The key to estate planning is to plan ahead and have a say in where your assets end up, rather than let the state make the decisions, according to Kiplinger in “Estate Planning: A Family Affair.”
If it helps to get you to move on this, consider that if you don’t have an estate plan, the decisions about what will happen to your property–and if you are a parent of minor children, what will happen to your kids—will be decided by the laws of your state and the courts. That should be enough motive to get you past the fear of confronting your own mortality and on to planning for your death or incapacity.
Don’t have a will yet? You need to do that right away. If you have an estate plan, but haven’t reviewed it in a while, and your life has become more complex, it’s time for a review. By the way, just because you review your plan does not necessitate an overhaul. However, laws and lives do change and the same goals your will and estate plan addressed four years or 14 years ago, may not be the same as they are now.
Every five or six years or whenever there is a major change in your life, such as a divorce, inheritance, financial loss, birth or a change in estate laws, it’s time for a review. Reviews should take place more often, when you are in your 50s or 60s. At that time, your assets may have grown, your children may have children of their own and your goals may have changed. Your focus may have switched from protecting your children in the event of a premature death of a parent, to transferring wealth from one generation to the next. Also, the large changes to the tax law may mean that you no longer need some of the tax planning strategies you put into place prior to 2017.
One couple looked at their estate plans from almost 20 years ago, before two of their children were even born. They realized that the plan was out of date, their estate had become much larger, more complicated, and they wanted to build in significant charitable giving.
The first task: updating their wills, health care proxies and advance directives for end-of-life care. They created a trust that will donate 11% of their estate to a charity that matters to them. Trusts were set up that will pay out a certain percentage to their children at ages 30, 35 and 40, rather than giving their kids lump sums. They set up a plan whereby a trustee has the discretionary ability to make payments for education, health care, emergencies and even a down payment on a house, which will be subtracted from the child’s future distribution. An additional benefit: Because of their use of trusts, their distribution of assets will be private. Trusts are considered the “work horses” of estate planning because they can be used to accomplish so many different tasks within an estate. However, it is important to note that there is no one-size-fits-all trust.
Don’t forget to have the talk. Sit down with your family members and tell them, to the extent you are comfortable, what you have decided. You don’t have to discuss numbers. However, your family will appreciate being part of the conversation, so they understand the reasoning behind your decisions. If you are a member of our Safe Haven Family Care Plan, we will facilitate this family meeting for you and even include your financial advisor.
If you need to review your current plan or if you need to start your planning, contact us at the Estate Planning Center, (423) 648-9829 or www.epctn.com.
Reference: Kiplinger (Nov. 1, 2018) “Estate Planning: A Family Affair”