Eight Reasons People Avoid or Delay Estate Planning
I hear lots of reasons why people have put off estate planning. Here are a few of those debunked!
#8. I’m not old enough to worry about estate planning yet.
Many clients come into my office saying that they realized they were “that age” and needed to do estate planning. At my estate planning seminars, when we discuss this issue, I flash a picture on the screen: Prince! Prince died at 57 years old. He clearly was not planning on that, because he didn’t make a will or do any form of estate planning.
The truth is we don’t know what the future holds. I hope my clients don’t need the plans I put in place for many, many years after we complete the estate plan. But the peace of mind they get from having that plan in place – just in case – is a wonderful feeling.
#7. I don’t need a will or planning because my estate is too small.
I hear this often, and from people who I know have a home, an IRA, a very nice car and a bank account. Your estate is just the assets you have. Most adults have enough that they need to have a plan.
In fact, every homeowner should have some kind of estate plan. Even if all you have is a life insurance policy to take care of your minor children, you need a plan. The insurance may be just a monthly bill to you now, but on your death it is an asset in your estate. You need a plan to be sure that money is used appropriately for your children.
#6. Estate planning is talking about my death and that’s morbid and depressing.
Estate planning is about more than your death. It also is about who would take care of your finances if you couldn’t –including as you age.
It may not be fun to take care of this. However, in my office, my clients often tell me how painless I made the process. Working with an attorney you like and can relate to helps make the planning much more pleasant.
#5. My estate won’t be subject to estate or inheritance taxes, so I don’t need a plan.
With the federal estate tax exemption at $5.5 Million, few of us need to worry about estate taxes. However, there are other taxes that proper estate planning can avoid or minimize. We look at capital gains taxes and how to avoid them.
Also, there are other expenses besides taxes that we avoid with proper planning. The biggest is court costs and attorney’s fees. Without a proper plan, we will likely have to file a court proceeding called probate to settle your estate. In my office, that costs more than most of my estate planning work – sometimes by a substantial amount.
#4. I can do my own will. I typed one up and signed it in front of a notary.
The rules on what wills are valid are confusing for lay people and often don’t even make sense to attorneys. If you typed up your will and signed it in front of a notary, you do not have a valid will. That surprises many people. It is worth the money to get a proper plan from an attorney who does estate planning. It will cost you far less than it will cost your family when they discover that your self-help plan is worthless.
#3. I don’t want to give up control and if I create a trust, I will.
The revocable living trust that is the cornerstone of much of my planning doesn’t cause you to lose control – it gives you more control. During your lifetime, you are the trustee and the beneficiary. You are in charge, and you can change, revise or revoke the trust. You can buy things as trustee, sell the property as trustee and deal with all of your property in the trust much like you do now.
The trust also gives you control when you are incapacitated. You have chosen who is going to follow you as trustee and take care of you and your finances, instead of leaving it to chance or to the family to decide. You provide guidelines for the trustee. On your death, you have designated who is going to wrap up your estate, who gets your assets and when and how they will receive their inheritance.
#2. I don’t need a will or other estate planning – I’m just going to put my adult child as a joint owner on all my property.
This can be a huge mistake. The problem with putting your son or daughter on your account or on the title to your home is that they now own the account or home too. If your child develops financial problems, their creditors are looking for accounts with their name on it. Their creditors probably won’t be listening when you tell them that the money or home is yours, not theirs!
Also, if you have more than one child, what happens if the child on the account won’t share with his siblings once you are gone? You may not think your child would do this, but I see it all the time. The child on the account is generally the one who spent more time caring for the elderly parent, and often feels entitled to take the money for himself. If this happens, your other children may be left out in the cold or may have to sue their sibling to get their share. This leads to resentment and a rift in the family that may never be repaired.
A better choice is to put your assets in a revocable living trust. Your trusted child can be a co-trustee with you, enabling them to assist you with managing your assets, but keeping the assets all yours. As a co-trustee, your child has a fiduciary duty to use the funds according to your wishes and the terms of the trust. The trust protects your money from their creditors and provides instructions for distribution on your death.
#1. I’ll be gone, so it’s somebody else’s problem!
First of all, estate planning deals with what happens when you are incapacitated and who will deal with your finances when you can’t. You’ll still be here, and it may be a big problem for you. Without a proper plan, your loved ones will probably have to go to court to get control of your finances so they can pay your bills and take care of you. That means that money that should go for your care is going into the pockets of an attorney – or two attorneys. Avoiding that is your problem.
If you haven’t done your estate planning, I hope this debunks some of the thinking that may have kept you from moving forward. A proper estate plan will make things easier for you and your loved ones throughout your life.
For more estate planning information, schedule your free initial consultation. Call me at (602)375-6752, email email@example.com or use our scheduling app on my website: Libbybanks.com.