To hear estate planners and “death tax” opponents tell it, a crisis looms. Currently, the estate tax exemptions are at a little over five million dollars ($5,000,000.00) for one person and double that for a couple. We all know there are not that many people in Arkansas that need to worry about the death tax. Meanwhile, the tax focus obscures the real estate planning crisis affecting way more families. Nearly 2.5 million Americans die each year, and many haven’t signed the basic documents needed to protect loved ones. A 2011 Associated Press survey found 64% of baby boomers didn’t even have a living will, which anyone over the age of eighteen (18) should have.
Few young adults need to set up a fancy grantor retained annuity trust to transfer wealth to future offspring before they’re even married. But simple estate planning should start early and evolve over time as a client’s wealth and relationships change.
The next few blogs about estate planning will cover different stages in our lives. We will start with the young and broke.
Estate Planning for the Young And Broke
In Arkansas parents don’t have the authority to make health care decisions or manage money for their kids once they turn eighteen (18) – even if they still have those kids on their health insurance plans and claim them as dependents on their tax returns. That means if a young adult is in an accident and becomes disabled – even temporarily – a parent might need court approval to act on his or her behalf. The risk is real. Accidents are the leading cause of death for young adults, and a quarter-million Americans between 18 and 25 are hospitalized with nonlethal injuries each year.
Every 18-year-old should have a health care proxy (also known as a health care power of attorney) authorizing a health care agent to make medical decisions on their behalf, if they are incapacitated, and a living will (also known as an advance directive) expressing his preferences about certain aspects of end-of-life care.
Every adult, no matter their age, should also sign a durable power of attorney allowing someone else to take over financial matters if need be. It is important that the power of attorney be “durable” meaning that it remains in effect when you become incapacitated and lists the proper powers so that your agent can assist when you need it. Also, consider naming a successor agent in case the first agent is unable to serve.