Estate planning 101 for young families
Question: I have a niece and nephew in their early 20s who have both recently started their own families. I know they do not have a will, advanced directive or a living trust because they are intimidated by the idea and cost of hiring an attorney to draw up the paperwork. Instead of a gift card this year, I would love to help make sure their assets and children are protected. Is there an easy/affordable product or site online I can use to help get them situated?
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Answer: Thanks for listening and supporting public radio. It’s a wonderful thought to help out your niece and nephew to get their basic household finances in good shape now that they’re parents. I would focus on making sure they have a will and life insurance. A will and life insurance represent the financial foundation for a household with children.
A good resource for learning more about wills is Nolo.com, a DIY legal organization. The company’s lawyers and authors publish affordable, clearly written books, articles, and software on a wide range of personal financial topics, including estate planning. Nolo offers several low-cost will writing products and you can also tap into its lawyer directory to find attorneys that will review the DIY will for a fee.
However, I’m a fan of working with an attorney when crafting a will. Yes, it costs more, but I believe it’s money well spent. Your niece and nephew could get a lot more insight and feedback about estate planning issues working with a professional. Perhaps you could help out here by searching in your area for lawyers that specialize or have a strong practice working with young families and their wills.
Life insurance is critical to financially protect children from the death of a parent or parents. For most young people, the best product is term life. It’s a pure death benefit. It’s a simple product that allows for easy comparison shopping. They’ll want a low-cost, plain vanilla policy from a financially strong insurance company.
How much life insurance should they get? An industry rule of thumb is 5 to 10 times annual income, and like many rules of thumb, it’s a reasonable starting point for conversation. But just an opening gambit. Among the questions they’ll want to pursue to come up with the right level of life insurance coverage for them is whether they want their children to go to a private independent college (expensive) or a public university (less costly). Do they want to eliminate all existing debt for the surviving spouse? And so on. They can shop for quotes at sites such as Selectquote.com and Insweb.com.
You can get some more ideas on estate planning by listening to this Not Quite Six Feet Under conversation between Tess Vigeland and John Ventura, author of Kiplinger’s Estate Planning.
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