You may be wondering why I would ever consider writing a post about not having an estate plan. As an estate planning attorney, it might seem counterintuitive for me to discuss the reasons why an estate plan isn’t a necessary component of every adult’s life planning.
The reality is the reasons listed below come not from me, but from conversations I have had with people who do not have estate plans. People of all ages, levels of wealth and familial situations have used one or more of these reasons to explain their reluctance or unwillingness to prepare an estate plan. And with more than 60% of adults in the United States lacking even a basic will, it’s more likely than not that a relative, friend or colleague of yours has relied one of these reasons.
Reason Number One: Insufficient Assets. One of the key goals of any estate plan is to delay, minimize or eliminate any estate taxes on the assets passing from an individual to his or her heirs. Without sufficient assets, this component of an estate plan is unnecessary.
BUT, for individuals living in New York, New Jersey and Connecticut, having sufficient assets to require tax planning is more common than in other parts of the country. First, individual income and personal wealth are higher in the tri-state area than in many other parts of the United States. Second, the estate tax exemptions in Connecticut ($2,000,000), New Jersey ($675,000) and New York ($1,000,000) are amongst the lowest in the US (many states do not have a state estate tax). When you consider the real estate values in the tri-state area and the fact that life insurance death benefits are included in a taxable estate, it is very easy for an estate to surpass the state exemptions.
This does not even factor in the possibility that in 2013, the federal estate tax exemption will drop to $1,000,000. This would expose many individuals to both federal and states estate taxes.
Reason Number Two: Estate Planning is Expensive. Compared to many forms of planning, the upfront costs of preparing a good estate plan may seem expensive.
BUT, unlike other forms of planning, the fees for estate planning are not re-occurring unless your plan needs to be changed. Additionally, while many of the larger law firms may charge fees that are uneconomical for many, there are numerous high quality boutique law firms and solo practitioners in the tri-state area who can provide a comparable service for a fraction of the cost.
Reason Number Three: I’m Too Young To Need An Estate Plan. Fortunately, the likelihood of a premature death is small for most Americans. For parents with minor children, the chances that both parents will pass before a child reaches 18 is very remote.
BUT, just because something is unlikely or an event is remote does not mean it is impossible. The care of a minor child is not something most parents want to leave to chance. And while there may be relatives or friends willing to step in and care for a minor child, not having a guardian named is a risk not worth taking.
Reason Four: I Can Rely on the State Intestacy Statute to pass my property to my heirs. It is true that every person has a fallback estate plan regardless of whether they prepare any documents on their own. New York, like all states, has a statute known as the intestacy statute which governs who will inherit your property and who will be able to manage your property if you die without a will.
BUT, the distribution pattern laid out by the New York intestacy statute is not necessarily what you would want. For example, if a spouse and children survive an individual, the spouse will receive only fifty percent of the estate with the remainder passing to his or her children. There are no provisions to reduce estate taxes, protect assets from waste or select your own representatives by utilizing this statute. Furthermore, from a purely ideological perspective, there are very few people who would prefer such intimate decisions to be made by the government rather than by themselves.
Reason Five: Mortality Fears. An unfortunate consequence of preparing an estate plan is the necessity to think about death and severe illness. In many cases, this fear trumps all the previous reasons for stopping individuals from preparing an estate plan.
There is no BUT attached to this reason as because mortality fears are very real and deserve proper consideration. In my experience, for many of my clients, preparing an estate plan allows an individual a sense of piece of mind from the fact that their affairs will be handled properly if they die. Furthermore, preparing an estate plan reduces the stress and complications that your family will have to deal with in the aftermath of an already traumatic event.
And in the end, for all the reasons not to prepare an estate plan, the ability to protect your family from those stresses and complications remains the best counter-argument for estate planning.
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