DBTC Law Firm

Who Needs An Estate Plan? You Do! When Do You Need To Update Your Estate Plan? Probably Now…

Many people assume that they are not wealthy enough, their affairs are not complicated enough, or that time is not ripe for implementing an estate plan, such as a Will, Power of Attorney, Living Will document, etc. Usually, they are “dead” wrong: if you have minor children, regardless of your wealth or lack thereof, the formal designation of guardians for them is essential. Many married couples assume that their spouse will inherit their property, so they do not need a Will.  Again, wrong: the spouse is second in line to inherit most of your assets, after the children. Even a relatively modest amount of less than $100,000 left to a child can literally eat itself up with guardianship administrative expenses, or be disbursed to that child regardless of his or her  maturity at age 18, if you do not establish a trust to take care of your children’s inheritance, both to save the administrative costs and avoid squandered distributions. Even inexpensive real estate (including timeshares) that are owned in more than one state will require two probates, where the cost of probating can eat up a modest estate– all avoidable with relatively simple estate planning. Finally, many people think that once they have implemented a Will and/or Trust, they are “done”. The one thing that does not change about life is the fact that it changes: your relationship with people who would serve as your executors, trustees and guardians can change throughout the years; children can mature rapidly (or unhappily fail to mature), changing how their inheritance should be treated; your wealth and how it is comprised in assets, and the effect of the tax laws, can all change over a few years. Though a “checkup” may only require a short phone call with your estate planning attorney, estate plans can quickly and unexpectedly become obsolete, making them worse than no estate plan at all.

“Estate planning” is the generic term for making careful and reliable preparations for your incapacity or death to assure that your legal and financial affairs will be effectively and fairly handled in the way that you intend, when the point in time comes that you can no longer attend to them. Difficult questions about choice of medical care or withholding medical care in the event of devastating disease or injury, which can happen to anyone, create huge emotional and legal problems for family in the absence of a simple living will and healthcare proxy.

Even a young, single person who has no great wealth has a possibility of suffering a short-term or long-term incapacity. Without having a Power of Attorney authorizing those whom the person trusts to take care of their affairs during incapacity, it can lead to much confusion and uncertainty among friends and family about who should do what, with a concurrent expenditure of very limited resources to establish and maintain the formal guardianship which is required under probate procedures for the management of that person’s affairs.

Simply being alive and over the age of 18 creates the desirability of at least some simple estate planning. Being married, having children, accruing wealth, owning real estate in various states, creating blended families through marriage, each exponentially increase the need for careful and formal estate planning to avoid what could occur in the event of incapacity or death: completely unintended results; uncertainty and frustration among friends and family members; and even bitter, expensive and protracted dispute and litigation.

At its core, careful estate planning is as much about caring for your family so they will avoid these trials and tribulations, as it is caring about yourself. While it is true that complex financial, legal, and family situations usually require a complex and sometimes expensive estate plan, most people can take selfless action to ensure uncontroversial and smooth transitions in the event of their death or incapacity, through a simple Will, Power of Attorney, and Living Will for legal fees in the range of $1,000.00.

Always a threshold consideration is whether planning needs to be done to avoid estate, death and inheritance taxes. Careful planning can in fact mitigate or avoid altogether various death taxes. However, under current federal and Arkansas law, unless the “taxable estate” (net worth  plus death value of life insurance) exceeds five million dollars, no taxes are due. This fact alone persuades many people they are not “rich enough” to need estate planning.  As noted above, that is simply an uninformed, incorrect, and potentially very dangerous conclusion.

Homemade and internet estate plans?  Lawyers love them, because they frequently lead to expensive litigation where the lawyers profit much more than they would have in simply setting up a valid plan. There is simply a much higher risk of not properly addressing and resolving all concerns, when a layman “self-helps” with consumer packages, making it a penny-wise and pound-foolish decision.

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