There is a common misconception that estate plans are only for the ultra-rich – the top 1%, 10%, 20%, or some other arbitrary determination of “enough” money. In reality, nothing could be further from the truth. People at all income and wealth levels can benefit from a comprehensive estate plan. Sadly, many have not sat down to put their legal house in order.
According to a 2016 Gallup News Poll, more than half of all Americans do not have a will, let alone a comprehensive estate plan. These same results were identified by WealthCounsel in its Estate Planning Awareness Survey. Gallup noted that 44%of people surveyed in 2016 had a will place, compared to 51% percent in 2005 and 48% in 1990. There appears to be a trend of fewer people even thinking about estate planning.
When it comes to estate planning, the sooner you start the better. Below are four reasons why everyone – no matter what income or wealth level – can benefit from a comprehensive estate plan:
- Forward Thinking Family Goals: Proper estate planning can accomplish many things. The first step is to ask what your goals are. They may include caring for a minor child, an elderly parent, a disabled relative, or distributing real and personal property to individuals who will appreciate and maintain these assets prudently. Understanding what your family wants and needs are for the future is a great starting point for any estate plan. If you can sit down and spend time planning your vacation, you can do the same for your estate. Your future self – and your loved ones – will thank you.
- Financial Confidence Now and After You Are Gone: One immediate benefit of having a finished estate plan in place is that you will likely feel in control of your finances, possibly for the first time ever. Many people experience a new sense of discipline in maintaining their finances which can help with saving for retirement, a big purchase, or other goals. In addition to the personal benefit of financial control, an estate plan allows you to dictate exactly how and when your heirs receive an inheritance. This is particularly important for a minor heir or those who need additional guidance to manage their inheritance, like a disabled child.
- Identify Risks: An important aspect of a good estate plan is to mitigate against future and current risks. One example is becoming disabled and unable to support your family. Another is the possibility of dying early. Through an estate plan, you can choose who will be in control of your personal assets, instead of the court appointing a legal guardian who will cost money and be a distraction for your family. While contemplating these types of risks is never fun, preparing ahead of time ensures your loved ones will be prepared if an unfortunate tragedy occurs.
- To Maintain Your Privacy: In the absence of a fully-funded, trust-based estate plan, one risks your list of assets and debt becoming available for public view upon your death. This occurs when a probate court needs to step in. Probate is the legal process by which a court administers the deceased person’s estate. A customized, comprehensive estate plan should generally avoid the need for involvement by the probate court, thereby protecting your family’s privacy.
The Bottom Line: Seek Professional Advice
There are numerous benefits to working with a professional team when it comes to estate planning. Estate planning attorneys, financial advisors, insurance agents, and accountants have a broader and deeper knowledge of money management, financial implications, and the law. When you work collaboratively with a qualified team of advisors to implement your estate plan, you can rest easy knowing your family will be taken care of no matter what happens in the future.
There are several components of a comprehensive estate plan, one of them being a revocable living trust. Common factors that prompt someone to create a trust include privacy, tax benefits, avoiding probate, and caring for family members with special needs. Estate planning also lets you dictate how your assets will pass on to future generations after your death.
Avoiding Probate
One of the primary reasons for creating an estate plan is to avoid probate. Unlike a will, a properly funded living trust will avoid probate, typically a lengthy and costly court-supervised process. Probate includes locating and determining the value of the deceased’s assets, paying off any outstanding bills and taxes, and then distributing the remaining value of the estate to the deceased’s rightful beneficiaries or heirs.
Avoiding probate is often a top reason for estate planning, and there is no surprise as to why. First, probate can be a costly way to transfer your assets upon death. Second, it is very time-consuming for your family. It can take from six to nine months (or even longer) to complete the probate process. Complications, such as a contested will or an inability to find clear records of all of the deceased’s assets and debts, can extend this timeline. Finally, probate proceedings are a matter of public record so when your estate goes through this process, there is no privacy.
Reducing Taxes
While a living trust can help you avoid probate, it can also provide you with tax savings, especially if your estate is subject to death taxes (also known as estate and gift taxes) or if you have significant retirement savings that you’d want to be paid out to your beneficiaries for a period longer than ten years. Of course, there are many types of trusts. One way to think about the variety is to consider a toolbox. For example, there are numerous kinds of screwdrivers, hammers, power tools, and so on. Each tool has an intended use. Trusts are no different. When you work with us, we’ll make sure to align the type of trust with the tax-saving needs and other goals of your family.
Asset Protection
Your trust can be drafted in a way that provides asset protection to your beneficiaries upon your death.
Asset protection planning, which is an important part of estate planning, can protect you, your family, and your assets from lawsuits. You’ve likely already done some asset protection planning such as purchasing homeowners’ and auto insurance.
There are many ways to protect assets and the method we use will depend upon your goals, assets, and family. As we briefly mentioned, purchasing insurance is the simplest form of asset protection.
Seek Professional Help
It is important to understand that a trust only controls assets that are in the trust. In other words, you must place these assets in the trust – commonly referred to as “funding” the trust. Moreover, because our lives are always changing (marriage, childbirth, home purchase, etc.) and so are tax laws, it is essential to continually update and monitor the funding of your trust over your lifetime. For these reasons, you will want to work closely with your estate planning attorney to make sure your assets are properly aligned with your trust. This will not only help you get organized, but it will also make things easier for your heirs when you pass away. You don’t have to go it alone. We are here to help you and your family.
Let’s consider a few things to watch regarding estate planning under the new tax law, so you and your family can be completely protected.
- The death tax.The death tax has been in a state of flux ever since the early 2000s when the Bush administration’s first tax cuts changed the exemption and tax rates. The 2018 Tax Cuts and Jobs Act is the latest significant change. With the new tax law, the state tax exemption amount will double to $11.2 million per person (married couples have $22.4 million of combined exemption). Like the current exemption, this amount will adjust annually for inflation. However, this enhanced exemption expires on December 31, 2025, at which time it will return to an amount similar to the $5.49 million per person exemption we had in 2017. Similar to what happened when the Bush tax cuts phased in (and were scheduled to expire) during the 2000s, we’ll face the same situation over the coming years – the law provides a deadline and timetable, but political activity may result in something entirely different. Regardless of your stance on this new tax law, if you have a plan based around the now-old rules, it’s time to visit with us, so we can make sure the plan still meets your needs and goals while maximizing the benefit to your family, charities, or other beneficiaries.
- Incapacity planning. What happens if you don’t die? Historically, much of estate planning focused on what happened to your assets after your death. With cognitive impairment at near epidemic proportions, you must plan for the contingency that you don’t die and instead require assistance managing your affairs. Depending on your circumstances, this could range from a relatively simple matter of ensuring you have a trusted person authorized to make decisions to extensive planning to become eligible for help paying for nursing home care. Either way now is the time to work with us to ensure that your plan protects you, even if you don’t die.
- Giving your family lifelong financial security.Although you may not have a “large” amount of wealth now, you probably have an IRA or a life insurance policy. A modest IRA or life insurance policy could be the foundation for lifelong financial security for your family. To make this a reality, you need to set up your affairs with the proper structures to ensure money avoids costs, taxes, and the risk of financial immaturity or ignorance. We are here to help you ensure that the savings you’ve spent a lifetime building will be there for your family.
- Fixing broken or old trusts. Many people have inherited assets from parents, aunts, uncles, and others through a trust. Some of these trusts may use old strategies or be expensive or difficult to administer. The law recognizes that old trusts may need some refreshing. There are many options available to modernize an old trust, and the best way to get started is to meet with us so we can explore which option is best for you and the trust you inherited.
No matter where you are on the estate planning journey, carve out some time to talk with us to make sure that you and your family are fully protected. Give us a call today.
Let’s consider a few things to watch regarding estate planning under the new tax law, so you and your family can be completely protected.
- The death tax.The death tax has been in a state of flux ever since the early 2000s when the Bush administration’s first tax cuts changed the exemption and tax rates. The 2018 Tax Cuts and Jobs Act is the latest significant change. With the new tax law, the state tax exemption amount will double to $11.2 million per person (married couples have $22.4 million of combined exemption). Like the current exemption, this amount will adjust annually for inflation. However, this enhanced exemption expires on December 31, 2025, at which time it will return to an amount similar to the $5.49 million per person exemption we had in 2017. Similar to what happened when the Bush tax cuts phased in (and were scheduled to expire) during the 2000s, we’ll face the same situation over the coming years – the law provides a deadline and timetable, but political activity may result in something entirely different. Regardless of your stance on this new tax law, if you have a plan based around the now-old rules, it’s time to visit with us, so we can make sure the plan still meets your needs and goals while maximizing the benefit to your family, charities, or other beneficiaries.
- Incapacity planning. What happens if you don’t die? Historically, much of estate planning focused on what happened to your assets after your death. With cognitive impairment at near epidemic proportions, you must plan for the contingency that you don’t die and instead require assistance managing your affairs. Depending on your circumstances, this could range from a relatively simple matter of ensuring you have a trusted person authorized to make decisions to extensive planning to become eligible for help paying for nursing home care. Either way now is the time to work with us to ensure that your plan protects you, even if you don’t die.
- Giving your family lifelong financial security.Although you may not have a “large” amount of wealth now, you probably have an IRA or a life insurance policy. A modest IRA or life insurance policy could be the foundation for lifelong financial security for your family. To make this a reality, you need to set up your affairs with the proper structures to ensure money avoids costs, taxes, and the risk of financial immaturity or ignorance. We are here to help you ensure that the savings you’ve spent a lifetime building will be there for your family.
- Fixing broken or old trusts. Many people have inherited assets from parents, aunts, uncles, and others through a trust. Some of these trusts may use old strategies or be expensive or difficult to administer. The law recognizes that old trusts may need some refreshing. There are many options available to modernize an old trust, and the best way to get started is to meet with us so we can explore which option is best for you and the trust you inherited.
No matter where you are on the estate planning journey, carve out some time to talk with us to make sure that you and your family are fully protected. Give us a call today.
Let’s consider a few things to watch regarding estate planning under the new tax law, so you and your family can be completely protected.
- The death tax.The death tax has been in a state of flux ever since the early 2000s when the Bush administration’s first tax cuts changed the exemption and tax rates. The 2018 Tax Cuts and Jobs Act is the latest significant change. With the new tax law, the state tax exemption amount will double to $11.2 million per person (married couples have $22.4 million of combined exemption). Like the current exemption, this amount will adjust annually for inflation. However, this enhanced exemption expires on December 31, 2025, at which time it will return to an amount similar to the $5.49 million per person exemption we had in 2017. Similar to what happened when the Bush tax cuts phased in (and were scheduled to expire) during the 2000s, we’ll face the same situation over the coming years – the law provides a deadline and timetable, but political activity may result in something entirely different. Regardless of your stance on this new tax law, if you have a plan based around the now-old rules, it’s time to visit with us, so we can make sure the plan still meets your needs and goals while maximizing the benefit to your family, charities, or other beneficiaries.
- Incapacity planning. What happens if you don’t die? Historically, much of estate planning focused on what happened to your assets after your death. With cognitive impairment at near epidemic proportions, you must plan for the contingency that you don’t die and instead require assistance managing your affairs. Depending on your circumstances, this could range from a relatively simple matter of ensuring you have a trusted person authorized to make decisions to extensive planning to become eligible for help paying for nursing home care. Either way now is the time to work with us to ensure that your plan protects you, even if you don’t die.
- Giving your family lifelong financial security.Although you may not have a “large” amount of wealth now, you probably have an IRA or a life insurance policy. A modest IRA or life insurance policy could be the foundation for lifelong financial security for your family. To make this a reality, you need to set up your affairs with the proper structures to ensure money avoids costs, taxes, and the risk of financial immaturity or ignorance. We are here to help you ensure that the savings you’ve spent a lifetime building will be there for your family.
- Fixing broken or old trusts. Many people have inherited assets from parents, aunts, uncles, and others through a trust. Some of these trusts may use old strategies or be expensive or difficult to administer. The law recognizes that old trusts may need some refreshing. There are many options available to modernize an old trust, and the best way to get started is to meet with us so we can explore which option is best for you and the trust you inherited.
No matter where you are on the estate planning journey, carve out some time to talk with us to make sure that you and your family are fully protected. Give us a call today.
It’s no longer unique to include your pet in your estate plan.
It is essential that you don’t just assume your loved ones will take in and care for your pets; we’ve seen all too often when that hasn’t happened. Why? Families live at a distance, suffer allergies, work long hours, or just don’t feel the same attachment to your pet as you do. This gets even more complicated if you have horses, livestock, or other farm animals. You can protect your pet with pet planning.
When you incorporate planning for your pets into your estate plan you can:
- Document your wishes and instructions on how to care for your pet.
- Authorize a caretaker to take custody of and provide for day-to-day pet needs.
- Appoint a trustee to manage the money you leave for your pet’s care.
- Provide for a contingent caretaker and trustee in case your primary choices are not able or willing to serve.
Fortunately, you can avoid something bad happening to your pet by planning ahead. Chat with your loved ones and get their honest feedback. Can they and will they take in your pet? Let’s document those commitments and your wishes in your estate plan.
A durable power of attorney is a legal document where you designate a trusted person to act as your agent for the purpose of managing your day-to-day personal affairs if you are unable to act on your own. Through the general power of attorney, you authorize someone to sign your name to contracts, pay your bills, make business decisions, manage your assets, give away your assets, purchase real estate, handle your mail, complete long-term care planning, apply for government benefits, and participate in estate planning on your behalf, etc. Make sure that your power of attorney is comprehensive, specific, and re-executed at least every five years.
A durable power of attorney usually covers a long list of powers, whereas a limited power of attorney is for a singular purpose, such as signing documents on a real estate transaction when you can’t be present at closing.
A health care power of attorney allows a loved one such as a trusted friend or family member to make medical treatment decisions for you if you are unable to make those decisions and communicate your wishes to doctors. This can be for convenience (for example, maybe you just had surgery and need help picking up medicine) or it can be because of an emergency (for example, the surgeon needs the authorization to take an emergency action during a procedure). A health care power of attorney not only saves precious decision-making time, but it also makes sure that the individual you trust the most has the power to make important health care decisions for you if you are unable to make the decisions on your own. Without this essential document in place, your loved ones could be forced into court to obtain a guardianship or conservatorship on your behalf.
A living will, which is more commonly known, in Oklahoma, as an advanced health care directive, is a legal document where you direct your health care agent and doctors on your end-of-life choices regarding life-extending treatment. It is a gift to your family to document your decisions before your loved ones have the burden of guessing your preference at a very difficult time.
During guardianship and conservatorship proceedings, a judge hears testimony from your loved ones and medical professionals as to why you should be deemed incompetent and have a guardian named to make health care and financial decisions for you. This procedure is public, expensive, time-consuming, and stressful for those who love you. Littleton Legal PLLC can help you avoid these proceedings through disability planning.
Guardians and conservators are court-appointed individuals who make decisions on a person’s behalf in the event of mental or physical incapacity. The need for a guardian can often be avoided by adding properly drafted, thorough and comprehensive documents like durable powers of attorney, health care powers of attorney, and advanced health care directives where you appoint this person and they can act on your behalf without court supervision.