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This article is the first in a series of articles designed to educate and inform the reader on common estate planning pitfalls and mistakes we see in our practice, and solutions to avoid them. Often these mistakes result in undesired outcomes, create undue stress on loved ones and require costly measures to fix things that could have been avoided with minimal planning. Our first topic for discussion covers the importance of having a comprehensive estate plan in place.
Estate Planning Mistake #1. – Not Having a Comprehensive Plan in Place:
Estate planning is the process of contemplating, planning and arranging for the management of one’s affairs and assets after they die or otherwise become incapacitated. Often, individuals speak to their loved ones, express some concerns and desires and hope that their loved ones will not be overburdened.
What the statistics tell us.
According to a 2020 survey conducted by Caring.com, planning for death or disability is becoming less prevalent overall; which is an alarming trend. The number of adult Americans that have an estate plan in place has decreased nearly 25% since 2017. This study found that the number of older and middle-aged adults with an estate plan in place dropped by nearly 20% and 25%, respectively. This same study also determined that a growing number of individuals lack the knowledge and resources to put an estate plan in place; despite 60% of individuals believing that an estate plan is very important for the future of themselves and their loved ones.
The majority of survey participants attributed the primary reason for not having an estate plan in place to simply not getting around to it; followed by a belief that their estates were too small to warrant a comprehensive estate plan.
What is a comprehensive estate plan and why have one?
We often refer to a thoughtful and ample estate plan as a comprehensive estate plan because it is complete and includes all elements which may be needed if one becomes incapacitated, cannot express their desires and must rely on loved ones to make decisions regarding their care and finances. A comprehensive estate plan is typically comprised of several documents designed to manage one’s health care decisions, financial decisions and a plan to dispose of one’s assets upon their death.
You may have specific desires on who should inherit specific property and at what times and under what conditions individuals will receive the inheritance. We have found that clients can be very particular on the timing of receiving an inheritance and have justifiable concerns for minor grandchildren if their parents pass away. Having a thoughtful plan in place will allow an appointed individual to carry out your wishes exactly as you instruct them to. If you have a blended family, or family members relying on government benefits or with specific needs, you also may require very thoughtful planning with regard to certain assets.
What are some pitfalls estate planners try to overcome and avoid?
Often these plan documents are crafted with contingencies in place if your loved ones are unable to act on your behalf and/or the people you desire to receive your estate are themselves deceased.
One of our primary goals is to avoid seeing your family struggle with accessing and managing your finances if you end up in a hospital or care facility. Having no estate plan in place may leave your family with only one choice – to obtain a court approval so they can deal with bank accounts and manage businesses and financial decisions. This type of procedure is very costly and completely avoidable.
After your death, your estate may also be subject to a court supervised procedure known as a probate if certain thresholds are met and you do not have an estate plan in place. We see this scenario quite often and a court supervised probate can unnecessarily cost your family tens of thousands of dollars.
Estate planning can be a somewhat daunting endeavor leaving many individuals feeling as though they simply do not know what to do, or how to start the process. Dealing with unexpected life events can be less stressful, and much more cost effective, by simply planning ahead. Putting a comprehensive estate plan in place can bring some certainty to how your family and loved ones will be impacted when the unexpected occurs.
Solution:
Meet with an estate planner and a financial planner, to discuss and plan for your incapacity and end of life desires.
Kirk & Simas is here to assist and simplify this endeavor, which should be of particular interest to you if you are a homeowner, business owner and/or have young children or other dependents. Addressing these issues now will ensure that your loved ones are not left overburdened with unexpected costs and complex decisions later.
Our next article will discuss some common pitfalls and unexpected surprises to using a document preparation service to draft your estate plan; or worse, trying to draft an estate plan yourself.
For more information, please visit us at www.KirkSimas.com, or call us at (805) 934-4600 to schedule an appointment.