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Estate Planning Before Your 40's

There is no age limit when it comes to planning for the worst

Many people think that estate planning is an issue to start thinking about in your 50's or 60's, but definitely not in your 20's and 30's.  Wills are for old people, right??  Well, that is not entirely correct.  There is also a lot more to consider than just a Will when thinking about your estate plan, and these other considerations are appropriate for adults of any age.  
The following is a brief explanation of common estate planning tools and when they may be appropriate for you.  The goal of this post is not to tell you that you definitely need any or all of these tools, but rather to help you consider whether any of the following would be appropriate for you and your family.
Wills
Recommended For: Married Couples, Anyone with Minor Children, Single Persons with Sizable Assets or Real Property
A Will is generally the first thing that pops into someone's head of when they hear the phrase "estate planning," and for good reason.  Wills are extremely useful tools, but they are not for everyone.  
The primary purpose of a Will is twofold - to direct how assets should be distributed at death, and to nominate a guardian for minor children.  The latter is the most important.  The future care of your children is not something to be left to chance, which is what happens when you do not designate a guardian for your children if something ever happened to you and your spouse.  Most of the time, the court makes the right decision and chooses the same person you would have chosen.  However, sometimes they do not.  For this reason, it is best to take the decision out of someone else's hands and control who will care for your children when you are gone.
Asset distribution is the other main goal of a will, but this may not be as important for a young couple still establishing an asset base.  However, if you do have large assets, such as savings, certain retirement assets, or a home, then a Will is an important document that will allow you to determine what happens to those assets after you pass away.
Community Property Agreement
Recommended For: Married Couples
A Community Property Agreement is a great alternative to a Will for young married couples. These agreements act to pass all community property to a surviving spouse in the event of one spouse's death, but as opposed to a Will, Community Property Agreements allow you to avoid probate.  Probate is the process by which the courts generally administer the passing of property, and it can be an expensive process.
The downside of Community Property Agreements is that they are severely limited - they only work between spouses.  For that reason, they are often used to supplement a Will.  However, for a young couple with no children, a Community Property Agreement may be the most appropriate choice.
Power of Attorney
Recommended For: Individuals of All ages
A Durable Power of Attorney is probably the most important "estate planning" document someone can have, no matter what their age.  A power of attorney gives a person of your choosing the power to make decisions for you in the event that you are unable to.  This person is called the "Attorney in Fact."  You are able to direct what powers your attorney in fact has, but they generally include the ability to access your bank accounts to make payments on your behalf, and also to make decisions regarding your healthcare.
The most common example of the need for a Power of Attorney is that of someone who is in a car accident and is in a coma for a month.  Unfortunately, life will march on for that person - bills and rent/mortgage will still be due, and they may have other obligations to meet as well.  Without a power of attorney, they may be left in a situation where they are unable to meet these obligations because they have no one who can act for them to make payments or deal with a bank.  Maybe a more appropriate example would be the situation where a person is out of the country or otherwise indisposed, and a water pipe bursts in their home.  With a power of attorney document, the person they designate will be able to handle any of these issues on their behalf, along with a plethora of others.
Healthcare Directive
Recommended For: Individuals of All Ages
A general healthcare directive is a limited document with critically important implications.  It allows an individual to direct the following: 
  • Whether or not they would like to receive life-sustaining treatment
  • Whether or not they would like a doctor to teeminate care in the event that two doctors agree that the individual is in a permanent vegetative state
The healthcare directive is certainly the most morbid of these four planning tools to think about but it can also have the biggest impact.  Although this directive is recommended for everyone, it is not a document to execute lightly - one should think long and hard about what they really want before making a decision on this document..
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