Ann Carrns of the New York Times recently wrote (paywall) on the importance of drawing up a will and healthcare directive. In it, she gave a few stats around just how few adults have them, particularly young adults:
Fewer than half of American adults (42 percent) have a will, according to a survey published this week on Caring.com, a website that offers resources for older Americans and their caregivers. [...]
People are more likely, though, to have important estate planning documents as they age. Just one in five millennials — adults 18 to 36 — has a will, the survey found. But 81 percent of people 72 and older have one. [...]
Ms. Roper said she was especially surprised at the survey’s finding that just 36 percent of adults with minor children have a will.
Having a will is important for many reasons, but the key ones include dictating how your estate should be distributed, declaring who who will take care of your minor children, declaring who will wind up the affairs of your estate, preventing a lengthy probate process, and minimizing estate taxes.
Getting a lawyer to draw up a will and accompanying estate planning documents isn't cheap (the article says to expect between $1,200 and $5,000 for a couple, depending on location and complexity of their situation), but still a bargain considering the protections it gives you. Low cost (<$100) online services like LegalZoom and Quicken Willmaker may be sufficient for the "simplest estates," but she warned that NY Times (paywall) and Consumer Reports studies showed them lacking for even modest complexities.
People often fail to understand, however, that certain accounts take precedence over a will, Ms. Hurme said. If you jointly own a home or a bank account, for instance, the house, and the funds in the account, will go to the joint holder — even if your will directs otherwise. Similarly, retirement accounts and life insurance policies are distributed to the beneficiaries you designate, so it is important to keep them up-to-date.
My clients will have designated beneficiaries for their individual retirement accounts (IRAs) when they set up their accounts, but it's important that they review these designations from time to time. Please call if you forgot your beneficiaries. :-)
Health care powers of attorney, which let a trusted person make medical decisions for you when you are unable, are more common than wills, the survey found. More than half of adults have granted someone legal authority to make treatment decisions.
Health care powers of attorney may be more common than wills because generally they can be drawn up with less professional legal input. Most states offer free forms that include their mandatory provisions, and are available at caringinfo.org.
It's easy for parents to forget that when their child turns 18, they lose control over the ability to make medical decisions for them should their child become incapacitated in most states. If that's you, I recommend that your child fill out a health care power of attorney ASAP.
Another document that you may want your adult child to sign, which is not discussed in this article, is a durable power of attorney. This gives the parent the ability to act on his or her child's behalf in a variety of financial and legal matters. This is helpful should your child become incapacitated, but if your child is traveling outside of the country. Like with a health care power of attorney, you can complete a durable power of attorney for free — just google "free durable power of attorney form" and your state.
And then there's the issue about where to keep your original will and other estate documents. If a lawyer prepared them, the article recommends keeping it with the lawyer — but make sure the people you trust know that it is there. Do-it-yourselfers may want to keep their originals in a safe deposit box or a fireproof safe — but again, make sure that someone you trust can access them should you become incapacitated.