There are a myriad of reasons why you put off creating an estate plan. You’re too young. You’re too busy. It’s too expensive. Thinking about your own death? It’s too morbid!
Thoughts like these are understandable. After all, if we are getting into the nitty gritty of what will happen to your estate, it must mean you’re already gone, and if you’re already gone, who cares, right?
An estate plan is like insurance, or maybe even anti-virus software; you don’t think you need it until you really need it. An effective plan for what will happen to your assets, your children, even your body, will alleviate a burden on your heirs, preserve the value of your estate, and ensure that your wishes are honored.That is ultimately what it is all about.
“But Allie, I’m young, I’m healthy, I have very few assets- I don’t need it!”
The truth is that a person without a house, a huge bank account, or investments probably doesn’t require an extensive estate plan. That said, there are some documents that can secure your intentions in the case that you, for whatever reason, are unable to make them at a later date. Health care power of attorneys, for example, will allow you to spell out who can make decisions on your behalf if you become incapacitated. A living will can allow you to specify the medical care you wish to receive. A living trust can grant a successor trustee (the person you choose to take over after your death) the power to manage your assets.
Maybe the case is that you are the breadwinner for your family, and you have a small child or children. At a minimum, creating a simple trust can keep your matters out of the court-run probate process. This will save your spouse and family the headache of probate, which can take anywhere from 6 months to well over a year. It will also save them the approximate 3 to 6 percent of your total estate that the probate process can eat up in costs!
“I’m in a “transition” phase of life. I'll get to it when things calm down.”
Keep in mind that your estate will include everything you own at the time of death. Many lawyers refer to it as a “snapshot” of what you own at the moment you die. What you might have owned, or what you don’t own anymore, is almost always irrelevant for estate planning purposes.
“But I’m moving!” Are you buying or selling a house? There could be significant asset changes that affect your estate.
“I am starting a new job.” Are there changes in your benefits or retirement plan(s)? These can be considered assets that are included in your “snapshot.”
“We are tying the knot!” First, congratulations! You are most likely getting ready to combine assets or embark on a journey of collecting assets together! (Not to take the romance out of it . . .) This could be a great time to sit down and think about your joint goals. If this is your second marriage or you have a prior estate plan, updating it and remaining current can only benefit you. The same thing is true if you are recently married or have recently had a child.
“It’s too expensive.” Picture this: Your family friend Max has a gardening business. He works hard for his money, and doesn’t think meeting with an estate planning lawyer is worth the money it will cost. In fact, Max has never once consulted a financial planner or professional regarding the state of his affairs. One day while working on a particularly unique yard, Max falls from a ladder into a creek and drowns.
Aside from potential civil claims Max or his family may have, his estate is now entirely exposed to the public probate process. His financial affairs are in the hands of the court, and become part of the public record. The court system is bogged down with other cases, just like Max’s, and as a consequence, it takes over a year before Max’s case is settled. His estate is subject to over $150,000 in attorney fees and costs. His family, after being dragged around for over a year, is forced to sell some of Max’s assets in order to pay the amounts owed. Additionally, a large portion of Max’s hard-earned assets went to estranged siblings he hadn’t spoken to in over a decade.
Max is not an ELG client or even a real person. This story represents a very possible situation. When I hear people say that estate planning is expensive, I completely understand. But I can’t help but ask, expensive compared to what?
Generally speaking, estate planning lends itself well to flat-rate fees. As a consequence, the services provided are some of the more affordable legal services your money can buy. Contrary to how Max’s hypothetical played out, a bit of money up front can ultimately save you and your family a lot of money, time, and heartache.
“Thinking about my own death is too hard for me.”
This sentiment is very real. I always try to frame estate planning as a protection mechanism. It is protection for yourself, as mentioned above (powers of attorney, living wills, etc.), but it is also protection for your loved ones. You are doing yourself and your family members a favor by spending the time to plan out your goals and wishes. An estate planning professional can help soften this sentiment by legally memorializing your wishes and ensuring that they will be honored.