Critter Corner: Is Estate Planning Worth it?

Dear Hayek,

I am a planner by nature. I plan everything in advance from dinner for the week to a family vacation in a year. My wife isn’t much of a planner and is glad that I am the way I am. The only thing is that she does not see the value in estate planning, where I certainly do. Can you help me convince her?

Thanks for your help!

Macon Plans

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Dear Macon,

Dwight Eisenhower once said, “In preparing for battle, I have always found that plans are useless, but planning is indispensable.” I agree with him and I certainly agree with you and your planning ways. Now, to help you convince your wife!

This week, Oct. 19-25, 2020, is National Estate Planning Awareness Week, a good time to think about estate planning. Before the pandemic, it was estimated that more than two-thirds of Americans did not have a will. Now, things seem to be changing, as more people are seeing the importance of planning in advance.

What is Estate Planning?

Estate planning (including incapacity planning) involves communicating your final wishes when you are no longer around or no longer of sound mind. This is commonly accomplished using wills, trusts, powers of attorney, and advance medical directives. Read more about the Farr Law Firm’s estate planning and incapacity planning documents and what they do under “Practice Areas—> Trusts and Estates.”

Communicating your final wishes can be emotionally draining and some people may be reluctant to get started. What they don’t understand is that not doing estate planning can put a huge burden on your family. For instance, if you die without a will or trust, your estate will go through probate which is a nightmare for many reasons, as explained here.

Besides peace of mind, these are some other reasons estate planning is extremely important:

Estate Planning Assures Your Assets Are Distributed as You Intend

It is critical to formalize a plan for your assets, so they go where you want them to. An estate plan allows you to allocate your assets according to your wishes. If you don’t have an estate plan, your money and property may not get to the correct person. Without an estate plan, the state in which you reside will decide how your assets are distributed.

Estate Planning and Incapacity Planning Allow You to Indicate Your Wishes and Who Will Carry Them Out

An estate plan often contains a financial power of attorney and an advance medical directive – two vital legal documents that help ensure that your legal and financial and medical affairs will be carried out the way you want them to be. A financial power of attorney appoints a trusted relative or friend to manage your legal and financial affairs should you become unable to do do yourself. An advance medical directive gives someone you choose permission to make healthcare decisions for you based on your wishes if you’re incapacitated.

Estate Planning Can Help Minimize Taxes

Some advance planning can save your heirs from getting a big tax bill. For 2020 the Internal Revenue Service raised the gift and estate tax exemption to $11.58 million per individual, or $23.16 million per couple. This doesn’t apply to a lot of people, but if you have a very large estate and hope to take advantage of today’s generous gift tax exemption amount, you might want to act fast. The current threshold is set to expire at the end of 2025, at which time it will revert to the pre-2018 exemption level of $5 million (indexed for inflation) for an individual taxpayer.

Financial planning coupled with estate planning can help the rest of us when it comes to taxes. For instance, your beneficiaries will need to pay income tax on money they inherit in a traditional IRA. However, money you leave them in a Roth IRA can be withdrawn tax-free. That’s just one example. Careful estate planning and financial planning can create less of a tax burden for your relatives.

Estate Planning Protects Those You Love

Minor children, special needs children, and sometimes even pets need to be addressed when preparing your estate planning documents. Special provisions in the estate planning documents will nominate a guardian or trustee to protect the ones you love and their assets.

You can find more information about estate planning and incapacity planning on our website and by searching “estate planning” on our blog.

To learn more about National Estate Planning Awareness Week, click here.

Hope this is helpful in convincing your wife!

Hayek