Lisa Montano, Wells Fargo Advisors Planning and Life Events Specialist, has seen more clients creating and updating their estate plans as a result of the coronavirus pandemic.
“Right now, this type of planning is on the minds of a lot of people because they’re thinking about the ‘what ifs’ and want to make sure they have things in order,” Montano says.
Though it may not be on your list of favorite topics to discuss, it could be a good time to also discuss the subject of estate planning with your grown children and grandchildren, Montano says. She says many young adults mistakenly think they don’t need an estate plan until later in life. The reality is, anyone over the age of 18 needs some level of estate planning.
Montano says you could introduce the topic by saying something like: “‘Your dad and I have a plan in place for what we want if something were to happen to us. It’s not too early for you to be thinking about the same thing.’ Even though that may seem unthinkable for your adult children now, it’s never too early to start planning.”
Here, Montano shares some important topics to cover with your grown children or grandchildren, along with some key considerations.
1. Health care power of attorney
If your children are 18 years or older and become incapacitated, in most states doctors may not share your child’s medical information or let you make health care decisions for them—even if you pay their college tuition and still list them as dependents on your tax return. You may have to go to court to get that authority.
That’s why it’s important your children sign a health care power of attorney (also called a health care proxy) as soon as they turn 18. A health care power of attorney authorizes someone to make medical decisions for them in the event they are unable to do so for themselves.
Talk to your children about who should make decisions for them if they’re in an accident or get a serious illness that leaves them incapacitated. It should be someone they know and trust to respect their wishes, Montano says.
2. Living will
Another important document for your children to consider is a living will. A living will expresses one’s intentions regarding the use of life-sustaining measures in the event of a terminal illness. In some states, this document may be combined with a health care power of attorney, sometimes referred to as an advance directive or health care declaration.
Broaching such a heavy topic could be challenging, but sharing your own personal preferences for end-of-life care might serve as a good way to start talking to your children about their preferences and the importance of putting those wishes in writing.
What would your adult children want to happen if they could no longer breathe unaided? How do they feel about feeding tubes? Would they want to be kept on a ventilator?
You can explain that having a living will is important because it lets family members know your wishes.
“If you don’t have your wishes in writing, it can lead to family disharmony,” Montano says. “A living will provides comfort and direction to your family members during what is already a very difficult and emotional time.”
3. Durable power of attorney
Another document to discuss with your children is a durable power of attorney, which lets them give a trusted individual management power over their assets if they can’t manage them themselves. If one of your children is in an accident or unconscious, it allows someone to step in and take care of paying bills, filing taxes, and depositing checks, Montano says.
You can offer to serve in that capacity, or your child can name another trusted individual. Assure your adult children that a financial power of attorney requires that the person they name to act on their behalf must act in their best interests.
4. Last will and testament (or revocable trust)
Your children may say they don’t have many assets, but they probably have more than they think, Montano says. Do they have a car, furniture, a laptop, a checking or savings account? A will provides instructions for distributing individual assets with no beneficiary designations to family and other beneficiaries upon death. If your children have children of their own, a will is especially important because it is the only way they can designate a guardian for their children.
“I’ve seen situations where both a grandparent and a sibling wanted to serve as guardian and it led to a drawn-out court process,” Montano says. “It’s already an emotional time when people are grieving the loss of a loved one, and then they’re fighting with each other to decide who will raise their loved one’s children.”
Even if your adult child only has a pet, remind him or her to include provisions in their will for any pets—most importantly, who will take care of them. They should also consider including detailed pet care instructions and if possible, set aside funds to help cover pet care.
Some young adults with significant assets may want to consider a revocable trust, depending on which state they’re in and the nature of their assets, Montano says. By transferring assets into a revocable trust, you can provide for continued management of your financial affairs during lifetime, at death, and even for generations to come. A trust lets trust assets avoid probate and can be a way to encourage your loved ones to consult with an estate attorney for guidance.
“The main thing you want to convey is that this type of planning is a positive thing,” Montano says. “You want to have a plan in place to give you control over these important matters, but also to make it easier for your loved ones to navigate what can be very difficult and emotional situations.”