Don’t think you need an estate plan? Think again
If you’re like most people, you don’t think you need an estate plan. Do any of these reasons sound familiar?“I don’t have enough assets to worry about estate taxes.”
Forget taxes for a minute. There are a number of non-tax reasons for estate planning. If you have not done any planning, state law determines where your assets will pass when you die. There is no guarantee the legal system will make the same decisions you would have made. Putting your directions in your estate plan is the only way to ensure that your wishes are followed.
Let’s assume assets would be distributed just as you would like. There are still several reasons to plan. First, in your will you can determine who will handle your estate when you die — called the personal representative. A will also allows parents to nominate who will take care of their minor children. Although the court makes the final appointment, naming a guardian ensures your wishes are known, and in most cases, followed.
“I already have a will.”
Some situations are more complex and may require more than a will. Non-traditional family dynamics, tax planning issues and privacy concerns might be better handled through a trust. Marital property agreements clarify ownership of marital and individual property.
Even if your will plans for the distribution of property, don’t forget to address incapacity. You should consider naming someone as the financial power of attorney to handle your monetary affairs. Also consider naming someone to be your health care power of attorney to make health care decisions should you be unable to make them yourself.
“My partnership agreement or articles of incorporation account for the continuation of my business.”
For business owners, estate planning requires a delicate balancing act between preserving the interest and longevity of the business, planning for their own financial independence later in life, and creating an equitable distribution of business and personal interests to heirs. Only some of these issues are typically addressed in a business’s partnership agreements.
Many businesses’ legal papers address the passing of company ownership in the event of death. In the case of closely held businesses, many times ownership passes to the next generation. Tax laws actually make this transaction very efficient. The unaddressed issue, however, is distributing equal assets to all heirs, particularly if they choose not to participate in the business. An estate plan can create an equitable solution that does not necessarily involve distributing equal assets or liquidating a portion of the business.
Many closely held businesses do not have a current succession plan in writing. Those that are written often are not funded, meaning the stipulated successor hasn’t planned to inherit the business and therefore does not have the funding to assume ownership. This presents significant challenges when a business owner’s estate is liquidated to heirs.
“The estate tax has been repealed.”
It’s true the estate tax was repealed, but the future of the tax is uncertain at this point as Congress debates provisions. It’s better to put a plan in place and make changes as they’re needed.
