What is the immediate importance of estate planning and why should any parent, business owner, homeowner, or those nearing retirement be focused on this issue? Why do most people delay one of the most critical financial and personal planning issues during their life (and after)? What changes are approaching within a year that could substantially affect existing estate plans?
What is the Importance of Estate Planning For Most People?
Let's begin with the first question. What is the importance of estate planning for most people? Why should the majority of Americans have an estate plan?
One of the most common and traditional estate planning methods many still attempt to follow is simply a notarized will, accompanied by some health-related documents and perhaps a power of attorney. Most people don't realize the time, hassle, and expense this will place on the shoulders of their spouse, children, heirs, and beneficiaries, not to mention the executor of the estate itself.
A will must be administered through a Probate Court in most instances. This process will usually take a year or much longer and will tie up most tangible assets throughout that period. Up to 20% of the decedent's assets could be lost in probate fees, executor's fees, and associated costs. While many consider the request to serve as an executor as an "honor," the paperwork and hassles of marshaling assets and debts and managing the will's instructions through probate is a nightmare for most.
The least expensive and most productive, controlled, and efficient manner of managing your assets and wishes is usually a straightforward plan that includes a revocable trust as well as advanced healthcare directives. Those who are married should seriously consider this simple estate planning structure. The benefits far outweigh the modest cost of a trust (it's much less expensive than most people expect and far less expensive than probate).
The immediate importance of estate planning extends to your long-term retirement needs. If you wish to seek long-term care without exhausting every cent of your retirement assets and the equity of your home, a solid estate plan and trust strategy must be employed.
The combination of a will and a revocable trust provides the opportunity to manage and direct every aspect of expressing intentions and distributing one's assets after passing. However, the process will only take a few weeks, imposing far less cost and hassle upon the grateful children, heirs, and beneficiaries provided for within the estate plan. The trust shields your assets from creditors and can affect the calculations of Medicaid (or your state's version of Medicaid) upon supplementation of retirement home or elder care costs. Most importantly, the trust allows substantial assets like your home and investment accounts to easily and quickly transition to those you intend to honor.
Why Do Most People Put Off Estate Planning?
Why do most people put off estate planning? It is hard to contemplate one's mortality, and many cannot bring themselves to consider these issues. Most Americans overestimate the cost of an estate plan, as economics are always an issue. The actual cost of an estate plan is a fraction of the costs of taking a will (or an estate without a will) through probate. Cost is not a genuine issue.
Is it painful to consider retirement, elder challenges, or passing away? An experienced estate planning and tax attorney can help remove these burdens from your shoulders and make the process lighter and easier to complete. If you are a business owner or have substantial assets, look for a provider with a combination of estate planning, legal, tax, and business advisory experience and proven expertise. Many issues in a comprehensive estate plan will involve a blend of these areas of expertise in order to craft the best solution for your unique requirements.
What Changes in Taxation and U.S. Law Will Impact Every Estate Plan Within a Year?
What changes are approaching within a year that could substantially affect existing estate plans? Are you familiar with the TCJA - the Tax Cuts and Jobs Act or 2017? This legislation provided substantial tax savings and benefits to the majority of Americans, especially business owners and those with significant assets.
Most of the essential provisions of the TCJA are scheduled to "sunset" (come to an end) on December 31, 2025. These issues cannot be addressed until after elections and the new administration is installed on January 20, 2025. This means Congress will barely have 11 months to address the substantial TCJA provisions scheduled for sunset.
One immediate impact could be a 50% reduction in the U.S. estate tax exemption, which presently stands at $13.61 million for an individual and double that amount for spouses who provide joint gifting. These limits are scheduled to return to their 2017 levels (an estimated $7 million based on inflation for single filers and $14 million in exemption for those who are married).
These facts, and many other issues, underscore the immediate importance of estate planning and why every working person, parent, business owner, homeowner, or those nearing retirement should seek the advice and counsel of estate planning, tax, legal, and business advisory professionals. Many people will put off these matters without a thought. The financial impact of inaction is challenging to overstate. The effect of ensuring one's wishes and intentions are carried out during and after their lifetime can be devastating. Many potential changes that could substantially affect existing estate plans are on the immediate horizon. Are you prepared?
