Have you added estate planning to your New Year’s resolutions? No matter if you are young, don’t think you have enough assets, or if you are as fit as an Olympic athlete, you can benefit in many different ways from setting up an estate plan. Many, including young professionals and young families, believe that they aren’t old enough to need a will. Similarly, people often think they don’t have significant enough assets to need a will or trust and that estate planning is only for the wealthy. Others assume do not need to plan until their health declines. Estate planning is so much more than just deciding who gets your assets when you pass away. It is, quite literally, planning for the unexpected in a way that protects those you care about and making sure your wishes are followed.
The following are just a few reasons why everyone should consider putting together a comprehensive estate plan, regardless of your age, health, or wealth:
Estate Planning Is More Than Just Who Gets Your Assets
A comprehensive estate plan might include a will, a living trust, financial power of attorney, health care power of attorney and an advanced directive.
Your estate plan can impact the financial security and the custody of your minor children, designating who and how they will be cared for if you pass away. Plans for adult children with special needs also can be carefully made. Provisions for partners who may be or have become financially dependent on you, and who may not be protected by your state’s inheritance laws, can be made through estate planning.
A comprehensive estate plan often includes a legal instrument that allows someone to handle your financial affairs if you become incapacitated – a Power of Attorney. Family members or even friends assisting with medical issues shouldn’t be left scrambling to get authority from a court to pay your bills and conduct your affairs if you are suddenly unable to do so for yourself.
You should also include a health care power of attorney and an advanced directive in your estate plan. These documents are as important for you as they are for your family. Most people feel strongly about issues like life support. Estate plans are personal and should reflect your wishes for your life and for your death. Estate planning creates an opportunity to ensure those wishes are followed and to talk with your family in advance of illness or death to communicate those wishes to them, to help them understand, and to ensure that — regardless of what your wishes are — you have someone named is able and prepared to carry out your wishes.
You May Be Worth More Than You Think
People often delay estate planning believing that they simply do not have enough money to worry about it. Estate planning is a great opportunity to really take stock of your assets. Comprehensive estate plans will take into account the value of not just your retirement and investments, but also your tangible personal property. How much equity do you have in your house? Will you inherit significant assets from someone else in the future? Do you own a vehicle? Planning for what will happen to all these things and for how any debts you have will be paid is important regardless of your net worth.
Estate planning also creates a framework for any unplanned increase in your net worth, like if you inherit money from a family member or receive a substantial cash bonus at work. The planning process may also prompt you to figure out what, if anything, your coin collection, baseball cards, or your prized stash of “precious” porcelain dolls might be worth. This process also helps some people realize that they are underinsured!
The Value of Family Heirlooms
Some of the items which are most valuable to us as individuals are family heirlooms. Even if your father’s antique car may not be worth a million dollars, it is probably still a treasured possession, and it may be important to ensure that the right person ends up in the driver’s seat. Knowing your family treasures will actually stay in the family and will go to someone who will value them is often as important as deciding who gets the money you have in your bank account when you pass away.
Minimize The Taxes and Other Costs Your Beneficiaries Will Pay
There are limits on the amount of money you can either gift during your lifetime or leave to your friends or family when you die without your friends or family having to pay federal estate tax. While those limits currently are generous enough in almost all situations to protect your heirs from estate taxes, there is no guarantee that those limits will not be reduced or eliminated in the future. Estate planning can be handled in a way that will mitigate the impact of any estate tax that may be triggered and owed by your heirs upon your death.
Additionally, effective estate planning will also address the best way to pass along assets that will be taxed when inherited, such as tax-deferred retirement accounts (standard IRAs, 401(k)s, etc.). An estate planner will help you minimize the tax implications for your beneficiaries by structuring how these types of assets are passed along to them upon your death.
An estate plan can also be structured to minimize the need for your heirs to go through the public process of estate administration in probate court, which can save significant time, money, and effort in the handling of your affairs.
Estate Planning Should Be Personal To Your Wishes and Needs
A good estate plan is not a “cookie cutter,” fill-in-blank form. Strategies like establishing joint ownership, making pre-death gifts, funding trusts, planning for long-term and elder care, and carefully designating beneficiaries on non-taxed assets to minimize the tax to those who must pay are the kinds of things a qualified estate planning lawyer can help you consider. Whether you are most concerned with minimizing taxes, ensuring that your assets and debts are not a matter of public record, delivering treasured items into the hands of the right people, or providing for someone special in your family to allow them to buy a home or go to college someday, a well thought out estate plan is one of the easiest and best ways to achieve your goals.
Have questions? Ready to get started? Contact one of Martin Pringle's experienced estate planning attorneys in Wichita or Kansas City/Overland Park.