Think You Don’t Have an Estate Plan – Think Again
When I speak about estate planning, one of the first questions I ask the audience is: “Who has an estate plan?” Invariably only a few will raise their hands. I then proceed to explain that, in fact, we all have an estate plan. The real question is did we determine the terms of our plan or did the government. Every state has some form of a probate code that provides default answers to planning questions if we do not take the time to express our own wishes. Whether it is where our assets go, who serves as our personal representative (executor) or who takes care of our minor children, the probate code provides the fall back when we fail to act. Unfortunately, as with most statutes of general applicability the probate code answers apply to no one in particular. Further, if more than one person has priority for a particular responsibility the potential now exists for protracted litigation.Often I hear that I am too young to plan or my estate is not large enough to plan for. Such thinking, however, is not well founded.
- If you are 18 or older, have you signed a health care power of attorney and living will (often referred to as an advance health care directive)? If not, someone will be required to seek court approval to assist if you become disabled and to determine whether life support will be withdrawn. Your parents will no longer be able to access health care records without HIPAA authorization or court order. Statistics show that accidents are the leading cause of death for young adults, and leave many hospitalized with non-lethal injuries. One of my first cases as a new attorney involved setting up a special needs trust for an 18 year old young man who suffered permanent brain damage from a motorcycle accident.
- Do you have a 401K or life insurance through work? Regardless of your age, proper beneficiary designations should be in place to avoid additional headaches for those you leave behind.
- Are you married? Have you signed documents to allow your spouse to have access to health information? Have you made him/her the beneficiary of your estate? Some states will default to splitting assets between your spouse and your parents.
- Do you have children? Who will be the guardian and conservator? Will they inherit everything when they turn 18? Will there be funds from life insurance available to assist them as they grow up?
- Are you re-married? Did you sign a pre or post-nuptial agreement? Where do your assets go when you die – to your new spouse or to your children?
- Are you recently widowed? Current law allows for portability of the deceased spouse’s estate tax exemption, but it is not automatic. To take advantage of this opportunity requires the filing of an estate tax return within nine months of the date of death, even if no tax is owed.
As you can see many planning needs exist regardless of your age or net worth and the default plan of the government is never a great answer. This week has been declared National Estate Planning Awareness Week by Congress. It is a great opportunity to begin the work of making your own estate plan and not relying on the plan provided by the government. If you have previously worked on an estate plan, it is a great opportunity to dust it off and determine if it still meets your need. If you would like to learn more Estateplanning.com is putting on a complimentary webinar on November 16 discussing 2012 planning opportunities. You can register by clicking HERE.