Too many people think you have to be old and rich before you need to think about Estate Planning. Completely untrue! Here are 5 basic Estate Planning strategies that everyone in their 30s should use.
1. Execute a Power of Attorney. You thought I was going to start by telling you to write a will. That’s not the first thing. Let’s think about something you may need while you are still alive. Your Power of Attorney gives someone you trust the legal power to sign your name. Why would you want to do that? Simple. If you ever become disabled, you will spare your family an expensive and intrusive trip to Probate Court to have you declared incompetent. The person you appoint, called an “Attorney in Fact,” can step in and handle your legal and financial affairs. A Power of Attorney is also important for someone who travels frequently and especially for someone who is planning to be abroad for any significant period of time.
2. Write a Will. This isn’t as difficult as it sounds. You name a Personal Representative to be in charge of your stuff and you decide who gets your stuff. Michigan recognizes “holographic” (handwritten) Wills. For parents of minor children, writing a Will is crucial. In a Will you name those you want to serve as guardians of your children should something happen to you. Money in retirement accounts and insurance policies usually isn't controlled by a Will. With these accounts, you designate beneficiaries and any funds go directly to those beneficiaries upon your death.
3. Execute a Health Care Power of Attorney. With a Health Care Power of Attorney you appoint your Patient Advocate. You give the Patient Advocate the authority to make medical decisions for you if the time should ever come in which you can’t make those decisions yourself. He or she watches out for you. Your Patient Advocate has the right to know your medical information and the authority to tell doctors what to do and, sometimes more importantly, what not to do.
4. Start Saving for Retirement. If your employer offers you a 401(k) plan, put as much money in this plan as they allow. This is especially important if they offer any kind of matching funds. If there is no employer sponsored retirement plan, put the maximum amount into a Roth or Traditional IRA. In 2016 the maximum for those under 50 is $5,500.00. You don’t think you can afford it. But every month you sit down and pay bills. Consider this a bill in which you pay yourself. The younger you are, the harder compound interest works for you. If you don’t know about compound interest , Google it. It’s the most important financial concept you will ever learn.
5. Consider Term Life Insurance. If anyone else is financially dependent upon you then consider term life insurance. Don’t let an insurance agent talk you into a whole life or variable life insurance policy. If you are following number 4 above you don’t need either of those. But term life will never be cheaper than it is right now. Why? Because every time you celebrate a birthday you become one year older and statistically more likely to die. You can get "basic term," in which the premium will increase slightly every year, or "level term," in which you will pay the same premium for a set period of perhaps ten or twenty years.
Now, let me say something about “Do It Yourself” estate planning. We live in a DIY culture. You can find lots of “fill in the blank” estate planning forms on the internet and at bookstores. As an estate planning attorney I suppose I have an interest in scaring you into not “trying this at home”. But I won’t do that.
Here is what I will do…if you have any interest in discussing estate planning I’ll be happy to schedule a complimentary consultation. You will receive my advice for free and you may decide that spending a bit on legal fees is an appropriate trade for the peace of mind you will obtain.
If you live in Michigan and need experienced estate planning help, contact Michael Einheuser for a free consultation. Michael helps families in Bingham Farms, Troy, Farmington Hills, Rochester Hills, Southfield, West Bloomfield Township, Bloomfield Township, and the surrounding Michigan areas.
Schedule your Free Consultation today: (248) 398-4665.