There are a variety of reasons for
making sure your estate plan is up-to-date.
Although many people think that
estate planning is only for the wealthy, that premise is not really
true. Investopedia defines estate planning as “the
collection of preparation tasks that serve to manage an
individual's asset base in the event of their incapacitation or
death, including the bequest of assets to heirs and the
settlement of estate taxes.” Actually, that is
pretty good definitions, except that most people will not take
the time to understand it. Hopefully, more simply stated,
estate planning means to plan for the inevitable; death (or
incapacity) and taxes. Since we all will die (and/or
become incapacitated) and may have to suffer some sort of tax
consequence, it is rather shortsighted not to plan for it.
I understand that many
people do not want to contemplate their immortality, but there
are only two choices. One, ignore it and pass on that
burden to those we love and who are left behind or two, take
some basic steps now as a part of our legacy.
I once had a lady in my
office for a Will signing. We sat in my conference room
with her daughter, and after I had reviewed all of the documents
with her, we were joined by a couple of witnesses and a notary
public. I had noticed earlier that she seemed nervous, but
as she took a pen in her hand, her body began to shake and it
became readily apparent that she could not continue on. I
asked the witnesses and the notary to leave. After my
client put down the pen, I explained to her that she was not
obligated to die immediately after she signed. Of course,
I really didn’t say those exact words, but this lady then seemed
to understand and was able to complete the signing. She
realized that because she was uncomfortable with the subject of
death, it was still going to happen at some point, so the best
course of action was to ease the burden on her family by
planning for it the best she could. Now, if I had a sense
of humor, I would tell that sure enough as soon as she signed,
she suffered a massive heart attack and died, but that story is
for another day.
What do we plan for?
We plan for an orderly and definite plan to pass those things we
own at our death to whomever we what. In other words,
spouses, children, grandchildren, other relatives, friends and
charities. If we do not do that, when we die the state
decides who gets what. There are also ways, usually
through gifting or trusts, to make these transfers happen
quickly and less expensively.
In the case of incapacity, Powers of Attorney documents and
sometimes trusts, appoint people to manage what we own and
eventually to get these items to those who should get them.
Today, estates under $5.2 million ($10.4 for married couples)
will not suffer any federal tax, but there may be states
inheritance taxes in some states. There are so good
planning techniques to minimize inheritance tax.
Through proper estate planning, provisions can be made to
provide for the special needs of family and friends.
On often overlooked problem is for the timely and appropriate
passing of business interests. Your business partner may
not want to end up in business with your spouse, but your spouse
deserves to share in the value of your business interests.