We’ve noticed that more people are talking about estate planning and are actually doing something about it. I’m not sure if the increase means a concern about our mortality because of the global pandemic, or it is that people finally have some time to get to the items on their “to-do list.” Keep reading for reasons why you should create an estate plan.
Estate Planning Statistics
I was recently reviewing a pre-COVID article that summarized a few key estate planning stats, which I found very interesting.
For example, only 41% of millenials have a health care power of attorney in place, but 83% of those over age 72 have taken care of this important task. Also:
- 55% of Americans die without a will or estate plan
- Of those who have an estate plan or will, for 71.6% it is not up-to-date
- Only 48% of older Americans have a financial power of attorney in place
- Only 27% of those without a will or estate plan have even talked to their families about creating a plan
- 47% of people say they don’t have an estate plan because “they haven’t gotten around to it”
- 49% of people believe their assets are not worth enough to worry about estate planning
- 74% of Americans would create an estate plan if it helped lower their family taxes
- 74% of Americans believe estate planning is a confusing topic
This last statistic on estate planning being a confusing topic caught my attention. I am always amazed at what new clients have heard about estate planning. As an industry, we must continue to educate Americans on this topic.
So, what’s involved in estate planning and why should you have one? Let’s answer a few important questions.
What Happens if I Don’t Have an Estate Plan?
Every state has their state-specific intestate laws that apply when somebody dies without their own plan (will, trust, etc.) in place. This means that if you do not take time to plan, your state has it covered with their one-size-fits-all intestate laws.
You might not like these generic intestate laws, but if you didn’t take the time to create an estate plan, there’s no other alternative.
When somebody dies without an estate plan, they’re usually leaving a mess behind for their heirs. The realities of unwinding an estate with no planning is often sad, because surviving family members realize what they could have avoided if the decedent had just done some simple planning. It makes for difficult conversations. Creditors must be paid, greedy family members can complicate the process, Uncle Sam will need taxes paid, and unfortunately this can lead to an expensive probate process that reduces the amount of money transferred to any heirs. It is all so unnecessary.
The other painful reality is managing decisions for a disabled, or incapacitated, person in their final years of life. Dementia is very real, and even the basic financial and health care power of attorney documents can make this period of time much easier for the family.
Estate plans are not just for after you are dead. They are just as important when you are alive and not in your best mental state. And if you think mental capacity won’t happen to you, the statistics are not in your favor as you get older.
[Read More] What is a Power of Attorney and Why Might I Need One?
Why Should You Take the Time to Create an Estate Plan?
The answer can certainly vary by the individual family situation, but the overriding reason is that YOU get to define what will happen after you die and/or if you ever lose mental capacity.
What parent wants to leave a mess for their adult children or other heirs to sort through and finalize? You will not believe the number of estate planning clients that are motivated to complete their own estate planning by the memory of having to clean up a mess left by a loved one.
In addition to leaving things tidy for your loved ones after you die, estate planning is important to:
• Avoid Probate. Most people want to avoid the probate process. The cost, the time delay, and the loss of privacy associated with a probate court can be quite a burden. Depending on the state you live in, there are ways to avoid probate altogether.
The average probate costs 3-8% of total assets, and often lasts 6 months to more than two years — this can vary dramatically depending on the type of assets, family harmony and other factors involved.
[Read More] What Happens in Probate and Why You Want to Avoid It
• Provide Beneficiary Asset Protection. We do both will-based plans and trust-based plans, but we do many more trust-based plans.
A will is only used in a probate court, so many clients like trust-based plans. They can be designed to provide asset protection for beneficiaries by including a distribution plan with an independent trustee who has discretion on how distributions are made.
Let’s face it, between divorce, creditor issues, spendthrift heirs and other real-world situations, nobody likes the thought of leaving an inheritance and then having it lost after their passing.
The value of asset protection becomes very important with trust-based planning. Additionally, if your loved one ever has a special needs situation, the built-in value of a contingent special needs trust will protect both their inheritance and their government benefits. Families with special needs beneficiaries need trust-based planning for their heirs.
[Read More] Don’t Forget the Beneficiary Designation Part of Your Plan
• General Organization and Peace-of-Mind. Don’t put the burden on your children or other heirs, and provide yourself with peace of mind knowing that you have everything arranged if you should die or become incapacitated. 71% of Americans believe a well thought out estate plan would give them peace of mind and help them feel like a good spouse or parent.
[Read More] Reduce Confusion By Organizing Your Estate Plan
More Reasons You Need an Estate Plan
As estate planning professionals, we often see a few additional reasons that commonly arise:
• Basic Planning for Mental Incapacity and/or Disability – All of our plans include powers of attorney, so this critical component provides true value for all our clients.
• Tax Planning – Most clients do not currently have a concern about estate taxes due to the estate tax exemption of $11.58 million per person (approximately $23.2 million for a married couple). For the few who have a concern about estate taxes, an estate plan will provide a proactive game plan. Wise trust-based planning can maximize the step-up tax basis at the death of the first spouse, where this may be a planning concern.
• Blended Family Planning – Many people have blended families, and that can bring a whole set of different challenges to planning. An estate plan can capture the interests of the blended family, and provide any necessary protections to ensure they’re honored, so proactive planning is critical.
The Bell Law Firm offers a no-cost initial consultation to prospective estate planning clients. In this session, which is typically about an hour, we first listen to your interests and needs. Then, we apply many of the items listed above and any others that might apply to your situation. Our goal with the initial consultation is to listen to your needs, and then clearly articulate how estate planning can help you in the future.
The answer may be as simple as power of attorney documents, or the answer might be a will-based plan or a trust-based plan. In the end, the client gets to decide for themselves and we will detail the costs before you make that decision.
Our goal is to provide you peace of mind through your estate planning.
No one knows what the future will bring, so the time is now to complete your plan or update your existing plan. Call us today at (913) 345-2323. We will work with you to complete your plans so that your wishes are clear and your family benefits in the future.