Why Do I Need an Estate Plan?

With a federal estate tax exemption of $11,180,000 in 2018 for individuals and twice that amount for married couples, avoiding estate tax is no longer a goal for most Americans. In fact, the IRS states, “most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. However, estate planning still achieves the following goals:

Estate Planning doc for blog (1)

When people ask me, “Why do I need an estate plan?” I ask them these five questions:
  1. Do you own real estate?
  2. Do you or will you have assets in excess of $100,000?
  3. Will you have debts and liabilities at the time of your death?
  4. Do you have minor children or any special needs dependents?
  5. Are you unsatisfied with the probate court’s plan for the distribution of your assets?

If they answer yes to any of these questions, then I advise that they need an estate plan.

The two most difficult things the client must do are:
  1.  Select a fiduciary. A fiduciary is a person or entity whose job it is to carry out the intentions of your estate plan.
    Sometimes, single persons choose one or both of their parents. Sometimes, a single person’s parents are divorced and that person has a difficult time choosing between the two parents, and knows that making them work together is an impossible task. Sometimes, a single person’s parent or parents are deceased, so they choose another relative (sibling, aunt/uncle, cousin, etc.) Sometimes, they choose a friend or a trusted professional advisor. Married persons do not have it easier simply because they are married. Yes, married persons certainly choose their surviving spouse, more often than not, but a good estate plan provides for the death of both spouses. So, what then? Should the children become the fiduciary? Depending on their age, this may or may not be a wise decision. At the end of the day, anyone that creates an estate planning document must choose for themselves what person and what successors will be in control of their assets upon their death.
  2. Determine what you want your estate to accomplish.
    It is the client’s responsibility to set goals and plans: avoid probate or not, give outright gifts in a lump sum or partitioned out over time, give charitable gifts, etc.
A good estate planning team can help clients reach their goals: wealth protection and risk management to insure income for dependents (that’s where your financial planner and investment broker come in), income tax efficiencies for heirs (that’s where your CPA plays an important role), and the orderly transfer of assets upon your disability and death (that is the role of estate attorney).
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