“You may delay, but time will not,” Benjamin Franklin. Everyone knows that they need an estate plan, but few of us do anything about it. In fact, according to a 2007 study, more than 55% of Americans don’t even have a simple Will. And yet, the clock is ticking for all of us. So why don’t more of us actually put together an estate plan? For some, it’s a morbid fear that by thinking about death, we’ll hasten it. For some, it’s simple procrastination. For many people, though, the problem is that they do not know enough about the estate planning process.
Here are 10 essential estate planning facts.
- It’s not just for the wealthy. Many people equate estate planning with tax planning. In fact, you may have heard that on December 17, 2010, Congress passed a new law, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which increased the estate tax exemption to $5 million per person, taxing only the wealthiest of Americans. However, this is only true if you and your spouse die in 2011 or 2012! The tax will make a comeback in 2013, hitting people who are worth more than $1 million at death. Even then, most of us will not be affected by the estate tax, and it might be easy to think that if you’re not going to be taxed, you don’t need a plan. This couldn’t be further from the truth. Estate planning encompasses so much more than just taxes, as you’ll see.
- Without a plan, the state is in control. If you pass away without an estate plan, you give up control over who inherits your property. Instead, your state’s “intestacy” laws kick in, and dictate how your assets are divided up and passed on. Having an estate plan is the only way to ensure that your hand-carved assets go to whom you want, when you want.
- Without a plan, your children could be in limbo. If you’re the parent of young children, the thought of them being cared for by someone you haven’t chosen probably terrifies you. And yet, if you don’t leave a will nominating a guardian for your minor children, you will have no voice in the decision.
- Proper planning can protect your children from creditors and lawsuits. If your children inherit your property through your state’s intestacy laws (or if you leave property to them outright), that property is vulnerable to their creditors. It’s treated just like your kids’ other property and earnings, and it can be lost to creditors, lawsuits, and divorce – to name a few possibilities. The solution? You can leave assets to them in a trust, giving them a measure of protection.
- Proper planning can save your children from their own misjudgments and bad habits. If you’re worried about your children having complete control over their inheritance, you can also leave their inheritance in trust and appoint someone else to make decisions about how the money will be used. This can protect your kids from losing their inheritance due to poor decision making, substance abuse problems, or just plain excessive spending.
- Estate planning is absolutely essential for non-traditional families. If you’re a member of a non-traditional family, you need an estate plan to make sure your assets are distributed to the loved ones you choose. Without a plan, state intestacy statutes distribute property according to a traditional family pattern. So, if you’re in a relationship other than a traditional marriage, your property would bypass your partner and go to your parents or other blood relatives, instead. Making sure this doesn’t happen is as simple as sitting down with the right lawyer.
- An estate plan lets you give generously to charity. Do you want part of your estate to go to a favorite charity? Intestacy laws leave no room for charitable contributions. So, the only way to be charitable in death is to create estate plan. And, if you have concerns about taxes, charitable estate planning can afford you tax breaks you otherwise wouldn’t qualify for.
- Sooner is always better. No matter what your stage of life, the time to create an estate plan is now. Making a plan when you’re healthy and without an emergency looming, gives you time to explore all your options and make calm, rational choices. Plus, if you wait too long, you might miss the opportunity to plan at all.
- You don’t have to do it alone. Estate planning can be intimidating, and it can also involve some complex rules and laws, creating pitfalls for the inexperienced. A qualified estate planning attorney can help you navigate the process and put an effective plan in place.
- Estate planning isn’t an event, it’s a process. Putting an estate plan in place is the first step. After that, it’s important to make sure that your plan keeps pace with your life. Changes like marriage, divorce, the birth of a child, or even new laws can make your old estate plan inadequate. Reviewing your plan on a regular basis – and keeping your estate planning attorney up-to-date on any life changes – will help ensure your plan continues to work.