A 2010 survey by Lawyers.com found that 65% of adult Americans lack any form of an estate plan. In past surveys, the findings were similar as were the reasons for avoiding estate planning. The reasons given included financial concerns, discomfort with talking about death and disability, a belief that their assets would pass properly without an estate plan and a lack of knowledge regarding estate planning.
But, for one in five respondents, their lack of planning came from the belief that they had insufficient assets to require planning. They had no “estate to plan.” I have encountered this line of thinking many times with people who believe that estate planning is only for the super affluent. In reality, many people beyond the very wealthy need estate planning. They include:
- Families with minor children-Who will care for your children, how the assets you leave for them will be controlled and when the children will have full access to the assets in the event both parents pass are key components of a well executed estate plan.
- Families with special needs relatives-Disabled individuals may only own limited assets in order to qualify for government assistance. Families can provide these relatives with additional assets by using a special needs trust or other planning vehicles.
- People concerned with disability and incapacity- Most estate plans include a durable power of attorney, an instrument that allows an agent to legally step into the disabled person’s shoes and complete certain transactions on their behalf. Another component is a health care proxy and living will which gives an appointed health care agent the ability to make medical decisions for an incapacitated person.
- People with current health issues or a family history of health issues- Many illnesses strike quickly and leave little time to get your financial house in order. An estate plan can provide the families of the chronically ill with one less issue to worry about.
- Families with children from multiple marriages-The dynamics of a family of second or third marriage present many issues regarding inheritance. Without an estate plan, assets may pass in a manner inconsistent with the parents’ wishes.
- Non-traditional families including same sex couples-Same sex couples and other non-traditional families are not granted the same inheritance and tax rights as traditional families. Even with the recent changes to the New York law, an estate plan is essential to protect the rights of spouses and children of these families.
- Professionals in areas with malpractice exposure or other liability concerns-Many professionals seek ways to protect their assets from lawsuits and other liabilities. By using trusts and other asset protection vehicles, assets can be shielded from exposure to any future liabilities (please note that such plans cannot protect assets from existing or known liabilities).
- Small and Family Business Owners-A estate plan coordinated with a business succession plan allows a business owner to protect both his business and avoid family conflict over the transfer of the business.
- People with assets in excess of their state’s estate tax exemption-All three states in the tri-state area have state estate tax exemptions significantly lower than the federal exemption ($2 million in Connecticut; $1 million in New York; and $675,000 in New Jersey). And while the tax rates are also lower, many people who would not be subject to federal estate tax may be subject to state estate tax.
- People who wish the control how their assets are passed-If you die without a will, your assets with pass through the intestacy law, which specifies who inherits your property and who may petition the court to control your assets. In essence, by not having a properly executed estate plan, you transfer decision-making regarding your assets to the government. Giving such power away is a tough pill for almost everyone to swallow.
None of these concerns or scenarios is predicated on having an estate worth more than the federal estate tax exemption. And yet, each of these groups would benefit from a properly drafted estate plan. So, who really needs an estate plan?
The answer is pretty much everyone.
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