Estate Planning For Young Adults
You’ve graduated high school, received your roommate assignment, picked out your new bedding and arranged your schedule to avoid those dreaded Friday morning classes. You’ve checked every box on the college preparation to-do list, but there’s one thing you might have forgotten: to draft and execute an estate plan.
Once you turn 18, you essentially become a stranger to your parents in the eyes of the law. They can no longer access your medical records, speak to your doctors or manage money on your behalf without your explicit permission. While you may enjoy this newfound right of privacy, these rules and regulations can create difficult hurdles for your loved ones in the event you are in an accident or face an unexpected illness or untimely death. By planning in advance and executing an estate plan, you can eliminate some of those headaches and ensure someone you trust acts in your best interests.
Healthcare Proxy, HIPAA Form and Living Will
You may be surprised to hear that despite having the option to remain on your parents’ health insurance until age 26, once you reach the age of 18, your parents no longer have a legal right to know about your medical care or make medical decisions on your behalf. The 2012 Patient Protection and Affordable Care Act gives adult children the right to privacy regarding all medical decisions. This means that should you become ill or severely injured in an accident and unable to speak for yourself, no one has the automatic right to help you get the treatment you need.
A healthcare proxy is a legal document that enables you to name a person, your proxy, to take on the responsibility of your healthcare decisions when you cannot. A healthcare proxy and the related Health Insurance Portability and Accountability Act (HIPAA) form enable doctors, nurses and other medical staff to speak to a designated person regarding your care and give permission to that individual to make healthcare decisions on your behalf.
Similarly, a living will, also known as an advance directive, sets forth your intentions for end-of-life medical treatment. Your proxy should be fully informed of your decision regarding this type of care and be prepared to act accordingly.
While it is important to have these documents executed in the event of an emergency, it is also extremely important to choose your proxy carefully. Choosing someone you trust ensures your wishes surrounding your medical care, including life-saving treatment options, are acknowledged and respected.
Power of Attorney
Congratulations, you’ve been accepted into your university’s exclusive study abroad program! You’ve researched your new campus and already connected with some friends. One of your new pals mentions wanting to execute a power of attorney before boarding the plane so someone can conduct their affairs while they are away. Should you have one of these too?
The power of attorney enables you to name an agent to conduct financial business on your behalf. In our earlier example, a power of attorney could ease the burden of transactions that arise while you are away, such as transferring money from one bank account to another, paying student loans, renewing your passport and car registration or even breaking a lease if you decide to stay on your new campus.
When executing this document, you can limit the powers you want to grant your agent and even set a time limit for their authority (e.g., the semester you are abroad) if you are not comfortable granting unfettered access to your finances. Having this document in place eliminates some of the difficulty of completing financial transactions while you are abroad, incapacitated or just too busy with your college courses to do them yourself.
Last Will and Testament
The last will and testament is probably the estate planning concept most people are familiar with. Your will allows you to designate how your property should be controlled at your death. According to a 2021 study from Caring.com, “the number of young adults with a will increased by 63% since 2020.”1 However, you may be thinking to yourself, I don’t have any property to leave anyone in a will, so why would I need one?
You may not currently own any real property, like a family home or a summer cottage, but you might have a car, an inheritance from Grandma and a bank account. You might even have a beloved pet. If you were to pass away unexpectedly, who should take care of your dog/cat/goldfish? In your will, you can choose to include a provision that directs a portion of your estate be used specifically for your pet’s upkeep.
Additionally, in the age of social media, many people have carefully curated their digital presence. From online blogs to YouTube pages to Instagram, some internet personalities have even monetized their following. Influencers can get paid for their posts through sponsored content, affiliate promotions or advertisements. For some, this can become a steady revenue stream, much like your traditional 9-to-5 job. In the event of your untimely death, what would you want to happen to those accounts? Would you want them closed? Can companies continue to use your image and likeness in their promotions? By including what trust and estate attorneys call “digital asset” language in your will, you can direct how you want your online presence managed in the event of your death.
The creation and execution of these documents are very important in taking the first step to create your estate plan. Be sure to discuss your plan with your healthcare proxy and power of attorney. The agents should have advanced notice they have been named so that they are prepared to act quickly, if needed. In addition, make sure your trusted person knows where to find an original signed version of your will. Leaving your lawyer’s contact information with them is an excellent step in ensuring they are working off the most up-to-date version.
The documents mentioned are only a brief introduction into the world of estate planning. While your assets will change and grow over time, the documents discussed here are an excellent starting point for college-aged students looking to protect both themselves and their belongings. If you’d like to further discuss creating your estate plan, reach out to your Brown Brothers Harriman relationship manager.