“How would you live today if it was your last?” Most of us have been asked this question and wondered how we would spend the last precious hours of our lives. The question is more philosophical than pragmatic — an introspective question that is often meant to inspire and motivate positive change. If you were to take the question literally, then you should not only think about how to spend your last hours but also wonder about the impact your death would have on your family and loved ones, both short-term and long-term.
Cancer stole my grandfather from our family some 20 years ago. I was a child but still recall my father being upset at my grandfather for planning his own funeral. In some ways our family was lucky that my grandfather was able to finalize his affairs since death and disability often show up without notice.
Estate planning is often synonymous with the rich and old. However, it should be an integral part of everyone’s financial plan regardless of age or the size of your bank account. It is a dynamic process that should be reviewed throughout your life as circumstances change over time; it is not something that you check off at the end of your life.
Here are three important documents that all young adults should consider:
1. Advance Health Care Directive & Health Information Portability and Accountability Act (HIPAA) Release Form
Once you turn 18, health information privacy rights come into play, preventing the release of health related information to others, including your own family. By signing a HIPAA Release Form, you allow doctors to share diagnoses and discuss options with the people you designate. You can designate a health care decision-maker and obligate doctors to inform a person or persons you designate to consult about your healthcare, in case you cannot make that decision yourself.
2. Financial Power of Attorney
A financial power of attorney allows someone to act on your behalf should you no longer be able to attend to your own finances. This includes writing checks to cover your mortgage and other bills.
Since so much of our lives now live on the internet, it is also important to think about how you would like your online accounts to be managed. Google’s Gmail has an “inactive account manager” and, similarly, Facebook allows you to setup a legacy contact that can manage your account should you become unable to do so. Password manager apps, such as PasswordBox, allow you to setup a legacy contact that can access important information. You can also designate in your will or trust a digital executor or trustee to handle your digital assets if you are unable to do so.
In addition, using a revocable trust should be considered if your assets (outside of retirement accounts and pay on death accounts) are over $150,000. A small estates affidavit is allowed for estates under $150,000, but estates above that amount have to go through the probate court and that can be lengthy, expensive and public.
Setting up a legacy contact for Gmail and Facebook is free while setting up a trust can cost $1,500 and up. It is important to understand that you will likely have to periodically update the plan, either due to changes in your life or changes to the law. Planning for your death and having to pay for it is perhaps not the most fun way to spend your time or money. However, think of your estate plan as a gift because it will certainly be an extremely valuable resource for those you love during what you can only imagine to be a very difficult time.