4 Reasons You Don’t Need an Estate Plan

estate planHere the four reasons you don’t need an estate plan:

1. You don’t own anything.

2. You don’t have anyone you love or care about.

3. You would prefer that the politicians in your state decide who your personal assets go to and who is the guardian of your children when you die because you think they are smarter than you.

4. You have no chance of dying.

If none of those reasons are you, then you do need an estate plan. But many times it is confusing for people and sometimes it is because the language of the law is different than what most people are used to. So I would like to share with you in layperson’s terms what the four basic parts are to an estate plan to take some of the mystery out of it and to encourage you that if you need one or you need a review, that now would be a good time to do it.

There are four basic elements that have to work together for an estate plan:

1) The documents an attorney would draw up for you based on their process of customizing a plan for you, and they would include:

-Documents used to distribute your assets at your death to divide up your property. This might be a will and/or a trust in certain situations depending on your net worth and assets that you have and what you are trying to accomplish.

-Documents to help you if you are incapacitated and can’t manage your own money or manage your own health:

  • These might include a power of attorney for finances, so somebody could make decisions and take care of your financial accounts
  • It would include a power of attorney for your health care decisions and typically it will also include a living will so you can state under what circumstances you would want the machines turned off or you would want to continue life support
  • Sometimes it would include a trust because a trust might be the best way to help manage your assets for you if you are incapacitated

-Documents or strategies to help with asset protection, for example if you are in a high risk profession

2) There are the people listed in your documents

-Who do you want to receive property when you die. Are there any special needs with those people and who do you want to receive the property if that person is not there? What if they have already predeceased you? You want to always have a backup for the people in your documents.

-Who manages it? Who manages your finances while you are alive if you become incapacitated and need help then and who is the back up for that person?

-Who settles your estate or makes the distributions at death and who is the back up for that person?

-Who makes the medical decisions if you can not and who is the back up for that? They can be the same person or different people for the different roles.

3) The next element of an estate plan is how you own your assets

For example, are you going to own your assets joint tenants with right of survivorship or just joint tenants? Or if you set up a trust, should the assets actually be owned by the trust? Because if you have a trust, but you own your property joint tenants with right of survivorship, or if you have a beneficiary designation, that property will automatically transfer to the joint tenant/beneficiary and not go through the provisions of the trust.

The ownership of your assets is critically important to make your estate plan work the way you planned it with your attorney. The ownership of your assets can also have some tax implications, either for estate taxes and/or income taxes. It is very important that the trust documents you do with an attorney, the people in your documents, and the ownership of your assets are all congruent and working together the way they should.

4) The last element of estate plan is to have a regular review

People and situations change, tax laws sometime change, or state regulations can change that might require an amendment or redoing. Death or divorces are obvious reasons why you might want to review and take care of your estate plan. When you have your first child, make sure you decide who the guardians are for your children if something happens to you, rather than what the state might think is best.

We think it is important, as a financial advisor, to have that discussion with clients periodically. Not because we want to do the documents or make the legal decisions for you, but as one attorney told me a while back, “you [the financial advisor] talk to the clients more often than I do and typically they can have changes going on in their life and they won’t think to call us all the time and ask us if it’s important”.

Do you need an estate plan?

I was being facetious at the beginning, most people do need an estate plan. But it’s amazing how many people know they need an estate plan, but they never do one. In fact, the statistics are that over 50% of people typically die in what’s called intestate, which means they don’t have a will or other estate planning documents. The courts and the state legal code decide where everything goes, you can pay the highest taxes and have an uncertain outcome.

This is an easy situation to make sure that you’ve got everything just the way you want it. If you have put this off, stop right now and contact us and we will give you several names for competent attorneys and this can be completed quickly.

About Dave Shepherd, ChFC, CFP®

Dave is the founder of Shepherd Wealth & Retirement in Tucson, Arizona. Dave is a Chartered Financial Consultant (ChFC) and Certified Financial Planner™ practitioner (CFP®). Have a financial question? Click Here to contact Dave Shepherd.

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Investment advice offered through Shepherd Wealth Group, a Registered Investment Adviser doing business as Shepherd Wealth & Retirement.

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