Worth Nothing Dead and Less Alive?

The world is changing so quickly around us that it can be difficult to understand or even take a guess at what the future holds.  One of the inherent difficulties in estate planning, of course, is that the law changes almost every year along with your personal financial and family situation.  The old adage that the only things guaranteed in life are death and taxes holds true but, sometimes the conflagration of the two is difficult to determine.  This is part of the reason why estate plans should be reviewed often, but planning should not be put off.  Increasingly, there is a third guarantee for many young people, student loan debt, which prevents them from planning.  Young adults reason that their assets are so far negative, that there is no point to planning.  

Students graduating now have an average debt load of nearly $30,000 with higher than average unemployment.  For those who go on to graduate school, their debt load is even higher.  Further this debt load represents the burden of college tuition rates that have increased over 350% in the last three decades at public universities and an average debt balance that has more than doubled in the last decade.  Although the mounting debt crisis for young adults is a social issue better left to politics, it disguises another, arguably equally important issue.  Young adults believe that there is no reason to engage in estate planning because “When they die, there won’t be anything left.”  However, even if probate avoidance is not your primary goal, there are other reasons to plan!

Taking the view that there is no reason to plan could be detrimental to the financial health of your family and could cause unnecessary problems if you die before your debts are repaid.  For many students, they will be middle-aged before their student debt is paid off, meaning that their children may already be grown.  However, it is important to name guardians for your minor children in a will early in order to ease their transition in the event of your death!  Young spouses are likely to die together in a common accident, leaving each spouse’s parents to argue over who will care for the grandchildren, in most cases.  Dealing with the loss of their parents is difficult enough without having to bear witness to such feuding and participate in such court battles.  Additionally, naming a financial power of attorney and health care agent is important in the event of your incapacity.  

Furthermore, it may be worthwhile to plan for your student loans in particular.  You can determine the financial status in which you will leave your family by determining which loans, if any, will be forgiven on your death.  If you have private loans that were cosigned by a parent, for example, it is not guaranteed that the loan will be forgiven!  Most federal loans are forgiven automatically at death.  If you are concerned whether your loans will survive you, it is wise to review your loan documents with your estate planning attorney and, possibly, consider purchasing life insurance to resolve the outstanding debt after your death!

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10/2013