Why Everyone Needs an Estate Plan

Many people think you have to be a millionaire to need an estate plan and investing in an estate plan is too costly for an average American. Not true! People of modest means actually need an estate plan more than the wealthy to protect what they have. A recent article from TAPinto.net explains the basics in “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive.”

Everyone needs an estate plan consisting of the following documents: a Last Will and Testament, a General Durable Power of Attorney and an Advance Medical Directive or Living Will.

Unless your estate is valued at more than $11.58 million, you may not be as concerned about federal estate taxes right now, but this may change in the near future. Some states, like New Jersey, don’t have any state estate tax at all. There are states, like Pennsylvania, which have an “inheritance” tax determined based on the relationship the person has with the decedent. However, taxes aren’t the only reason to have an estate plan.

If you have young children, your will is the legal document used to tell your executor and the court who you want to care for your minor children by naming their guardian. The will is also used to explain how your minor children’s inheritance should be managed by naming trustees.

Why do you need a General Power of Attorney? This is the document that you need to name a person to be in charge of your affairs, if you become incapacitated and can’t make or communicate decisions. Without a POA in place, no one, not even your spouse, has the legal authority to manage your financial and legal affairs. Your family would have to go to court and file a guardianship action, which can be expensive, take time to complete and create unnecessary stress for the family.

An Advance Medical Directive, also known as a Living Will, is used to let a person of your choice make medical decisions, if you are unable to do so. This is a very important document to have, especially if you have strong feelings about being kept alive by artificial means. The Advance Medical Directive gives you an opportunity to express your wishes for end of life care, as well as giving another person the legal right to make medical decisions on your behalf. Without it, a guardianship may need to be established, wasting critical time if an emergency situation occurs.

Most people of modest means need only these three documents, but they can make a big difference to protect the family. If the family includes disabled children or individuals, owns a business or real estate, there are other documents needed to address these more complex situations. However, simple or complex, your estate and your family deserve the protection of an estate plan.

Reference: TAPinto.net (Sep. 23, 2020) “Estate Planning–Getting Your Affairs in Order Does Not Need to be Complicated or Expensive”

It’s Like Going to the Dentist: You Need to Get Your Estate Plan Ready

This is one of those things that you know you should do, but you keep finding reasons not to. After all, says the article Estate planning: How to quit stalling and write your willfrom The Orange County Register, none of us likes to think about dying or what might occur that would require someone else to raise our children.

What do you need to get motivated and stop procrastinating?

Remember who you are creating a will for. Think of it as a love letter to those you leave behind. You want to provide specific instructions for the people you love about what you want to happen to your minor children, beloved pets and possessions. You are saving them the worries of trying to guess what you would have wanted, and the cost of having to pay attorneys to clean up a mess after you have died.

Legal visualization. Think about what will happen in the absence of a will. Without an estate plan, a court will decide who will raise your children. State law determines who inherits your possessions, and maybe the laws won’t follow your wishes. Every estate planning attorney has stories of people who die without planning. A spendthrift heir can easily spend a lifetime’s work in less than two years. A trust can be used to control how and when money is distributed.

Simple works. Don’t let the term “estate plan” throw you. A basic estate plan is not as complicated or as expensive as you might think. An experienced estate planning attorney will guide you through the process. You should also think about the short-term: what do you want to happen, if you die sometime in the next five years? You can always update the plan, if things change.

Give yourself a realistic timeline. Setting specific dates for tasks to be done and breaking the project out into smaller parts, can make this easier to address. Start by getting an appointment with an attorney on your calendar. Then, set a date to have a conversation with your family members about guardians, charities and other intentions for your legacy. That might take place around Thanksgiving, when families have extended time together. By December 1, clarify and confirm your documents, and get them signed before the holidays. You should also make sure to retitle any assets that are being moved into trusts.

If you were to start today, you could be done by New Year’s Day, 2020. Wouldn’t that feel great?

Reference: The Orange County Register (October 1, 2019) Estate planning: How to quit stalling and write your will

What Goes into an Estate Plan?

The very idea of creating an estate plan can be intimidating, but this article from Brainerd Dispatch, “Navigating your estate plan,” wisely advises breaking down the process into smaller pieces, making it more manageable. By taking it step by step, it’s more likely that you’ll be comfortable getting started with the process.

Start with Beneficiaries. This may be the easiest way to start. If you have retirement accounts, like IRAs, 401(k)s, 403(b)s or other retirement accounts, chances are you have already written down the name of the person who you want to receive your assets, if you die. The same goes for life insurance policies. The beneficiary designation tells who receives the assets on your death. You should also note that there are tax ramifications, if you do not have a beneficiary. Your assets could become taxable five years after you die, without a named beneficiary.

Be aware that no matter what your will says, the name on your beneficiary designations on these accounts determines who gets the assets. You need to check on these to be sure the people you have named are still the people who you want to receive your accounts. You should review the designations every time you review your estate plan, which should be every three or four years.

Where There’s a Will, There’s a Way Forward. The will is a key document in your estate plan. It can be used to minimize taxes on your estate, ensure that your family has the management assistance they need, and, if you have minor children, establish who their guardians should be. Don’t neglect updating your will, whenever there is a big change to the law or changes in your life. Not having a will leaves your family in a terrible position, where they will have to endure unnecessary expenses and added stress. Your assets will be distributed according to the laws of your state, and not according to your own wishes.

Directives for Difficult Times Health care directives give your loved ones direction when a terrible situation occurs. If you become incapacitated, through an accident or serious illness, the health care directive tells your family members what kind of care you want—or do not want. You should also have a health care proxy, so that a person can make medical decisions on your behalf. An estate planning attorney who is licensed in your state will know what forms are accepted.

In addition, you’ll need a financial power of attorney. This allows you to designate someone to step in and manage your finances in the case of incapacity. This is especially important if you are single, because otherwise a court may name someone to be your financial guardian.

What About Trusts? If you own a lot of assets or if your estate is complicated, a trust may be helpful. Trusts are legal entities that hold assets on behalf of a beneficiary or beneficiaries. There are many different types of trusts that are used to serve different purposes, from Special Needs Trusts that are designed to help families plan for an individual with special needs, revocable trusts used to avoid probate and testamentary trusts, which are created only when you die. An estate planning attorney will know which trusts are appropriate for your individual situation.

Reference: Brainerd Dispatch (Aug. 11, 2019) “Navigating your estate plan”