The Ten Reasons Why We Need Estate Planning

The Ten Reasons Why We Need Estate Planning

Why Estate Planning Is Still Important

With the federal gift and estate tax exemption currently at $5.25 million per person ($10.5 million for married couples), some with “smaller” estates may wonder if they need to do any estate planning. But there are many reasons to do estate planning other than to avoid estate taxes. The real reasons we need to do estate planning still remain: to take care of ourselves and our families the way we want.  Here are the top ten reasons we still need estate planning.

1.    Ensure Your Assets Are Distributed the Way You Want

Everyone has an estate plan, either the one you have created or the default plan of the state in which you live. It is very unlikely that the state’s default plan is what you would have wanted. Non-family members, like an unmarried partner, will not receive any of your assets under the state’s plan.

2.    Avoid Probate

If you don’t have a plan, your assets will probably have to go through a court process called probate. If you have a will, the assets it controls will have to go through probate before they can be fully distributed to your heirs. The time, cost, and loss of privacy and control that come with probate should be avoided. That is why living trusts are becoming ever more popular.

3.    Provide Responsibility for Minor Children or Grandchildren

If any of your heirs are minors and you have not made an estate plan, a court will control the minors’ inheritances until they reach a legal age (usually 18), at which point the heir will receive, in cash, whatever is left to spend as they see fit. For most eighteen year olds, that is a recipe for disaster!

4.    Protect Inheritances from Creditors and Predators

Gifted or inherited assets are protected from the courts and the beneficiary’s creditors, divorce proceedings and irresponsible spending only if they are held in a trust with proper safeguards built into it.

5.    Provide for a Second Spouse and Your Children

Planning in second or subsequent marriage is often different from planning a first marriage. There may be his children, her children and sometimes their children. Each spouse probably brought assets into the marriage, and each may want those assets to go to their own children after they die. At the same time, each spouse probably would want to make sure their surviving spouse will have enough to live on.  The best way to ensure your goals are met is with a properly drafted estate plan.

6.    Provide for a Loved One with Special Need

You may have a spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled¬¬ who may be entitled to government benefits. Most of these benefits are available only to those with minimal assets and income. An inheritance often disqualifies a disabled person from receiving government benefits that are needed for their care. A special needs trust can provide for a loved one without jeopardizing government benefits.

7.    Plan for Disability

If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc.), having a will won’t help. This is because a will can only deal with what happens after you die. If there is a problem with your power of attorney, you don’t have one, or someone (like a bank) that has your assets will not accept it, a probate court will have to appoint a guardian/conservator to manage those assets for you. This process is public and can be expensive, embarrassing, time consuming and difficult to end. It does not replace probate at death, so your family could have to go through the probate court twice. Properly developed trusts and powers of attorney can be the answer.

Also, costs of long term care, most of which are not covered by health insurance or Medicare, can wipe out a lifetime of savings. Consider long-term care strategies to protect your assets.

8.    Protect Your Business and Other Assets

Those in high-litigation-risk fields like construction, medicine, law and real estate must be concerned about protecting their assets from lawsuits. All business owners need to plan for what will happen to their business when they can no longer manage it due to incapacity, retirement or death. Asset protection planning and business succession planning can and should be included in your estate planning.

9.    Make Meaningful Charitable Gifts

If you want some or all of your assets to go to a favorite charitable, religious or educational organization, you must include this in your estate planning. Without a valid will or trust, your assets won’t be distributed to any charity.

10.    Pass Down Your Values to Future Generations

Don’t be part of the more than 90% of family business that fail to survive the third generation. Take the time to plan how you leave assets to your family, and that will let them know how much you care about them. If you have young children, you can select someone who shares your views or manage their inheritance, and you can provide a letter of instruction to your chosen guardian with your views on the care of your children. Even end-of-life and funeral/burial instructions can be personal and convey your values.

Conclusion

There are even more reasons that these to do estate planning, even when avoiding estate and inheritance taxes is not a concern. If you have already completed your estate planning, this is an excellent time to review your plan and make sure it is what you really want, especially in light of the changes in the income tax law that went into effect on January 1.

 

2018-05-15T20:17:23+00:00