In 2020, only 47.9% of adults 55 years and older have estate planning documents, including a will. Nearly a third of adults claim that they do not have enough assets to make a will, and many adults say they just “haven’t gotten around to it.” The media frequently cites the presumed high costs of estate planning and the mistaken belief that people with more modest estates do not need to plan for them. As a result, Americans underestimate the value of their assets, and in the event of unexpected death, these assets can go to waste.
So, who needs a will? Even you? The answer is probably yes.
This article will explain the importance of a will and some of the factors that go into deciding whether and how to approach estate planning. In general, I think that “whether” is a red herring.
Though the media often report on the percentage of Americans who “have wills,” making a will is only one part of a complete estate plan. Every adult, even those with little or no property, should have powers of attorney that authorize a trusted family member or friend to make financial and healthcare decisions for the individual if he or she is incapacitated. A power of attorney for property can enable family members to continue providing for the care and support of a disabled person.
Similarly, a power of attorney for health care is crucial in helping the patient’s trusted family members or friends access health-care information and make medical decisions during incapacity. The patient can also express his or her wishes about medical care, including end-of-life treatment.
If you become disabled without having these straightforward documents in place, your family or friends may have to go to court to get authority to care for you and your property. Court-supervised guardianship proceedings are often expensive and time-consuming compared with the cost of preparing powers of attorney.
Estate planning can be an emotional process. People simply don’t enjoy thinking about what will happen to their loved ones, pets and property at their death. One way to overcome the emotional obstacle to estate planning is to consider the problems that can be solved with a solid estate plan. A good plan can help protect family members from need, can protect family assets from waste, bad decision making or avoidable taxes, and can reduce family friction.
For example, the birth of children often prompts parents to begin their estate planning and make a will. A parent’s will should name a guardian to care for his or her children, and can also name successors. This reduces the risk of family members fighting over the role. The will can also include trusts or other provisions to safeguard the children’s inheritance and guide how they will be raised.
When you make a will, you can distribute property according to your personal preferences. If an Illinois resident dies “intestate,” or without a will, certain assets will pass according to the default rules of Illinois law. Those intestacy rules are meant to mimic what you would want if asked, but often they are not on point. Consider a spouse who dies prematurely leaving a spouse and minor children. The spouse will receive one-half of the property and the minor children will share the other half. This will require a court-supervised guardianship for the children and leave the surviving spouse with only half of the couple’s savings.
Or, consider a committed but unmarried couple. Illinois law will make no provision for the surviving partner. There may be many other ways in which intestacy rules don’t address your particular wishes.
Also, having a will lets you name who will administer your estate. You may choose a responsible family member, friend, advisor or even a bank or trust company. Otherwise, your heirs may argue about who fills the role, and the court’s choice may be the wrong choice.
One of my partners once said that if you don’t have an estate plan, you’re simply letting the courts and state legislature make decisions for you. That’s a bad strategy for almost all of us. Except Uncle Sam.
[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Estate Planning & Asset Protection – 101 and The Legal & Tax Aspect of Investing: Asset Protection, Estate Planning, and Tax Efficiency. This is an updated version of an article originally published on August 8, 2016.]
©All Rights Reserved. May, 2020. DailyDAC™, LLC d/b/a/ Financial Poise™
Michelle M. Huhnke is a partner at Sugar Felsenthal Grais & Helsinger LLP. She focuses her practice on estate planning, charitable planning, and wealth preservation. She works with clients and their families to develop estate plans that address varied family circumstances in a caring, detailed way and include efficient estate, gift and generation-skipping tax planning.…
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