J.R.R. Tolkien once wrote, “Short cuts make for long delays.” Despite this wise advice, far too many young adults take shortcuts when it comes to estate planning. A recent study estimates that only about 1 in 4 American young adults, and 1 in 3 American adults overall, has an estate plan in place. Many think, “I’m too young” or “I don’t have many assets. Why would I spend the money on an estate plan?” Unforeseen events in the absence of proper estate planning, however, could prove disastrous.
By having a health care directive, power of attorney, and simple will properly prepared according to Minnesota law ahead of time, you are working to ensure that your family can carry out your wishes, cutting down on time and expense.
Health Care Directive
Due to HIPAA restrictions, once a child turns 18, parents only have limited access to their child’s medical records. Even then, the child must be on his or her parents’ health insurance (until age 26, at the latest), with parental access to information still being restricted.
A health care directive properly executed in advance, however, allows a person (the principal) to appoint someone (an agent), to act on the principal’s behalf and have access to medical information. Without a health care directive naming an agent, a petition must be filed with the court for an emergency guardianship so that a trusted individual can make medical decisions for an incapacitated adult, adding anxiety to an already traumatic situation.
Power of Attorney (POA)
A POA (a.k.a. financial power of attorney) is a document that delegates to someone the authority to act on his or her behalf. Similar to the health care directive, there is the principal, who grants authority to act on his behalf, and the attorney-in-fact, who is the one granted the authority to manage assets as if he were the principal.
Minnesota has a statutory short form power of attorney (Minn. Stat. § 523.23).
Simple Will
A will is meant to ensure that assets go to recipients in accordance with the testator’s (i.e. will-maker’s) desires. A common misperception is that it keeps your assets out of probate. While that is incorrect, a clear, well-drafted will can help cut down on associated costs and time. If you die intestate (i.e. without a valid will), your estate will likely head to probate, with some exceptions, and Minnesota state statutes will decide where your assets go. As your assets grow, setting up a trust to keep your estate out of probate and/or for tax planning purposes may make sense, but a simple will is effective for many people.
An important non-asset concern, however, comes when couples have minor children. For example, you and your spouse may direct a relative, “if anything happens to us, take care of Timmy and Janie.” The reality is, however, that a court may not honor this if there is no formal nomination of your relative as your children’s guardian. By nominating guardians (and backup guardians) for your children in your will, you are helping to minimize the harmful effects of a potential tragic situation.
So, do not take shortcuts when it comes to your estate planning. Investing now in even a basic estate plan can help protect your assets and—more importantly—those about whom you care most.
Contact attorney Greg Westerhaus today at (952) 746-2106 or [email protected] to get started on your estate plan.
