When it comes to estate planning, it’s important to first get past the issues of the amount of wealth a person may or may not have and so-called “death taxes.” The fact one doesn’t have great wealth or is unlikely to owe estate taxes shouldn’t control the conversation.
Most people want their children to inherit assets equally. But parents rarely realize their children aren’t equal people. Actually, parents mean they want to be fair with each child as opposed to equal. What does that look like? Consider the possibility a child might go through a divorce or fail in business. Moreover, a child might require government assistance and leaving an inheritance directly to that child could result in a loss of benefits.
How each child will receive an inheritance and planning for those unforeseen circumstances constitute critical decisions that should follow extensive discussion.
I typically ask my clients to picture themselves as ghosts standing next to each of their children at the moment their children receive their inheritances. I ask my clients whether or not they’re pleased with what they see. Would they like to see something different?
A second reason for estate planning is much larger than most people know. Disability is the inability to care for yourself — and I don’t mean broken bones that prevent functioning. I mean the inability to make decisions, whether temporarily or for the long term.
Once again, I ask clients to picture themselves, this time completely aware of their surroundings, their physical situation and what’s happening to their lifestyle — yet unable to do anything about it. Imagine living in a care center aware that you probably need to pay your bills, the TV is way too loud and you’re sitting in a chair alone in a room while others gather together around a piano in another room. Yet, you don’t know what to do about those bills. You can’t figure out how to lower the volume on the TV. And you physically can’t transport yourself into the room with the piano.
Still other questions abound that people usually don’t think about. Who will make decisions for me when I no longer can? What are the priorities for spending my money — just on me, on me and my spouse or my children? Who gets to say so? What do I want my day to look like? Do I want to putter in a garden? Do I want to avoid the loud TV? Do I want to socialize with others around the piano? Do I want to be left alone?
The third basic reason for estate planning — and this is one that rarely appears on the radar — is protecting assets from the claims of unknown creditors. What about the creditor that pops up because your employee or apartment manager caused serious injury to someone while on an errand for you or your business?
Most folks believe if they have a corporation or limited liability company, they’re protected — or at least their personal assets are protected — from that creditor’s grasp. Unfortunately, that’s almost never enough to protect the business or such personal assets as retirement savings.
You owe it to yourself and your loved ones to spend a bit of time with your estate planning attorney, maybe not to flesh out all considerations but to at least gain an understanding of what planning is all about and where it should sit in your priority list