Our society has a common and overwhelming fear of death and this paralyzing fear often leads to hesitation and inaction in planning for the inevitable. But estate planning doesn’t have to focus on the end of a life, but rather can be an affirmation of life, an act of love for the people you care about.
An estate plan is basically a set of written instructions about what should be done before and after one dies. Having an estate plan already in place protects the people you love during a difficult time of their lives; protects them from bad decisions, creditors, and ill-intentioned relatives. Thus, you can safeguard your family during a time of mourning and sorrow.
WHY PEOPLE DON’T PLAN
There are many misconceptions that keep people procrastinating their estate planning. Most people have good intentions and think they’ll get to it one day. Some believe that estate planning is for older people. The excuse that “I’m too young for that” is fairly common among the younger generation. They think they have plenty of time to plan, later. They believe they have a long life ahead of them and thus plenty of time to put it off. But, unfortunately, we all know that “death doesn’t wait for you to be ready…”
Another misconception many people have is that estate planning is only for the wealthy. In fact, people with modest incomes have even more reason to plan for their death; these are the people who can afford to lose the least. Every family can be hurt by infighting and creditors and that’s why estate planning is for everyone.
It isn’t just about what happens after you die; it’s also about what happens if you get incapacitated. Who makes decisions for you if you are unable to do so for yourself? A power of attorney grants legal power to the person you choose, allowing them to make decisions for you if you become unconscious or mentally incompetent due to illness or accident. You can also decide in advance what will be done for you regarding life support. Having plans already in place will save your loved ones from having to make these tough choices, tough choices that often lead to disagreements among family members. Without an estate plan, your family might end up fighting amongst themselves during a time when they should be caring for one another.
IF YOU DON’T PLAN, YOUR STATE HAS ONE FOR YOU
Some statistics show that only around 50% of people have a will or trust, meaning 50% of people lack the proper planning in the event of their death. But this doesn’t have to be the case! These documents can easily be created with the help of a competent attorney. Basically, a last will and testament lets you direct how your assets should be administered and distributed. If you die without a will, you die intestate. Intestate means that your assets are distributed according to the laws of your state. The problem with this is that you may not like how it’s done.
On the other hand, with the help of a competent attorney, you can ensure that your assets are allocated as you wish. A trust is basically a legal agreement between the grantor, the trustee, and the beneficiaries. The grantor transfers ownership of certain assets to the trustee, who then manages them for the benefit of the beneficiaries. This means that your wishes will be carried out the way you want it.
Over the course of the past twenty plus years, we’ve heard horror stories of people dying without a will or trust. These stories are made all the worse knowing that our services could easily have protected these families and made a difficult time a little easier. One client came to our firm while he was fighting with his siblings over the $100,000 asset that his dad left behind after he passed. He told us that his dad would’ve wanted them to love and care for each other instead of mudslinging and fighting. This client knew that his father would be disappointed knowing that his children were arguing. In the case of this client, even though the father died without a will, his heirs could still file a claim to the asset, which was the cause of the fighting.
In yet another case, a man died without a will, leaving behind his second wife and children. One of the kids came to us in order to ask about his rights. In some states, the children could be completely out of luck: they would get zero from his estate. Nothing. Luckily for this client, this happened in California and, under their intestate law, the children would still get a part of the estate.
Another client’s wife of over 40 years passed away without a will and trust. In this situation, tons of paperwork needed to be filed with the court which meant time and expense while the matter was in probate. While he should have been focused on celebrating his wife’s life and their years together, he had to deal with paperwork and legal matters. All of these situations could have been avoided with estate planning.
THE NITTY GRITTY
If you’re wondering what types of assets go into a trust, here is a partial list:
cash accounts, including checking, savings, and money markets; non-retirement investment and brokerage accounts; annuities; tangible properties; business interests; life insurance; monies owed to you; and real estate, among others.
SAVE ON TAXES
Let’s talk briefly about tax. Estate tax is expensive. How expensive? Try 45%-55%. Your estate will have to pay federal estate taxes if its net value when you die is more than the exempt amount set by Congress at that time. I’ll avoid the overwhelming details, but suffice it to say, your loved ones could end up paying a large sum. Fortunately, you can help your loved ones. If planned properly, you can reduce or avoid getting hit with a hefty estate tax.
One client who came to us to ask about a revocable trust confessed his motivation for seeking help: “It’s about peace of mind and the quality of the lives of the people I leave behind. I have six children, and I want to ensure that when I’m no longer around, they will continue to live comfortably and relatively happily.” You can have that same peace of mind. Plan your estate, not because death is inevitable, but because life is too precious for the ones you leave behind. ******