Estates for Millennials – Plan It
Below is a really good article on thinking about how to think about estate planning for the millennial generation. That generation, like the other generations, have their own set of issues that need to be planned around. Some of these things include the digitization of the world, as well as the burden of debt that has been borne by that generation.
See more below on the issues with estate planning. https://theeastmanlawfirm.com/estate-planning/
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Estate planning for millennials sounds counterintuitive. However, before you jump to that conclusion, consider this: No matter how much money you make in your lifetime, it’s not real wealth if you don’t effectively transfer it to future generations. To put it bluntly, if it’s not multigenerational wealth, it’s not wealth at all.
Unfortunately, estate planning remains the most neglected aspect of personal finance and wealth building, even among successful entrepreneurs and high-income professionals”an increasing number of whom happen to be millennials. This is in part because most people believe that they are neither old enough nor rich enough to make estate planning a priority. Ironically, millennials, who despite conventional wisdom are managing their money just as effectively as Generation X and baby boomers, may have the most to lose by buying into this misassumption.
“Estate planning is somewhat of a misnomer because it does imply that it’s only for the wealthy,” says family law and estate planning attorney Lori Anne Douglass, a founding partner of the New York law firm Douglass, Rademacher & Brown L.L.P. “But quite frankly, anybody who’s going to die, which is everybody, needs to put their affairs in order.”
“If you literally have nothing, and you have no children, then you have nothing to plan for,” she adds. “But if you have family members, and you have any assets at all”tangible personal property, you own a home, you have a retirement plan, you have money in the bank, life insurance”any assets at all, if you don’t have an established plan, it’s going to be a disaster.”
“Whether your estate is worth $100,000 or $100 million,” Douglass asserts, “the planning is critical, not just for wealth building, but to maintain family harmony, to administer the estate effectively and efficiently to save on costs and attorney’s fees.”
Douglass offers these five reasons why estate planning for millennials not only makes sense but needs to be a top priority.
NO ESTATE PLANNING FOR MILLENNIALS EQUALS NO BLACK WEALTH
Each year, millions (perhaps even billions) of dollars are lost due to poor estate planning, as assets are inefficiently transferred from one generation to the next, if they are passed on at all. This is one outcome that African Americans can ill afford, with at least one study predicting that black households are on a path to zero wealth by the year 2053. Without estate planning for millennials, however, this prediction is all but guaranteed to become reality.
“People seem to think that when someone dies that their assets just automatically go to the next generation,” says Douglass. “They don’t. It’s a complex process, and without process planning and input from the individual who owned those assets, it can be messy, time-consuming and costly, it doesn’t matter how much money you have.”
YOUR OBLIGATIONS DON’T GO AWAY WHEN YOU DO
Douglass offers this reality check: “The Internal Revenue Service, your state taxing authority, your debt collectors and your creditors are not going to just let your debt go because a person passes. If there are assets here to pay the debt, they have to be paid.”
“The first people to get paid are the taxing authorities,” she explains. “When someone dies, whether it’s the next of kin or the executor under a will, that person has an obligation to pay the final income tax returns of the decedent. If you own real property, real estate taxes are going to come due at most six months from the time anybody dies. That has to be paid. If you have an income tax due from prior tax years, that has to be paid. Also, there are states that have state inheritance tax and state estate tax.”
Keep in mind: Taxing authorities will take what is due them from your loved ones even if they haven’t received a penny from your estate yet, especially if they’re locked in battle contesting a non-existent or poorly executed estate plan.
ESTATE PLANNING IS NOT A DIY PROJECT
Though it’s easy to download documents to do your own will, it’s not wise, and could result in financial disaster. Sure, you could get it done quickly and inexpensively today, but your loved ones will likely pay a high price later for you taking the do-it-yourself option.
“If you try to do too much estate planning on your own and you make a mistake it can really cost a lot of problems for your loved ones” Douglass explains. “I would never advise anyone to do their own will or to do their own trust because it’s so complex. There are different kinds of trusts, there are tax ramifications, there are gifting issues, there are issues related to whether you want to give property to your children outright or hold that in trust.”
THE IMPORTANT EXCEPTION TO THE NO-DIY RULE
There is an aspect of estate planning for millennials that is an exception to the previous point. One thing that Douglass says millennials and everyone can and should immediately do on their own is to execute medical and financial directives, in case you become disabled.
“Now that people are living for so many years”people are regularly living into their 80s and 90s”a large percentage of us will become disabled, if not permanently, then for some period of time during an adult life,” says Douglass. “Therefore, you really need to have a power of attorney and medical directives such as a healthcare proxy and a living will, that people can help you make those decisions. And those documents are statutory, which means every state has in its own statute for how the language for those documents should be written, and you can get those documents right off most states’ websites.”
WHAT WILL HAPPEN TO YOUR DIGITAL ASSETS?
“Younger people need to do estate planning just as much as anybody over 50,” says Douglass. “Younger people should think about their beneficiary designations for their 401(k) or insurance, and other basic assets when they start to acquire them.”
But there is another reason estate planning for millennials needs to be a priority: wealth is no longer just physical and financial (money and real estate); it is also intellectual and digital, including the emergence of cryptocurrencies.
“Especially, you need to be thinking about your digital assets,” she emphasizes. “That’s the new thing in estate planning. When somebody passes, who can access your Facebook account? Who can access your PayPal account and deactivate that? All those are the kinds of things you would put in a will or a revocable trust, designating someone to handle your digital assets for you. This is especially important for the young people thinking about their digital assets and intellectual property, [such as a revenue-generating blog].”
“It’s sad,” she continues. “I had a client, a young person in his 30s who died unexpectedly. And one thing that is very difficult is that his social media still continues. On his birthday, a LinkedIn message goes out inviting people to send him a birthday wish, and it’s very distressful to the family. But he passed at a time when he didn’t do any planning and before people were really thinking about what happens to digital assets and intellectual property when someone passes.”
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