The last thing on the minds of young adults heading off to college is drafting a health care proxy and power of attorney. Once they emerge freshly educated four years later, visions of wills and trusts are also unlikely to be on their radar. After all, who thinks about ticking off items on an estate planning checklist while they're still in the throes of figuring out how they're going to pay off student loans?
Not many people do, but there are a few bare-bones estate planning basics that even the college freshman could benefit from and that are nearly necessities for singles in their 20s and 30s.
Nearly everyone has an opinion on what they would want to happen in worst-case medical scenarios, but few make it official with incapacity planning, as it's known in the estate planning biz. To plan for the worst, experts recommend that everyone fill out and sign a health care directive or living will and designate a representative to make medical decisions with a health care proxy.
This kind of planning can even be important for kids going off to college, says Melissa Langa, partner at Bove and Langa P.C. law firm in Boston.
"My clients are usually surprised when I say, 'You know, if something happens to your child while they are in school, you don't have any right to their medical records. They're adults. No one can see their records, and if they are unconscious or something like that, you don't have authorization,'" she says.
Legally, the parents wouldn't be able to even participate in health care decisions without a signed directive naming them as agents authorized to act on behalf of their child while he's incapacitated and unable to speak for himself. Also of vital importance: a signed form giving the health care agent access to medical records. That's known as HIPAA authorization, for the Health Insurance Portability and Accountability Act. It protects patient privacy by limiting who can look at your medical records. A simple form designating the people to whom medical records can be released easily skirts that issue.
Estate planning checklist
- Health care directive or living will.
- Health care proxy.
- Power of attorney.
- Beneficiary forms.
- Trusts, if applicable.
A living will typically accompanies the health care proxy.
"The health care directive has two pieces. It has a place to nominate an agent and maybe a backup, and then the next section is a living will. And that is really the time when you think through your decisions about your health care," says Anne Bjerken, an attorney and principal at Gray Plant Mooty in Minneapolis.
The great thing about health care powers is that no attorney is necessary. "They could print out the power and execute it as required in the state, so witnessed by however many people or notarized or both," says Steve Hartnett, associate director of education at the American Academy of Estate Planning Attorneys.
Power of attorney takes care of business
The other piece of bare-bones estate planning is designating someone to take care of your financial affairs if you are unable to do so.
That could even include semesters a student spends studying abroad, according to Hartnett. It's not necessarily always called into duty as a result of tragic circumstances, but a durable power of attorney will allow an agent to sign your name on contracts and financial documents.
"Someone can deal with their (Department of Motor Vehicles) issues on the car they leave behind. There are practical things they can do," Hartnett says.
In some states the power of attorney can be modified to be "springing" or activated upon incapacity -- but that's not universal.
"In Florida, it doesn't spring to life," says Elaine Bucher, a shareholder with the law firm Gunster in West Palm Beach, Fla. "You don't want people getting their hands on it, but if you are incapacitated a court needs to appoint a guardian, which is easily avoided with a simple power of attorney."
The term durable refers to the fact that the document will survive your incapacity -- not the fact that it would remain in force for years and years.
"In almost every state -- it varies -- but most states say that once you sign a durable power of attorney, it is good until you die. It's not that durable," says Langa. "In practice, if they get older than 10 years, you have trouble using them," she says.
What about my stuff?
A simple will should take care of how you would like to dispense with your worldly possessions. Even someone without a home, insurance policies or retirement accounts may have a need for postmortem instructions on the distribution of their stuff.
When someone dies without a will, it's known as dying intestate. With no other plans in place, state laws provide a framework for inheritances. If you want to change the default inheritance plan in your state, you need a will.
"Let's say someone has $100,000 in a retirement plan and hasn't completed the beneficiary form," says Bucher. "The plan typically defaults to the estate. There are no parents alive but this person has a brother and sister that he just can't stand -- that is who is going to inherit -- at least under Florida law," she adds.
If children ever come into the picture, the will is the place to name guardians. You can also step up your planning by establishing a trust.
Even if all you own are a comic book collection and your big-screen TV, a will lets you give to the people you choose. In addition, a health care proxy and a power of attorney constitute good estate planning moves for nearly everyone. At least having them will give you peace of mind before you're resting in peace.
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