Think You Don’t Need an Estate Plan? It’s Time to Take Another Look
Only 4 out of 10 Americans have an estate plan, according to Caring.com’s 2019 Will and Living Trust Survey. Not surprisingly, individuals aged 65 and older are more likely to have a will, while only 18 percent of younger Americans aged 18 to 34 do.
Respondents provided many reasons for delaying end-of-life planning. Half said they just hadn’t gotten around to it, while 22 percent felt they didn’t have enough assets to make the process worthwhile.
When it comes to estate planning, many people think solely about devising a will to handle the disposition of their assets. In reality, an estate plan is essential for many reasons.
The process is critical to ensure that your family is provided for after your passing, as well as any charitable causes that are important to you. It is also a way to pass on your values and goals by specifying certain conditions regarding the use of funds. Lastly, an estate plan is essential for business owners, to ensure that your life’s work continues to run smoothly after your passing.
What Should an Estate Plan Include?
At a minimum, individuals should consider granting power of attorney to someone they trust to handle their affairs. This agent can be a friend, family member or even a trusted advisor, such as an attorney.
Powers of attorney for financial decisions allow an individual to make decisions regarding financial matters on your behalf. This individual is able to receive income, deposit checks, pay taxes or bills, and handle other financial matters that require your attention.
Powers of attorney for medical decisions authorizes your agent to make directives regarding your medical care. However, while appointing someone as your power of attorney assures that you have a trusted individual in place to make medical decisions on your behalf should you become unable, it won’t always ensure that your wishes are taken into account. For that, you should consider putting a living will in place.
A living will provides instructions for your care should you develop a terminal medical condition—without the ability to communicate—or enter a persistent vegetative state. The document covers all aspects of your care, including directives for when life-sustaining procedures should be administered and for how long these acts should be continued.
The next step in estate planning is providing for the disposition of your assets. Many individuals develop a will for this purpose, but it may not be the most advantageous method to use while planning for the distribution of your estate. For one thing, wills must generally pass through probate court, which can be an expensive and time-consuming process.
Depending on where you live, you can plan for your estate to be assessed anywhere from 3-7 percent or more in probate charges. These payments may include court fees, executor fees and attorney fees. Passing an estate through probate may also be a lengthy process, tying up funds that may be needed by your family or successors. For a medium-sized estate, the process can easily take six months to two years.
With a revocable trust, however, your estate has no need to go through probate court, saving your heirs time, frustration and money. A revocable trust is a legal entity that owns your assets while you are living. This type of trust provides management of your assets if you become incapacitated and will manage the disposition of your assets when you pass away.
However, revocable trusts are living documents, able to be changed or amended as you see fit during your lifetime. They provide greater flexibility in managing your estate, allowing you to specify exactly how much of your assets will be handed down to each beneficiary, including charities or special causes.
If you become incapacitated, a trustee appointed by you will manage and distribute the assets in the trust for your benefit, such as paying your bills and maintaining your home.
Upon your passing, the trustee will protect and manage the trust for your beneficiaries, making it an excellent tool when leaving an inheritance to someone with special needs. A revocable trust also ensures greater privacy, because your estate will not need to pass through probate.
Wills can be used in conjunction with a revocable trust for any assets that remain in your name at the time of your passing. In this case, the will serves primarily to cover any property or financial holdings that were not included in the revocable trust, to provide for the care of minor-aged children, and to save your heirs from having to make difficult decisions, such as what to do about funeral and burial.
Estate Planning, It’s Never too Early to Start
Regardless of your age or financial standing, it’s never too early to put an estate plan in place. Estate planning ensures that your wishes are followed in critical medical situations and that any property or financial holdings are quickly available to the individuals that you want to receive them.
While you have many options when it comes to planning your estate, you can be certain to select the right approach by working with a trusted estate planner, particularly one who has experience in creating trusts.
Learn more about FNBO’s Trust Services.
This material does not constitute legal, tax, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.