Mary Lago, CFP®, CTFA
Chief Wealth Strategist
Principal
It is easy to put off creating or updating an estate plan. Afterall, most of us believe we have at least a bit more time before it will be necessary and the excuses are obvious and plentiful. Herein, we will outline common impediments and corresponding benefits of a relevant plan with the intent of encouraging us all to take on the challenge.
Impediment: It can be anxiety-provoking to consider our own death.
Benefit: Completing your estate plan may increase your peace of mind knowing your desired beneficiaries will receive your assets and your estate administration will be less complex for your heirs. It can also be
empowering to review your assets and reflect on how they can be used to: support your lifestyle; make gifts to family and charitable organizations during your lifetime; provide for your heirs; and offer guidance and education to help them become responsible stewards of wealth.
Impediment: I am not sure which attorney to engage and I know there will be legal fees involved.
Benefit: Those who maintain an active relationship with an estate planning attorney establish a valuable resource for heirs, which will reduce the burden during a time of loss. Without a valid personal estate plan, state intestacy laws will determine who receives your assets. For those with wealth, this will generally require a complex and expensive court supervised process. Completing an estate plan during life will likely cost a small fraction of the expense associated with administering an estate with no valid guiding document.
Impediment: I haven’t made final decisions about who should receive my assets or how and when I want the funds to be available for use.
Benefit: While a small percentage of trusts are designed to be irrevocable, most estate plans are designed with fully revocable documents. In other words, individuals retain the right to change their mind so long as they are alive and have capacity. Individuals are not giving up any rights, but rather putting in place arrangements that will be carried out unless they update their plan in the future. Documents drafted by qualified legal counsel in consultation with their clients are far more likely to reflect client wishes than default state plans.
Impediment: My kids are young. I want to wait until they are a bit older so I can get more of a sense of their ability to manage wealth.
Benefit: Unfortunately, we cannot prevent our death by being underprepared. A plan that includes nominating guardians and protective provisions providing for the care of heirs is even more critical for those with minor children. Trusts can provide specific benefits for personal care, such as health, education, maintenance and support and evolve as children reach designated ages or achieve desired accomplishments. By carefully outlining the care provisions, you are also communicating your values to future generations.
Impediment: I know I have some tough decisions to make about who will serve as my personal representative under my will, successor trustee of my trust(s) and my healthcare representative.
Benefit: While it may be challenging to identify those we believe qualified to manage our affairs, we can all think of those we would not want in charge. Creating a plan gives you control over this decision rather than leaving it to chance. Before you say, “I don’t care because I won’t be there,” consider that those over age 65 have a greater than 50% chance of requiring some form of assistance prior to death. Even worse, those who do not receive assistance when needed are vulnerable to fraud, mismanagement and financial abuse. By nominating future decision makers, you are more likely to receive support and preserve the assets for your care as well as your heirs.
Impediment: I don’t want to spend my time thinking about estate tax planning. Can’t they figure that out later?
Benefit: When it comes to estate taxes, ignorance is not bliss. As a simple example, gifts given during your lifetime avoid most* state level estate taxes, which run as high as 35% in the state of Washington and apply to estates exceeding $1 million in the state of Oregon. Larger estates may also be subject to the 40% federal estate tax. For couples, proper planning can often fully eliminate state and federal estate taxes upon the death of the first spouse and significantly mitigate estate taxes due when the surviving spouse passes.
While we won’t suggest that estate planning is fun, we hope we have shared enough of the benefits to override the impediments and help you move forward.
Ferguson Wellman does not draft estate plans, but if you are ready to get started, we can (1) provide the names of independent estate planning attorneys for you to interview, (2) help you consider key issues to prepare for the meeting and (3) share key financial data to support thoughtful planning with your selected counsel.
*Connecticut is the only state assessing a tax for gifts made during life.
Disclosure
The views expressed represent the opinion of Ferguson Wellman. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections and other forward-looking statements are based on available information and Ferguson Wellman’s views as of the time of these statements. Past performance may not be indicative of future results. Ferguson Wellman, Octavia Group and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational purposes only and not as a substitute for qualified counsel who can determine how this information applies to you. We believe the information provided is from reliable sources but should not be assumed accurate or complete.
Please see additional disclosures.