06 Jun List of Burdens of Failure to Plan Ahead
List of Burdens of Failure to Plan Ahead
Ignorance is bliss – First ask yourself if you want to learn about estate planning knowing it will probably change your attitude and propel you into action. In other words, you need to decide whether you want to be a person that believes ignorance is bliss. It’s okay if you are, just don’t continue reading. Otherwise, please continue reading and share it with others if you found it helpful. This post serves as an overview for some major issues in estate planning that are relevant to you, your loved ones, friends and family.
Unsurprisingly, everyone is reluctant to think about death and for good reason. It’s unsettling. It makes your stomach muscles tighten, and who wants that to happen on purpose? I know that estate planning isn’t a sexy area of law. It’s certainly not dinner party conversation. Nevertheless, one thing is certain, it hits home to everyone and their loved ones, friends and families during their lives and after their deaths. Failing to properly address it during life may act like an grenade when it explodes after death. You won’t have to deal with it but our family most certainly will. There’s a significant emotional tax that is paid here. Below is a list of the relevant areas of estate and business planning that may concern you. If you have questions about a particular area, contact us and we’ll answer them an possibly write about later to help others.
Burden: Discovery – Discovery for your family may be uncomfortable and burdensome – Upon your death, your estate can pass smoothly and seamlessly to your designated beneficiaries so your family can focus on grieving and moving forward in a healthy way. Without planning ahead, your family is thrusted into your life, discovering all of your personal information and affairs. It can be a lot to take in both having to immediately accept such responsibility, all while experiencing a painful loss, which alone can be devastating.
Burden: Responsibility – dealing with an estate as personal representative is a job. You have obligations and accountability. It starts with discovery and making a formal inventory of all assets. Creditors are given an opportunity to make a claim, and you are responsible for identifying those whom are reasonably ascertainable. If there’s going concerns (businesses), you’re responsible for administering them and keeping them going, unless the governing documents say to the contrary. If there’s expenses and upkeep, you’re responsible for that too. Some people have no exposure to this and it’s a tremendous learning curve with no real benefits at the end of the tunnel. For most, it’s not necessary to abruptly place this burden and responsibility on your family when you can easily plan ahead and avoid it. My clients who are going through it now would label it as emotionally exhausting. They are so frustrated with their loved one that they left them with a mess to clean up and deal with that they immediately create a plan.
Waste: Guardianship – For purposes of this discussion, guardianship is one of the pressing matters you should be concerned about. It consists of legal proceedings that occur when you lack sufficient mental capacity to administer your own affairs. Someone is appointed to take care of these matters for you since you didn’t designate how they would be handled ahead of time. It’s time consuming, expensive, unpredictable, potentially embarrassing and unnecessary. Most importantly, in my opinion, is it thrusts your family members who are your care givers into your personal affairs and your life quite abruptly. Planning ahead would provide for an easier transition for them and therefore for you. There’s an emotional toll that this takes on your family that can and should be avoided.
Control: Health Care Decision Making – If you lack sufficient mental capacity, you are not permitted by law to make health care decisions for yourself. In that event, someone must be appointed to make your decisions for you. Consider who may be appointed versus who you’d want to make such decisions. Will they agree? Do you foresee a problem?
Protection: Second Marriages – are you remarried? Do you have children from different marriages? Are you officially divorced or just separated? These state specific issues are like grenades or mines in a minefield and can have disastrous consequences to your family if you are not properly advised. Are you aware that your children may take a back seat to your current spouse in terms of inheritance? Are you aware that without planning ahead, none of your estate will be inherited by your step-children unless you legally adopt them? Are you concerned about the stability of your children’s relationship? Are you aware that leaving assets outright to your children risks your assets being split in your child’s divorce? Do you have children and want to ensure that your assets remain in the blood line? These are compelling reasons to plan ahead and take advantage of a trust or other entity.
Waste: Estate and Gift Tax and GST Tax – For those with assets exceeding five million dollars, or spouses with assets in excess of ten million dollars, failure to plan ahead can result in substantial tax liabilities that would otherwise be completely avoided. There are proven strategies to reduce if not eliminate these taxes so why needlessly throw money away?
Waste and Trauma: Probate – Probate is the process by which a deceased’s affairs are settled. Creditors are paid and the balance is inherited according to statute unless a will or other operative document directs otherwise. Like guardianship, it’s time consuming, expensive, unpredictable and completely avoidable Probate administration is emotionally taxing to those who are thrusted into it. That’s usually family members who are already deeply experiencing loss. It keeps the wound open for a while with constant poking. Most people I know who have experienced probate have a very sour taste in their mouths. It’s neither something they care to repeat nor subject their family to experiencing. These people understand the value of planning ahead and sprint to take care of their affairs immediately after dealing with it if not sooner.
Waste: Probate – Money – Fees and Costs – Probate and Guardianship are time consuming and unpredictable (broken record). They may be embarrassing as they are not private, and they are certainly avoidable. They are taxing emotionally and they are expensive financially. There’s filing fees, simple fees and complex fees. You must retain an attorney to administer the proceedings. There’s a lot of stages from start to finish and each requires some time to do. The more complex the facts and circumstances, the more money it will cost. Attorneys’ fees take priority and are therefore paid out first even before beneficiaries receive their inheritance. If you are unfortunate enough to experience a probate administration, we can counsel and represent you from start to finish with the goal of ensuring a smooth and seamless transition.
Risk: Beneficiaries’ Exposure to Creditors – Did you know that if you let your beneficiaries inherit assets outright, they can squander the assets? Did you know that even if they are responsible and manage the assets well, their creditors will be able to swoop in and make a claim against them? This is why you need to encapsulate assets that are devised to your beneficiaries to protect and preserve them for their future. Trusts are a fantastic tool for this purpose.
Risk: Control – Did you know that if you don’t plan ahead, your property will be devised according to statute? That means that the state determines who inherits your estate. They will inherit outright (subject to waste and loss to creditors) and there is no guarantee that the assets will be preserved, protected or even appreciated.
Bottom line: Planning ahead shows your family you care, prevents exploding grenades within your family, eliminates the need to thrust our family into your affairs both during life and after death; reduces financial and emotional waste; and it’s affordable. Call us to schedule a consultation and get started today.