Estate planning considerations are for “young people,” too
The arrival of the covid Delta variant has many of us wondering when life will return to what we knew before. It has also brought estate planning issues top of mind for the “younger” crowd, specifically those between 30 and 50 years old. In my own family and circle of friends I have witnessed multiple ER visits and an ICU stay due to COVID for those in that demographic.
This raises two important questions: (1) Have those in younger generations in your family completed their estate planning? and (2) If so, do you know your involvement in their planning, even if it is just in a secondary, or backup capacity?
After I have completed an estate planning project for a client, I usually recommend they hold a family meeting to discuss their estate planning decisions with their children and other important people. Lately, I have seen the importance of a sort of “reverse” family meeting, in which parents check in with their children to make sure the younger generation has their affairs in order. Many people in the age 30-50 range still have their parents listed as a backup fiduciary (such as a health care agent, financial agent, or personal representative) because their own children and peers are not old enough or mature enough to take on the task. So, you may be asked to step up and help if your child is in the ICU or passes away.
Some estate planning issues are universal to all ages and stages of life, such as naming health care and financial agents under a power of attorney. This article will discuss the issues unique to ages 30-50.
The first critical task for those ages 30-50 is to do a self-audit to check who exactly are the owners of their accounts and who are listed as beneficiaries. Many married individuals think they have their spouse listed as beneficiary on a life insurance policy, only to find out they still have their parents listed because they purchased the policy before they were married. Some adults still have a parent as joint owner on a bank account, perhaps the child’s first bank account set up before they moved away from home. Check in with your adult children to make sure they have removed you as a joint owner or beneficiary on their accounts.
The second critical issue is to designate who will care for any minor children in the event both parents are incapacitated or deceased. If you are named as the primary guardian for your grandchildren, consider what your age will be when your grandchildren each turn 18. Will you still be willing and able to be their primary caretaker up until that point? Talk with your child about naming a backup guardian who could step in if necessary.
The third critical issue is to design a trust to hold funds inherited by minors, or those who are not yet mature enough to independently handle funds. Minors cannot own property, so if your child leaves assets to their minor child directly, the court must appoint a conservator to care for the funds until the minor reaches the age of majority. This is a public and costly process that can be avoided by simply creating a trust for the minor in the estate planning documents.
This trust names a trustee who oversees managing and distributing funds to the beneficiary until they reach a certain age. I recommend setting an age of maturity of at least 25 years old. Even the most mature 18- or 21-year-old would struggle to wisely manage a large windfall.
The trustee follows the rules written in the trust about when the beneficiary can receive distributions. For example, the trustee may distribute a sum of money to help pay for a six-year-old to buy back-to-school clothes, 12-year-old beneficiary to attend space camp, a 16-year-old to buy a car, or a 23-year-old for a house down payment. If there are any funds left once the beneficiary reaches the designated age of 25, the trustee releases the remaining money directly to the beneficiary.
Choosing a trustee is an important issue. If your child named you as the trustee for your grandchildren, make sure a backup is also named. You may not be able to serve as trustee for the duration of the grandchild’s trust due to health issues or simply a decreased desire to be responsible for the headache of bookkeeping, investing decision, income tax filings, etc. in your later years.
A family meeting to cover these issues can be brief. Simply ask your adult children if they have estate planning in place, and if so, whether you are specifically named for a trustee, personal representative or power of attorney role. If you are, either confirm you will serve in that role, or decline to serve and ask them to update their planning to remove you or name a backup. You will be glad you took a few minutes to sort through these important issues.
This article does not constitute legal advice. Each individual should consult his or her own attorney.