You are going to live forever.
You can eat whatever you want and drink whatever you want and run for as long as you want forever. Because you are invincible and nothing bad will ever happen to you.
Did you buy that? No?
Unfortunately, people don’t stay young and healthy forever. We don’t like to think of a time in the future when we will no longer be able to take care of ourselves, but it is incredibly important that you do so. Ask yourself:
If you become incapacitated, who will have the legal authority to take care of you?
If a parent or other loved one becomes incapacitated, who will be able to assist them with managing their assets or healthcare?
If you die before your children reach adulthood, who will have custody over them or be able to take care of their inheritance until they come of age?
You may not know the answers to these questions, and that’s fine. That is probably why you are reading an article on an estate planning website. (Either that or you are very bored.)
Whenever we ask questions about capacity or managing someone’s financial or medical care, we enter the realm of guardianships and conservatorships. Two big legal words with two big legal explanations. So, let’s dive in and learn more about these concepts.
A guardianship is a court-supervised process whereby the judge appoints a guardian to manage the personal care of a ward (i.e. someone who is physically or legally unable to manage their medical care). Similarly, a conservatorship is a court-supervised process whereby the judge appoints a conservator (similar to a guardian) to manage the assets of a ward (i.e. someone who is physically or legally unable to manage their assets).
“Probate” is a dirty word to most people.
Sure, sometimes it can be helpful. But you generally want to avoid it.
Think of it like the raw broccoli that for some reason is included on every party platter everywhere, but without the dip. No dip, just raw broccoli. Avoid. It.
One of the ways to avoid probate is by naming beneficiaries on your financial accounts and contractual policies.
In estate planning, a beneficiary is a person or entity who receives part of your estate after your death. You can name a beneficiary through your estate planning documents OR through a contract such as a life insurance policy, IRA, or agreement with your bank.
If you designate a beneficiary on an account or policy, then the assets or proceeds of that account or policy will pass directly to the named beneficiary, probate-free, after your death.
Sounds cool, right?
Right. It is very cool.
However, sometimes beneficiary designations can have unintended (and undesirable) consequences. Here are some mistakes to avoid when naming beneficiaries:
This one seems obvious, but it’s worth mentioning because it is so easy to avoid.
If you do not name a beneficiary (or take other steps to avoid probate), you are virtually ensuring that your estate will be probated. And although probate is not the worst thing in the world, it is costly and time consuming. It is also usually avoidable.
Even if you believe all your accounts and policies have named beneficiaries, double check. Triple check. Check once a year. Do everything you can to make sure you don’t make the silly mistake of forgetting to name a beneficiary.
However, designating beneficiaries is not always as easy as it sounds…
If you are a young professional, estate planning is probably not even on your radar.
And why on earth should you have to think about it?
You don’t have many assets.
You’re single (and your grandma keeps reminding you about it).
Your family knows what you want.
You have other things to worry about.
You’re going to live forever.
However, estate planning is just as important (if not more important) for single young professionals as for older, wealthier, married-ier individuals.
But how do you create an estate plan? Where should you start? It’s a big question. Lucky for you, we have already done the heavy lifting. Here are 4 quick estate planning tips for young professionals:
In short, a Durable Power of Attorney is an estate planning document that gives someone (your “Attorney-in-Fact”) the ability to act for you in certain financial and/or medical situations.
“Why is this useful?” you may be yell-asking at your computer screen. And that’s a great question.
You remember that part of How The Grinch Stole Christmas (the Jim Carrey version, of course, because it’s the best one) where — spoiler alert — the Grinch realizes the true meaning of Christmas and his heart grows three sizes?
That basically happened in real life a few months ago, except instead of the Grinch it’s the IRS and instead of “Christmas” it’s “retirement savings.” (The heart-growing thing doesn’t really enter into it. Also Christmas was over a month ago. This was a bad analogy.)
Starting in the 2019 tax year (for filing in 2020), you can contribute even more money toward retirement accounts such as an IRA or 401(k). It’s a Christmas miracle!
Below is a brief summary of the new inflation-adjusted numbers for retirement account contributions; see IRS Notice 2018-83 for more technical guidance.
401(k)s. In 2019, the annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan, is $19,000. That is up from $18,500 in 2018.
The end of the year is always a great time to reflect on life and to commit yourself to improvement in the year to come. (And to create some awesome estate planning New Year’s resolutions!)
We recently wrote about the importance of using this time to review your estate plan. But estate planning is a big and often complicated topic. To help you think about estate planning and the issues you may face in the future, here are our posts from 2018 that readers found the most useful:
Wills and Trusts are two of the most common (and most well-known) estate planning documents. But what are the differences between them? What are their relative advantages and disadvantages? In our most popular post of the year, we explain the differences (and similarities) between a last will and testament and a living trust.
In Oklahoma, undue influence consists of taking an unfair advantage of another's weakness of mind or body or the use of authority to procure an unfair advantage over someone. This post explains how undue influence can occur in estate planning and how you can identify and avoid it.