While it is well-established in most minds that the elderly population should have estate planning measures in place, the need for estate planning for the young and healthy is often overlooked.
Estate planning, i.e., planning for incapacity or death, is just managing risk; insuring against the unexpected. We insure our homes against floods, fires, and falling trees. We insure our vehicles against bad drivers, our own driving mistakes, and thieves. We insure RV’s, boats, ATV’s, and the like, all with the goal of managing the risk of loss on one of those items. We insure our health, paying to manage the risk of needing medical care, whether for stitches or something far more serious. We insure our very lives to make sure there is money available to the people we love just in case something unexpected and tragic happens to us. All of these measures we take amount to risk management, or planning for things we hope won’t happen.
Likewise, having some estate planning in place is risk management, or planning for things we hope won’t happen. It’s estimated that 50-64% of adults do not have a will or trust. Presumably, the bulk of those who have done no planning are either young or middle-aged adults, thinking that estate planning is premature or unnecessary at this stage of life. Sadly, that type of thinking has created much hardship for those who have experienced tragedy first hand.
Case Study #1: The College Student.
A few years ago, I heard a story of a college student who was in a terrible car accident, leaving him in a coma. Because he was over the age of eighteen, he was legally an adult when the accident happened. Like most 18 year olds, he did not have any documents in place authorizing anyone to make medical decisions for him or to manage his financial affairs. His parents were powerless – they couldn’t access his medical records, they couldn’t consent to or decline treatments for him, they couldn’t sue the negligent driver that injured him, they couldn’t collect government aid on his behalf, etc. His parents, who were estranged at the time of his accident, couldn’t agree on how to proceed or who should be in charge of his health care or his finances. They both spent tens of thousands of dollars and months in court, battling eachother and both attempting to get control over his medical care and financial affairs. As an adult, the college student could have easily signed two quick, easy, and inexpensive forms, empowering one or both of his parents to make healthcare decisions and financial decisions for him, in the event he was unable to do so.
All adults, regardless of age, should have two documents in place to plan for the “what if” of incapacity. These two documents, an Advance Health Care Directive and Financial Durable Power of Attorney, streamline things for the people empowered to make healthcare and financial decisions, and save a lot of time, money, and hassle for those same people.
Case Study #2: The young family.
Another tragic story that came across my desk a few years ago was that of a married couple who was killed in a car accident, leaving four children, ages 8-12. The children had four sets of grandparents, one of whom they were especially close to. The parents had bought a significant amount of life insurance to make sure their kids would be covered financially if something tragic happened to them. However, the parents died without wills, which is where guardians are nominated. Because there was no way of knowing who the parents would have picked as guardian of their children, all four sets of grandparents (who had become aware of the life insurance dollar amount), petitioned the court for guardianship. What was the net result? All four sets of grandparents were awarded partial custody, and so those children are shuttled from house to house to house to house throughout the year. Having lost their parents, the children now have no real stability, no real “home base.” In this situation, too, the parents could have quickly and easily signed wills, clarifying their wishes with regard to guardians for their children. This would have so simplified things and most likely, would have given their children a much better life.
All parents of minor children should have, at a minimum, a will designating their choice (and probably one or two backup choices) of guardian. This will save much time and money for those who have to petition for guardianship, and will ensure that the parents’ choice of who should raise their children is honored.
In the same way we plan for the possibility of sickness or financial loss, we can plan for the possibility of the unexpected with some very simple estate planning measures. As is evident from the two case studies presented above, estate planning can and should be used as risk management for people of all ages.