A common refrain that we hear from people when we encourage them to consider estate planning, especially people in their twenties and thirties, is “But I don’t need an estate plan.” The reasons vary, and this post will address the first of three of the most common ones.
Reason # One: I Don’t Need an Estate Plan Because I Don’t Have Very Much.
For young people just starting out, this is a common belief. But, estate planning isn’t just a way to distribute your property after your death – it’s also planning for your incapacity and making arrangements for your minor children. A “foundational” estate plan generally consists of three or four documents: (1) a durable power of attorney for finances (DPAF), (2) a durable power of attorney for health care/advance health care directive (DPAHC), (3) a will, and occasionally, (4) a trust. Of those four, the first two of those documents are exclusively for use during your lifetime. The DPAF names someone to handle your financial and personal affairs if you are ever unable to do so, and the DPAHC names someone to make medical decisions for you and sets forth your wishes for medical treatment. Additionally, if you have a trust, the trust names a person to manage the assets in the trust both during your life (if you are ever unable to do so) and upon your death.
Without a DPAF or DPAHC, if you are ever incapacitated, a court proceeding called a “conservatorship” will be required in order to name someone to handle your affairs for you. This job will not simply fall to your spouse or parents by default, and a conservatorship proceeding is time-consuming, expensive, and public. Additionally, the person you would want to be acting on your behalf may not be the person who is appointed by the court, especially if you want someone other than the “traditional” choice (like a friend instead of a parent). With a DPAF and DPAHC, however, you will have already appointed someone to manage your affairs for you, so no conservatorship proceeding will be necessary. In the unlikely event that it is necessary to open a conservatorship, the DPAF also nominates someone as conservator, giving you an opportunity to have your wishes known.
Finally, if you have minor children and you want to nominate guardians for them after your death, you do so in your will. A court proceeding will be necessary to actually appoint the guardians, but this gives you an opportunity to state who you would like to care for your children. This is especially important if you don’t have any relatives who would be a good choice or if there are very specific people that you would like to serve as guardians. Additionally, nominating guardians can help prevent disputes if there are family members or in-laws who might fight about who should raise your children.
For this reason alone, even the simplest estate plan is a worthwhile investment at any age. Stay tuned for my next two posts for additional reasons why an estate plan provides valuable protections you don’t want to be without.