TWE for Young Lawyers
Executive Summary
Whether you took TWE in law school or you learned Trusts, Wills, and Estates for the bar, you have a better understanding of these legal documents than most people. You understand the case law too, but do you know how they apply to your own financial life as a young lawyer? Young lawyers usually believe that Trusts, Wills, and Estates don’t apply to them, but that is not true at all. Anyone over the age of 18, should have at least some estate plan. An estate plan is about control. Control over your life if you are ever incapacitated, control over your assets if something happens to you, and control over your legacy. The estate plan can be complex or simple, but it is necessary for just about everyone. Documents like a will, living will, power of attorney, and a financial overview are just a handful of relevant estate documents every lawyer needs in their life.
In law school, you may have taken TWE and learned all about Trusts, Wills, and Estates. When you took the bar, you knew what is required to create these documents and the relevant case law around them, but do you know how it applies to your financial life?
Estate planning is a fundamental component of every financial plan. No one likes to think of their mortality and then plan for it. But doing so gives you control over your life even when you can’t be there to share your intentions.
This blog won’t offer legal advice on how to create these documents, but it will lay out:
What documents you may need as a young lawyer
When you should start and then later review your estate plan
Why you should make an estate plan
Everyone Needs an Estate Plan
An uncomfortable statistic that justifies the need for an estate plan is: 100% of people pass away. Nobody likes thinking about their mortality, but it is an inevitable part of our lives. Instead of avoiding it, you have the choice to take control of it.
Your estate plan tells people what treatment to give you if you are incapacitated, what to do with your assets when you pass away, and the legacy you hope to leave on this world. You can have no assets and still want a say in the treatment you receive if you are incapacitated. You also do not need money to have a lasting legacy. The people you love can appreciate even the smallest gesture after your passing.
A well-crafted estate plan can accomplish all of these. Since these are legal documents, it is always best to work with an estate lawyer and a financial professional.
Relevant Documents
An estate plan is a collection of various documents for different purposes. None of these documents are mandatory in an estate plan, but each document can provide tremendous value to a young lawyer.
Will
The will is what most people think of when they hear about an estate plan, but this will may only be one portion of your estate plan.
A will describes your final wishes and best interest desires for your heirs. It also allows you to list who your heirs are. Dying without a will (intestate) means the state determines how to distribute all of your things based on the law, not your best interest or final wishes.
The will lays out the instructions for your executor to follow upon your passing. It can be as detailed or as broad as you want it to be. It can cover how you want your possessions to be distributed and handled. It can also list your heirs. Lawyers should update it throughout their life, especially when they experience a significant life event (marriage, the birth of a child, death of a spouse, divorce, etc.)
The will may include funeral provisions, how to take care of your personal property, and writings or recordings of your beliefs and values. If the writings or recordings of your beliefs and values are separate from the other parts of the will, this is called an ethical will.
Letter of Intent
This document can accompany your will and may include a detailed explanation of your thought process on how you divided your assets so your heirs can better understand your intentions.
Memorandum of Tangible Personal Property
You may decide in your will to sell all of your tangible personal property and put it into your estate. Other lawyers may choose to leave some personal property for someone to inherit. Most states consider it legally binding if you mention the memo in your will. So mentioning it allows you to update it frequently as you obtain and dispose of your personal property. You can also modify who you want to inherit each item listed.
Guardianship
If you have children, you can designate a guardian for your kids if both parents are deceased or cannot care for the children. Assigning guardianship allows you to control who raises your kids. Neglecting to designate a guardian means the state will make this decision on your behalf.
Pets can also be assigned a guardian in the will. There can also be funds set aside for your pet and its guardian. But be aware that designating a guardian by will or verbal commitment does not mean they have a binding agreement to use that money on the pet. Only a pet trust can accomplish this.
Digital Assets
Another part of the will should be your intentions for your digital assets. Digital assets can include your computers, photos, stored data, social media accounts, and cryptocurrencies. To assist your heirs, you should have a secure but accessible way for your heirs to obtain your passwords.
Living Will
An estate plan does not only matter once you have passed away. The estate plan is about controlling your life when you cannot have your say. There may be a time when an accident or unfortunate event leaves you incapacitated. If this happens, it may be up to someone else to decide on your behalf what treatment you will or won’t receive. Most people want to have a say in the care they receive. They also want to avoid putting that overwhelming decision on someone else.
That is the role of the living will. This document states what kind of care you want near the end of your life and the care you want to receive if you are incapacitated (do not resuscitate provision). The living will gives you control when you have no control.
This document should be compliant with your state laws and easily accessible for someone to present if the moment arises.
Power of Attorney
Power of attorney gives someone else legal status to act on your behalf. The power can be limited to specific activities or be general power over everything. Power of attorney can also be effective at signing or when a significant event happens (incapacitation or becoming incompetent). Young lawyers will rarely create a general power of attorney. Instead, they may opt for the limited power of attorney for certain parts of their financial lives.
In situations in which lawyers do not designate power of attorney to someone else, your state will decide who will be the decision-maker. Having power of attorney in place gives you more control over how you would like your life handled when you cannot manage it yourself. You should make sure you trust the person with this authority and feel confident that they will do their best to make decisions in your best interest.
Financial Power of Attorney
Financial Power of Attorney designates someone to take care of your finances if you are mentally incapacitated. This power of attorney may include:
Paying your bills
Managing your bank/investment accounts
Signing contracts
Buying and selling real estate
Your financial life does not stop when you are incapacitated. Expenses still need to be paid, and markets continue to operate. It may be necessary to have someone fulfill your financial obligations in a dire situation.
Healthcare Power of Attorney
Healthcare Power of Attorney allows you to designate someone to make healthcare decisions on your behalf if you are incapacitated. Healthcare Power of Attorney can also assign your guardianship or conservatorship if you become mentally incompetent. If you have a living will, the person with power of attorney will need to follow your living will.
Beneficiary Designations
Have you ever opened a bank account, investment account, or retirement account and been asked to assign a beneficiary. Designating a beneficiary is an easy task to accomplish as a part of your estate plan. By listing a beneficiary for the account, the assets will automatically pass on to your heirs if you pass away.
Assigning a beneficiary allows you to control how your assets are divided. It also allows these assets to skip probate. Most parts of your estate will have to go through probate, which can be costly for your heirs in terms of both time and money. Doing this small act will alleviate some of the complications of managing your estate.
Beneficiaries can also be organizations. If you prefer your monetary assets to go to charities, you can easily set this up when creating your designations.
Financial Overview
The financial overview is a great document to create with your financial plan. It can be a detailed spreadsheet of all of your accounts, their passwords, and their value. It can also just be a letter that outlines what you own. The financial overview is not a legally binding document, which means you can update and amend this document to your liking.
Its purpose is to give your heirs and executor a comprehensive overview of your financial life. The financial overview may reassure them that they have all of your assets accounted for. It is also beneficial for yourself because it allows you to see your entire financial life in one document. It can also include:
Marriage/Divorce documents
Life Insurance policies
Power of Attorney
Personal and Family medical history
Deeds
Proof of loans
Vehicle titles
Corporate/Partnership agreements
Tax returns
Bank accounts
Investment accounts
Pension/retirement accounts
Will
Trust documents
List of all usernames and passwords
The financial overview should be a part of your estate plan and easily accessible for your heirs.
Trusts
Trusts are legally binding agreements that someone will have to perform. Trusts are outside of the scope of this blog post, but young lawyers with specific needs, large estates, and complicated tax situations can benefit from implementing trusts. Trusts require more money and effort to create. Lawyers will benefit from discussing the benefits and costs of trust with both a lawyer and a financial professional before implementing one.
When to Create and Amend
Your estate plan is as relevant today as it is near the end of your life. It offers you control over your financial life, which is extremely powerful. Everyone has ideas and beliefs about how they operate their financial life. The estate plan is one way of implementing them. Young lawyers should have at least some form of an estate plan created early in their careers. Once started, you can add and update it when different needs arise.
The plan and documents should be reviewed every five years or sooner if there is a significant life event like marriage, birth/death, retirement, buying high-value assets, or receiving an inheritance.
Final Takeaways
Estate planning matters even when you are young. It is empowering to take control of your life that extends beyond yourself. A properly prepared estate plan gives you this control, alleviates burdens for your heirs, and may even save your estate money after your passing.
You may have known how to create estate documents, but now you better understand how to implement TWE in your own financial life.
Estate planning is only one component of the Developing Financial Process. The estate plan gives you control over your financial house. But most young lawyers should primarily focus on building their financial house. My comprehensive financial planning process accounts for all of the financial areas in your life. Then we discuss how to incorporate these components in a plan that aims to achieve your dream life. We cannot predict the future, but we can plan for it. Schedule a free Meet & Confer today to learn more about my process and how it can help you create an estate plan plus the other aspects of a financial plan.
Disclaimer: Nothing in this blog should be considered financial advice or recommendations. Your questions are unique to you and your own personal financial circumstances. You should consult with a financial professional before making a financial decision. See full blog disclaimer.