22 January 2020

Estate Planning for Millennial Clients

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As surprising as it seems, many of your young professional clients — have no estate plan whatsoever.  It's never too early to begin sketching out the basic estate plan for your millennial financial planning clients. Here's a round-up of what they should know, even if their highest earning years are still to come:

Know your beneficiary designations: A young professional probably has access to a retirement plan at work, and he may have assets outside of that in an individual retirement account. Further, there might be a group life insurance policy available at the workplace. It's important that the client revisits who's listed as a beneficiary on each of those accounts.

Talk about life insurance: Group coverage through the workplace doesn't cut it, as it's typically not portable and it may not be enough to sustain a surviving spouse and children. If your client is getting married, start talking about obtaining individual life insurance policies, ideally as term coverage. The birth of a child should jump-start that discussion, too.

Create a health care proxy and power of attorney: The last thing any young person wants to talk about is the possibility they may be incapacitated. And unlike the issue of life insurance, you don't have to wait for your client to get married or have a child before having this discussion.

Draft a will: Maybe your client isn't a multimillionaire yet. If she has assets, she probably has an idea of where she wants them to go in the event of an untimely death. Without a will, state intestacy laws kick in, and the estate could be settled in a manner the decedent didn't intend. If there are children, clients use the will to declare who has guardianship over them.

Wills also help avert litigation when naming an executor, because nobody wants a legal brawl among family members, especially after funeral services.

Discuss federal and state estate taxes: Young clients whose assets fall below the 2015 estate tax exemption of $5.43 million might still face a whole slew of taxes from the state in which they reside because those estate tax exemptions are lower. In New Jersey, the estate tax exemption is at a much more tangible level of $675,000 — a home, two cars, and healthy 401(k) and IRA balances can get a professional married couple close to that amount. Even if it isn't time to talk about trusts, it's good to keep these clients aware of the local tax environment.

Click here to access the full article on Investments News. 

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