll be taken care of in the years to come.

Having an effective plan in place won’t just minimize friction, make sure your instructions are followed, and keep legal costs to a minimum. 

Doing so can also assist with all aspects of the transition process including:

– Charitable Donations

– Tax Deductions

– Gifting Money

– Insurance and Proceeds

– Transfer of Money

Whether you’re looking to retain wealth, keep assets in the family, or provide for a spouse or future generations, there’s ample reason to build an estate strategy. Similarly, there’s no better time to begin investing the assets and efforts needed to effectively execute upon one now, while you’re young and doing well, and there’s ample time to plan for uncertainty. Not only can you create greater security for yourself and loved ones by putting a sound estate strategy in place. You can also create an effective safeguard against whatever unforeseen circumstances that tomorrow may bring.