Young people often avoid estate planning because they mistakenly believe you have to be either rich or old to have an estate plan. The truth is that estate planning is important no matter a person’s wealth or age. For example, if a person in Michigan dies with no estate plan, that person’s spouse will get 100% of the decedent’s estate. If that person wanted to leave part of the estate to children or other loved ones, an estate plan can help ensure that the estate is settled according to that person’s wishes.
As life carries on, individuals in their 20s and 30s begin to establish themselves, buying houses, establishing careers and starting families. Each of these changes increases the complexity of life and underscores the need for a comprehensive estate plan.
An estate plan can be made of four essential documents: durable power of attorney, living will or health care proxy, will and revocable trust. Durable power of attorney is a document that appoints a trusted person to make financial decisions in the event that an individual becomes incapacitated and cannot make their own decisions. A living will is a document that spells out an individual’s preferences regarding treatment should that person become incapacitated, and a health care proxy is a person chosen to make medical decisions on behalf of an incapacitated person.
A will is the foundational legal document for most estate plans. It gives instructions for the distribution of a person’s assets and the appointment of guardianship for minor children. An executor for a will is the person named in the will who is responsible for the distribution of assets. If a person lacks a will, the state will make a determination regarding asset distribution. Finally, a revocable trust is a written document that contains instructions for the management and protection of assets.
Every person’s situation is unique, so there is no one specific way to do estate planning. For example, not everyone will need a revocable trust, but in some cases, it can be a very useful document that helps an individual manage assets throughout life. An attorney may help with all aspects of estate planning, including drawing up documents and exploring options.