The old adage, “It is not to whom you leave your money, but how,” is still true. Most people have never had a taxable estate, and with the estate tax exemption at $5,000,000, 99% of the country will not pay anything in estate taxes.
So why do estate planning at all?
Estate planning is the mechanism to make sure your family, your loved ones, and the causes about which you care, benefit from your hard work and forethought.
Simple foundation planning, done correctly, allows you to choose not only who should inherit from you, but how they inherit. For instance, a child may inherit under the laws of “intestacy” (without a will or trust) however, they would receive the money at age 18. That means all you have worked for is in their checking account on their 18th birthday. Most parents would fear such a situation, despite how responsible the 18 year old may be.
Moreover, an inheritance, no matter how large, if received outright, is typically spent in eighteen months. The same amount left in trust lasts exponentially longer. One theory is that it is like the difference of having money in a checking account versus a savings account. Spending accessible cash in a checking account does not cause the hesitation that withdrawals from a savings account would. Just that simple change can help a child value money differently and make more thoughtful decisions as they mature. An “inheritance trust” also provides creditor protection and allows the creator of the trust more control over where the assets ultimately go if she or he chooses.
Yet, one of the most compelling reasons still to do estate planning is incapacity protection. Whether we age gracefully or not, at some point many of us will experience a time when we need assistance managing our lives and our affairs, whether it be temporarily or longer term. Being able to choose who will be making decisions with us, or for us, in such circumstances, and knowing that those persons have the necessary tools to do so, provides protections and a sense of relief. It also allows the people you have chosen to act on your behalf without huge difficulties or major hurdles.
Appointing one’s health care decision maker is also important. The HIPAA laws (medical information privacy act) mandates that medical information not be shared with anyone unless authorized in writing or under limited emergency situations. Making sure in advance that you know who would or could assist with medical decisions and that he or she could freely access is something that planning in advance can accomplish.
There are myriad other reasons to plan – most importantly because you care. As always, you may contact our office if you wish to arrange for an initial complimentary consultation at (415) 693-0550 or via email at info@dlklawgroup.com.
