Key Takeaways
- No one enjoys planning for their departure from Earth, but you owe it to your family to have an up-to-date will and estate plan.
- If nothing else, make sure your assets are properly titled and you are crystal clear about your financial and healthcare powers of attorney and guardians for your minor children.
- Don’t make the mistake of thinking you’re not wealthy enough for estate planning—or that your family will never argue about money when you’re gone.
What do we care about most? Most of you will say Family #1, Relationships #2, and Financial Security #3. However, when we look at how little many people are doing to protect their families, those priorities don’t seem to be aligned.
In order to make the impact we want on future generations; we need to be proactive. But being reactive, or even a little late can have serious consequences for those you care about most.
Studies show two thirds of Americans don’t have estate planning documents, or even a will. In fact, a recent study found 30 percent of Americans don’t know if their parents have a will and 40 percent don’t know what’s in their parents will. Yet 60 percent of Americans told researchers they consider estate planning “important” or “very important.”
Since October is national Estate Planning Awareness month it got me thinking about the disconnect here.
When new clients come to see me, even those who are financially savvy often have out of date wills and estate plans. That’s very troublesome because nearly $60 trillion will be transferred from approximately 94 million estates in America between 2007 and 2061.
Risk of an outdated will
As Greenwich, CT estate attorney, Alessandra Messineo Long, told me recently
A will dictates what will happen to your assets (referred to as your estate) when you die. “If you don’t have a will, then you die ‘intestate,’ and the probate court will apply the relevant state laws to determine what happens to your property. The court also decides who will care for any minor children or other dependents and the related costs that must be paid,” Long added
Click here for more of Long’s insights about wills.
So why don’t more people want to control who manages their assets and takes care of their children? Of course, they love them, but estate planning can be morbid, confusing and time-consuming. Plus, many people, even those considered affluent, don’t feel they’re wealthy enough to need an estate plan. According to WealthCounsel, three in four (74%) American adults believe that estate planning is a confusing topic.
Among those without a will, the top two reasons, according to Caring.com, are that they either haven’t gotten around to it, or they don’t feel they have enough assets to require a will or estate plan.
Trust me, those reasons aren’t compelling enough to let the courts decide what happens to your assets when you’re gone. What would you want for your family when you’re no longer there to support them?
Review your will and estate plan regularly
By the way, I know some of you are conscientious about your planning and have wills and estate plans. But those documents aren’t much use if they’re out of date. I suggest checking on them every few years as estate laws can change. Also, important life events such as a change in marital status, purchase of a home, becoming a parent, having a medical setback, etc. are all significant life changes that should trigger a review of your will and estate plan. Even if none of these events apply to you, if you have amassed or inherited assets, own a business, or want to provide for a beloved pet, you likely need a will.
Estate planning for different stages of life
- When you are young.
Although most young adults do not need to have a will or create a trust, there are four basic documents everyone aged 18 and over should have in place:
- a) A living will,
- b) A health care agent designation or health care proxy,
- c) Authorization for release and disclosure of health information, and
- d) A durable power of attorney.
Remember, once children reach age 18, parents no longer have the right to make these decisions for their kids.
When you get married, start a family
This is the time of your life to ramp up the protection side of the equation. Life insurance, disability insurance and liability insurance protect you and your loved ones against numerous risks that could prevent your family from building the wealth you desire
When you start to accumulate assets
This is where trusts could be of bigger benefit as they will help streamline the passing of your assets to future generations without the need for lengthy and costly probate. Trusts can also minimize estate taxes at the state and federal level for those with higher assets values.
There are a wide range of trusts to consider and there’s no one-size-fits-all solution. Always consult with an estate attorney and financial advisor before moving down the trust road. In most trusts, the assets are protected from creditors and they’re also a great way to donate money to charity. Some trusts also allow you to stagger the transfer of wealth to your children over many years based on meeting milestones that you dictate. Those milestones could be: graduating from college, getting married, reaching age 35—instead of transferring your entire estate all at once.
I’ll take a deep dive into various trusts in a future post.
Conclusion
If you or someone close to you has concerns about your tax, retirement or legacy planning, please don’t hesitate to contact me to schedule a Discovery Session.
Also, come join our private Facebook group to connect with others looking to gain control over their finances https://www.facebook.com/groups/UnconventionalFinancialWisdom/
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