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Estate Planning Strategies for Millennials: A Financial Advisor's Guide

This article covers key strategies such as managing student loan debt, digital assets, non-traditional living arrangements, and beneficiary designations - and the role a good financial advisor plays in the process.
November 28, 2023

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Estate planning is often perceived as a concern for older, wealthier individuals. However, millennials need to recognize the importance of having an estate plan in place, especially as they accumulate assets and start families.

Financial advisors play a critical role in guiding millennials through the estate planning process and ensuring they have a well-rounded plan tailored to their unique needs. This post highlights the top estate planning strategies for millennials and provides practical guidelines for financial advisors working with this generation. Snug is here when you're ready to seamlessly integrate these topics and products for your clients.

By focusing on strategies such as addressing student loan debt, managing digital assets, and providing tailored solutions for non-traditional relationships and living arrangements, advisors can ensure that their millennial clients have a comprehensive and effective estate plan in place.

Addressing Student Loan Debt

A significant challenge for millennials is the burden of student loan debt. Many millennials have co-signers on their student loans, which can create financial risks for both parties. Co-signers may be held responsible for the outstanding debt if the borrower dies or becomes incapacitated.

Strategies:

  • Co-signer release: Some lenders offer the option to release co-signers after a certain number of consecutive on-time payments have been made. Advisors should encourage clients to explore this option and guide them through the process if applicable.
  • Refinancing: Refinancing student loans can help borrowers obtain better interest rates and loan terms, and in some cases, remove the co-signer altogether.

Digital Assets and Social Media

Millennials are the first generation to grow up with a significant digital footprint. As such, their estate planning should include provisions for managing and distributing digital assets. Financial advisors need to ensure their millennial clients consider the following aspects:

Strategies:

  • Digital asset inventory: Encourage clients to create a comprehensive list of their digital assets, including online accounts, social media profiles, blogs, digital currencies, and intellectual property rights. This inventory should be regularly updated and stored securely.
  • Designating a digital executor: Advise clients to designate a trusted individual as their digital executor, responsible for managing and distributing digital assets according to the client's wishes. This person should be provided with clear instructions and access to the necessary information.
  • Memorializing social media: Millennials should be encouraged to create a social media plan, including instructions for memorializing or deleting profiles, handling private messages, and sharing final posts or messages.

Non-Traditional Families and Living Arrangements

Millennials are more likely to be part of non-traditional relationships and living arrangements, such as cohabiting with a partner without being married or being part of a blended family. Financial advisors must be prepared to navigate the unique challenges and considerations that arise in these situations.

Strategies:

  • Considering joint property ownership and beneficiary designations: For non-married couples, it's crucial to ensure that jointly held assets and accounts have the appropriate beneficiary designations in place.
  • Health Care Directive and Powers of Attorney: Non-married couples have extra need for these documents, as they may not be able to make decisions for each other in the event of emergencies.
  • Distribution among stepchildren and biological children: Blended families often include children from previous relationships, which can create complexities in estate planning. Financial advisors should work with clients to ensure their estate plan meets their goals.

Protecting Young Children

As millennials start families, it is essential for their estate plan to include provisions that protect and provide for their young children in the event of their untimely death or incapacity. Financial advisors need to ensure that their clients take the necessary steps to secure their children's future.

Strategies:

  • Guardianship: Financial advisors should encourage their millennial clients to appoint a trusted person as the legal guardian for their children. In the absence of a designated guardian, the court may appoint one, which may not align with the parents' preferences.
  • Testamentary trusts: Created through a will, these trusts come into effect upon the death of the grantor and provide for the management and distribution of assets for minor beneficiaries.
  • Special needs trusts: Designed for beneficiaries with disabilities, these trusts provide financial support without jeopardizing eligibility for government benefits.

Beneficiary Designations

Beneficiary designations play a crucial role in estate planning, particularly for millennials who may have fewer tangible assets but significant financial accounts and policies. Financial advisors should guide their clients through the process of establishing and updating beneficiary designations as part of their overall estate plan.

Strategies:

  • Avoiding probate: Assets with designated beneficiaries, such as retirement accounts, life insurance policies, and payable-on-death bank accounts, generally bypass probate, allowing for a faster and more efficient distribution of assets.
  • Integration with wills and trusts: Financial advisors should help clients understand the relationship between beneficiary designations and other estate planning tools, such as wills and trusts, ensuring that all components of the estate plan work together harmoniously and avoid potential conflicts or inconsistencies.

Essential Documents

It's never too early for millennials to start creating a comprehensive estate plan. Having the essential documents in place ensures that their wishes are honored, their assets are distributed as intended, and their loved ones are protected in case of unexpected events. Snug specializes in getting these documents in place for your clients, effortlessly.

Documents:

  • Last Will and Testament: Financial advisors may need to explain basic topics like beneficiaries, executors, testamentary trusts, etc.
  • Durable Power of Attorney (POA): Financial advisors should educate clients on the different types of POA, such as general, limited, and springing, and help them determine the most appropriate option based on their needs and circumstances.
  • Health Care Directive (HCD): Financial advisors should help clients identify a trusted person for this role and guide them through the process of completing the necessary paperwork.

Financial advisors have a crucial role to play in helping millennials navigate the unique challenges and opportunities of estate planning. By focusing on the strategies we've described, advisors can make sure their millennial clients have a comprehensive and effective estate plan in place.

Read more about onboarding your clients and their estate planning goals.