You may have heard about estate planning. Your estate is composed of everything you own or control - and that includes yourself. But what is the 'planning' really about and should you be concerned getting it done?
Later in life - perhaps during your retirement years - you decide that you should make provisions for both you and your estate. This article addresses 5 basic questions that encompass those provisions, the consequence of not answering them, and the urgency for doing so.
What are your answers to these 5 basic estate planning questions:
1. Do you want 'a say' in how you should be cared for if you become mentally or physically incapacitated to the extent you can't give input?
2. Would you like to eliminate needless loss of some or all of your assets when your long term care needs become enormously expensive so they cut deeply into your assets - which you wanted as a legacy for your beneficiaries?
3. Do you want to be sure that your assets go to the people you choose to get them when you die?
4. Would you like to minimize excessive tax loss on what you want to give your beneficiaries?
5. Do you want to prevent public exposure, costs and delays that probating your assets will produce?
I think that everyone would answer 'yes' to each. But you can't attempt to address them unless you aware that these questions must be answered.
We spend most of our lives trying to survive and prosper as if we're going to live forever. But there comes a time when we must address our future death and possibly a time of very poor health.
If you don't, here's what happens with respect to those five questions:
You may become incapacitated in a number of ways. Perhaps a heart attack, a stroke, or a severe car accident could leave you unable to handle you financial affairs. If so, someone else will handle those affairs - and not be handled in the manner or for the purposes you would want. Your assets may be squandered or stolen at worse.
If you're in a near death situation, what amount of resuscitation or extending life efforts should be performed on you - and who should decide this?
You need long term care when you can't perform a few of the daily activities of life. This may include a condition of senility. The concern here is 'how will you be taken care of?' Perhaps you'll be put in a nursing home when it's not really necessary - cut off from your close child. Or, perhaps, you won't when you should be.
Who do you trust to handle such decisions? The cost of long term care in a nursing home can easily be $70,000 to $90,000 per year. Paying for this can run through a lot of your assets in just a few years.
When you die, there's no way to guarantee just who will get your assets unless you make provisions for who gets what. With no provision -such as a will or trust - in place the state has rules for how much of what you have will go to your spouse and then to your children.
Such rules may be wholly unsatisfactory to you. You may have kids from a previous marriage you want to give something to, and you may have stipulations on how some of your money should be used by your beneficiaries - and not squandered.
Without living trusts or other arrangements made, everything in your name will have to be probated. That's a court process in your county that determines what you have, what it's worth, who you owe debts to, and then takes care of getting all this evaluated with debts and taxes paid.
Probate is not only a public process but a time-consuming and costly one. You may wish to avoid the probate process to keep your holdings secret, or to get your assets to whom you want to have them.
Lastly, end of life taxes - called estate and gift taxes - are imposed on the value of your estate and the gifts you've made during your life. There are exclusion levels for estate and gift values given before these taxes are imposed, but if you've an estate worth some millions of dollars, estate and gift taxes can rob up to 45% of what you've left or transferred.
Why is getting these questions answered such an urgent issue? It's because...
1. You never know when you'll die
2. You never know when you'll become mentally incapacitated
3. You never know when you may need long term care
And solutions to some of these requires 5 years lead time - at least - before these circumstances occur!
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
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