5 Reasons To Create An Estate Plan — Regardless Of Your Age, Health, or Wealth
You’re not too ____ for an estate plan. Fill in the blank. Many young people, including young professionals and young families, believe that they are too young to need a will. Similarly, people often think they are too poor to need a will and that estate planning is only for the rich. Others assume they are too healthy to need a will and do not need to plan until their health declines. Estate planning is so much more than just a will. The question on many people’s minds, though, is why they even need a will.
A fundamental misconception is that only wealthy people who are advanced in age or sick need a will and need to engage in the process of estate planning, but COVID 19 has made many people question that assumption. The recent death of Chadwick Boseman who died without a will at age 43 after a four-year battle with colon cancer also highlighted in the news what happens when someone dies without a will. While hearing of situations like these may make us think about getting our affairs in order, they don’t explain why doing so is important. Here are five important reasons why everyone should participate in some level of estate planning, regardless of age, health, or wealth.
Minimize The Taxes Your Beneficiaries Must 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 to protect the surviving family members — even someone who is a multi-millionaire — from estate tax, there is no guarantee that those limits will not be reduced, if not eliminated. Speaking with someone who is knowledgeable about the current estate tax rates can eliminate the uncertainty of planning and allow for the best plan possible at any given time.
Some states, like the Commonwealth of Pennsylvania, also have an inheritance tax or an estate tax that must be paid to the state as well. Many people do not even know if their state imposes an additional estate or inheritance tax beyond the federal tax. Most people do not know the rates or that they differ widely based on who is chosen as a beneficiary. In Pennsylvania, your son or daughter would pay substantially less inheritance tax than your sister or brother. Your niece or nephew would pay even more than your siblings. Making a plan that takes these taxes into account can allow for equitable distribution of your assets and may allow you to plan to distribute your assets in ways that minimize the taxes your beneficiaries must pay.
You May Be Worth More Than You Think
Often people delay estate planning thinking they 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 your possessions. How much equity do you have in your house? Do you have a valuable collection? Have you inherited jewelry? 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 comic book collection, or baseball cards, or English China might be worth. (As an aside, this process also helps some people realize that they are underinsured)!
The Value of Heirlooms
Some of the items which are most valuable to us as individuals are family heirlooms. Even if your grandfather’s old car may not be worth half a million dollars, it may be a treasured possession, and it may be important to ensure that the right person ends up in the driver’s seat. Many people do not want their intentions known until after their death, but as a part of the planning process, you may want to talk to those to whom you intend to leave heirlooms to ensure you have chosen the right person. Will your gift be a treasured bequest or an albatross that the beneficiary has to house in a home of limited space? These questions can all be resolved as a part of the planning.
Of course, your estate lawyer will not be surveying your family, but the process is valuable for encouraging and sparking these conversations. A great estate lawyer will help you ask and answer all the questions you may not consider otherwise, and knowing your treasures will stay in the family and will go to someone who will value them is often as important as deciding who gets the money.
Most of us know people who were lost to an untimely death. Even if you have not been personally impacted by COVID-19, you probably know someone who was killed in an auto accident or died from an acute medical event, or even committed suicide. Most often these events are totally unexpected. Even families where a loved one receives a terminal diagnosis of an aggressive illness do not have time or bandwidth to worry about estate planning as they work to maximize their remaining time together. Planning in advance ensures that when a loss, unfortunately, occurs the wishes of the decedent are clearly known. Your estate lawyer can even explain the best way to ensure that your burial wishes are known by your family (As an aside, it’s not by including your burial wishes in your will which will often be read after the funeral).
Planning for More Than Your Death
A comprehensive estate plan often includes a legal instrument that allows someone to handle your financial affairs if you become incapacitated. Family members or even friends dealing with medical issues are helped if they also are not left scrambling to gain authority to pay your bills and conduct your affairs if you suddenly are rendered unable to do so.
Human lives are often impacted by someone’s passing. Your estate plan can impact not just the financial security of, but also the custody of, any minor children. 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.
A comprehensive estate plan also includes a medical power of attorney and advanced directives. The medical power of attorney and advanced directives are as important for you as they are for your family. Most people feel strongly about issues like life support. There are NO wrong answers. 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 appointed who is capable, prepared, and comfortable carrying out your wishes.
Strategies for Estate Planning Success
Strategies like establishing joint ownership, making pre-death gifts, funding trusts, planning for long-term and elder care, examining property owned in states without an estate or inheritance tax, and carefully designating beneficiaries on non-taxed assets to minimize the tax to those who must pay are the kinds of things a great estate lawyer can help you consider. Whether you are most concerned with minimizing taxes, ensuring privacy related to your net worth, 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 the best way to achieve your goals.
Estate planning should never be a cold process where you are just filling out forms. Great estate lawyers will take time to find out what you value and what you want. Great estate lawyers will create a picture of what your directives will look like for you to consider before finalizing your plan. Great estate lawyers will help you think of the details and equip you to make the decisions that you may not even know you need to make. And great estate lawyers will prepare you to make changes if your circumstances or your wishes change over time.
Pittsburgh Estate Planning Attorneys
When it comes to planning your estate, there is no time like the present. If you would like help with your estate planning, no matter how simple or complex, the estates and trusts team at The Lynch Law Group is ready to help. If you have questions or would like more information about developing an estate plan, please contact The Lynch Law Group at 724.776.8000.