Essential Estate Planning for Young Adults

The cornerstone of financial planning is preparedness, and accidents and illness can happen to anyone

Journal of Financial PlanningOctober 2023


Philip Herzberg, CFP®, CDFA, CTFA, AEP, is a lead financial adviser for Team Hewins, LLC (, a fee-only financial planning and investment management firm in Miami and Boca Raton, Florida, and California. He utilizes his expertise to help clients implement tax-efficient investment, retirement, and estate planning strategies. He is past president of the Financial Planning Association of Florida, past president of FPA of Miami, and past president of the Estate Planning Council of Greater Miami.

Karl Schwartz, CPA, CFP®, is a principal, senior financial adviser, and Florida regional director for Team Hewins, LLC. He leads the firm’s planning team. He helps clients gain clarity of their financial situation and identify what they need to do to have a successful financial future through comprehensive financial planning. He has been quoted in and written articles for various publications, including Morningstar, Barron’s, CNBC, MarketWatch, AdviceIQ, and Yahoo! Finance.


Estate planning is not top of mind for many young adults, especially those in good health. Early adult years are frequently shaped by pivotal financial decisions and life events, such as attending college, getting married, starting a family, or buying a home.

While one’s mortality might be something we hope remains in the distant future, it’s important to consider the long term. Also, the cornerstone of financial planning is preparedness. Planning for the unexpected is vital, especially for young families; accidents can occur at any age, and illnesses can affect us at any stage of life.

Putting an estate plan in place for young adults can help safeguard their finances and future so that an unanticipated event does not derail their plans. As a planner, how can you ensure these emerging adults create an estate plan that is aligned with their goals and objectives? Review the key insights in this column to properly guide emerging adults and to help give their families peace of mind.

Let’s review the five must-have estate planning documents everyone 18 and older should have, regardless of marital status or whether they have children:

  • Healthcare proxy. This document names a healthcare surrogate or power of attorney, which allows them to make medical decisions on an individual’s behalf if that person becomes incapable of speaking or making those decisions on their own. Many states will appoint a decision maker on behalf of an individual if they do not have a healthcare proxy. Young adults should ordinarily choose a healthcare proxy who is trustworthy, relatively young, in good health, and lives close by, as some decisions can only be made in person.
  • HIPAA authorization. This document grants specified individuals, including a healthcare surrogate or medical power of attorney, access to a loved one’s medical records, which may be necessary to consider when determining a course of treatment. Due to privacy laws, once children attain the age of majority, medical providers will not communicate with their parents without this authorization.
  • Durable financial power of attorney. This document allows an individual to appoint a financial power of attorney who can make financial and property decisions should that individual become unable to manage their affairs. If there is no durable power of attorney in place, then the individual’s family members may need to seek a court-appointed guardian to manage assets for their benefit. Going to court takes time and resources. Just like a healthcare proxy, a durable power of attorney should be someone who lives close by and is in good health. A suitable durable power of attorney should also be reliable and responsible with money. If an individual were to be incapacitated with dependent children, a durable power of attorney could help to ensure their family’s bills would be paid with their available resources during a challenging time.
  • Living will. This document enables individuals to delineate their preferences regarding healthcare, disability, and end-of-life care. For example, would someone want to be placed on life support when incapacitated? In essence, through a living will, they can articulate their feelings to their loved ones about what kind of life is worth living. Be certain that the living will transparently communicates the individual’s wishes, especially religious considerations relating to end-of-life decisions or organ donations that may not be reflected in generic state forms.
  • Preneed guardian. This document designates a preneed guardian, who can serve as an individual’s guardian, or the guardian of anyone else they care for, should someone become mentally or physically disabled and no longer able to manage their own affairs. For single parents, this preneed guardian could be particularly important should they become temporarily incapacitated and unable to care for their children. A preneed guardian would allow the designated individuals to immediately step in and care for children without having a court appoint a guardian.

Documents to Consider When Assets Are Involved

While the five must-have documents serve as a solid estate planning foundation for young adults, a last will and testament (or will) and revocable living trust can be beneficial when assets are involved. In tandem with the advice of an experienced estate planning attorney, you can help young adults identify, articulate, and officially document their intentions and aspirations.

Upon passing, a will governs who will receive property not otherwise designated by titling, the terms of a trust, or a beneficiary designation.

This document also specifies an executor who will be responsible for carrying out those instructions.

This document will also be where young adults name a guardian responsible for raising their children in the event they and their partner die or become incapacitated before their kids reach adulthood. If young adults die without a will, state law determines how the assets will be distributed.

When selecting a guardian, young adults should keep the following in mind:

  • They should not name just one person or even one married couple. Also, a successor guardian should be named in the event the appointed guardian is unable to take on this role.
  • Choosing a guardian could lead to family tension. Some family members might be offended if they are not selected, while others may not have the means or desire to take on the responsibility. Discussing these plans in advance could help smooth over tensions and address any concerns that may arise.
  • The most important criteria to look for in potential guardians are that they are responsible, have values that the parents agree with, and will treat the children according to their needs and their parents’ wishes. Guardianship decisions can also be updated at any time, so young adults should not be afraid to review their decisions periodically to ensure that the person or couple they have selected is still appropriate.

If significant assets are involved, a revocable trust could be necessary for young adults. Placing these assets into a revocable trust could save their family and heirs the hassle and cost of going through probate. Like a will, a revocable living trust document permits young adults to designate who receives what property upon their passing. In contrast to a will, a revocable living trust provides an added layer of control and privacy over their assets that is not possible when assets are distributed through a will.

A revocable living trust is especially a prudent idea for those who:

  • Own real estate properties in addition to their main residence
  • Have beneficiaries for whom they want to control the distribution terms and timing
  • Have special needs beneficiaries
  • Have children from a previous relationship
  • Desire to limit a beneficiary’s access to inherited assets, particularly if there are concerns about a beneficiary’s spending habits, exposure to creditors, or level of responsibility
  • Are possibly subject to the estate tax—for married couples, setting up a revocable trust delays the payment of estate taxes until after both spouses die

Other Estate Planning Considerations

Review beneficiary designations on IRAs, other retirement accounts, insurance policies, and group benefits, so that heirs receive these assets directly, bypassing the probate process and the terms of their will. Assets that can have named beneficiaries may also include brokerage and bank accounts. These designated beneficiary assets are often referred to as TOD or POD accounts, which stand for “transfer on death” and “payable on death,” respectively.

If a minor is listed as a beneficiary on bank or investment brokerage accounts, the client needs to designate a custodian who can manage the children’s inheritance until they reach a specified age. Inform them that the state may decide for them if they do not. In that case, the custodian might end up being someone they would not have selected.

A life insurance policy is a contract that young adults should consider including in their estate plan. These life insurance policies can be useful, flexible estate planning tools, as they can provide tax-free proceeds and security for their loved ones. In addition to possibly paying off a child’s private high school tuition or college education, a life insurance policy may often cover their mortgage and possibly the cost of any estate taxes the family of the deceased might encounter.

In addition, you should ensure that digital property and information are addressed in an estate plan, so that they are properly managed and dispersed upon incapacity or death. Digital assets are the online accounts of an individual that may include files, such as photos, images, and videos; email accounts; and social media and networking accounts, including Facebook, LinkedIn, and Instagram.

Discuss with young adults how they desire their online life to be handled after their death. Encourage them to create instructions for loved ones to access features on their computer, email, and online accounts in their absence. For example, Google has an “inactive account manager” feature, which permits individuals to name “trusted contacts” with whom to share specific data available from their Google and Gmail accounts.

Advise young adults to list all financial, purchasing, and social accounts, including login IDs and passwords to access them. Do not list usernames or passwords in a will since this document becomes public upon one’s death. Be certain they store this inventory in a secure location, somewhere other than an email account.

Finally, you should talk with young adults about the importance of a letter of intent document, which can provide family members with clear instructions about their final disposition wishes. Young adults can ensure their legacy is preserved by specifying funeral details, such as whether they prefer to be cremated or buried. Also, they can include a directive about a trusted person who can take care of their pets.

An estate plan is not “set-it-and-forget-it” and should be revisited at certain milestones in a young adult’s life, such as a marriage, the birth of a child, divorce, or an illness. Changes in state residence can also affect the estate plan, as every state has different laws pertaining to the administration of a will, required residence of an executor, and the inheritance tax. 

Team Hewins, LLC (“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein. Certain information contained herein constitutes forward-looking statements. Team Hewins does not guarantee the achievement of long-term goals in the portfolio review process. Past performance is no guarantee of future results, and a diversified portfolio does not guarantee a positive outcome. Nothing contained herein may be relied upon as a guarantee, promise, assurance, or a representation as to the future.

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