We are all busy people living our lives. Whether we are parents of young children, pursuing careers, entrepreneurs growing businesses, or embarking on a new stage of life in retirement, we have things to do and places to be. We have so much going on today that it is overwhelming to think about tomorrow. Never mind taking any time to think about issues surrounding our mortality. Yet, estate planning is really not about us. It’s about ensuring the best possible future for our family and loved ones.
Despite its importance, we procrastinate about planning for the future. Like “Annie” we take solace in a belief that “there’s always tomorrow.” The only problem is that it’s a false sense of security. Life is uncertain. Disease, disaster, and tragedy always strike without warning. Simply put, we don’t have tomorrow. For some, even today is shaky at best.
That is why, according to a survey by LexisNexis, it is surprising that 55% of Americans have not done any estate planning. Shockingly still, 69% of parents with minor children and 25% of seniors 75 years of age and older similarly have not done any estate planning at all.
Everyone everyone should have some kind of estate plan; no matter his or her financial, family, or personal situations. In this blog, I have identified the first five common ways in which I see people leave a headache, heartache, and a general mess behind for their family instead of the legacy and security they may have intended. My hope is that it might help you better identify where you can improve in your own approaches to estate planning while it is not too late for you and your loved ones. You want them protected, kept out of court and conflict, and to be able to carry on the happy life you want for them. Here’s what to avoid doing:ß
1. Ignore the possibility of incapacity, not just death
I have a will so my family is fine. Not quite. Kudos for putting some planning in place. However, a will only accounts for the event of your death; it does not cover incapacity.
What will happen to you and your family if you become have a late onset mental illness, get into an accident and go into a coma, or become encumbered by dementia or Alzheimer’s? In any of these unfortunate situations, you would no longer be able to make decisions for yourself. Without proper planning a court will appoint a guardian or conservator (someone who doesn’t know you or your values) to handle your affairs and your assets. Your estate and the assets you worked hard to build and grow could be at risk and your family may not be taken care of in the manner you wish.
2.Make Assumptions When It Comes to Health Care Decisions
Many of us assume that our spouse or family will know what to do if they need to make important decisions regarding our medical care and end-of-life choices. However, ave you chosen who would be given the right to make those decisions? And have you had a true heart-to-heart conversation with them? Not only is it essential that you make these decisions, it is imperative that you commit these decisions to writing as well in and Advanced Health Care Directive and Living Will. Think of the Terry Schiavo case, in which her husband and her parents seriously disagreed about whether to keep her on life support. If Ms. Schiavo had recorded her health care decisions in writing, there would not have been any gray area and her wishes could have been followed. Moreover, clearly documenting your health care decisions will alleviate the burden from your loved ones of making daunting health care decisions.
3. Rely On the Idea that “it will all go to my spouse anyway”
Another common mistake is failing to create a wealth transfer strategy, instead relying on a default notion that assets will go to a spouse tax-free. While it is true that there is a marital exemption for the transfer of property to a spouse upon death, relying solely on that as an estate plan strategy is dangerous. It doesn’t account for the situation where the spouse is no longer alive or able to accept property, nor does it protect your assets for other heirs and beneficiaries. A living trust could serve as solution to these problems by protecting your assets from creditor claims, lawsuits, and the potential unwitting disinheritance of your children should your current spouse ever remarry after your death. In addition, it can provide huge tax savings to your children should you choose to gift your home and other real property to them.
4. Leave a lump sum inheritance to children or other heirs
While leaving an outright gift to your children may demonstrate that you trust your children’s judgment and fiscal responsibility, it fails to account for those events outside of yours and your children’s control. As my parents always told me when I first learned to drive, “It’s not you I’m worried about, it’s everyone else.” Instead of giving a lump sum, you can protect the assets you wish to gift through creating a trust. Such a mechanism as the ability to protect a child or other heir from their own bad devises whether are simply immature, a spendthrift, a poor decision maker, or struggles with addiction. It also can protect against lawsuits, divorces, and creditors so that your child, and the next generation of your family, will continue to enjoy the assets you worked hard to build.
5. Overlook the power of passing on values and legacy, not just property
Estate planning is not just about transferring assets and property, and is it not only for people who have wealth (in terms of dollars or property). We all have wealth in that we have stories, values, photographs, or heirlooms. If you don’t do proper estate planning, you will miss an opportunity to pass on these important aspects of your family’s legacy. For example, you can use incentives in a trust, which will safeguard your family’s financial security while also ensuring that they are using their inheritance in ways consistent with your family values. You also could use your estate plan to thoughtfully consider how important family heirlooms such as jewelry, artwork, and collectibles are to be gifted. Each piece may tell an important story of your family’s history that you would like to be preserved (and not sold off at an estate sale). Lastly, it is also an opportunity to leave your children and grandchildren letters, messages, and guidance about you, the life you lead, and the lessons you’ve learned along the way. That will forever be lost when you are no longer around to share with them. Give them something they can always remember you by. That is priceless and likely to be cherished more a high priced asset.
Avoiding these five mistakes (and five others that will be uncovered in next week’s blog) is essential to the well-being of your family’s future. Creating an estate plan unique to your family’s needs is an important step towards securing a bright and successful future for your loved ones. You love much and dream big. Contact the team at Snyder Law, PC and we will help you plan well.
