Many Americans put off getting an estate plan, thinking there is always tomorrow. Yet, according to a survey by Caring.com, more than 50% of Americans believe estate planning is at least somewhat important but only 33% have a will or living trust. Isn't it interesting that over half of our country thinks an estate plan is essential, but only a fraction has one in place?
What is Estate Planning?
Estate planning is the process for the management and disposal of an individual’s assets when they cannot make decisions for themselves or after death. Estate planning includes the following topics:
Why is Estate Planning Important?
Estate planning is essential because if you pass away without a will, the court will decide who receives your assets.This court process is known as "Probate". A common misconception is that a will avoids probate but wills do go through the probate process. If you pass away and have a will, your will makes suggestions to the judge however the judge ultimately decides what happens. On the other hand, having a trust keeps the transfer of assets private (i.e., out of court) and ensures your decisions are followed.
Some additional points to consider include:
The probate process takes 1-2 years to complete
The court takes about 10% of the value of the estate as a fee to administer the assets
Since probate is a public process, it promotes conflict among family members.
With 35% of Americans claiming they have personally experienced family conflict or know someone who has experienced family conflict due to not having an estate plan, this stuff is important! (WealthCounsel) Having a trust avoids all of this. Take the time to plan things out now to prevent future disputes among family members, keep the transfer of your assets private, and protect your beneficiaries from creditors.
Why Do Americans Brush Off Estate Planning?
Many Americans put off getting an estate plan. The reasons may vary but most are grounded in misbeliefs. A common misconception among many Americans is that they do not believe they have enough assets to warrant having an estate plan. Meanwhile others are discouraged by the potential complexity, cost, or time. For example:
74% of American adults believe that estate planning is confusing. (WealthCounsel)
36% of American adults say they do not have a will because they have not gotten around to it. (Caring.com)
7% of American adults say they do not have a will because they believe it is too expensive to write one. (Caring.com)
Regardless of the reason, stop thinking short term and get started on your estate plan. What happens if life throws a curveball at you?
Enter COVID-19. Not surprisingly, COVID-19 has had an impact on estate planning. A survey by Caring.com found that people who had a serious case of COVID-19 are 66% more likely to engage in estate planning than those who have not. This indicates that Americans understand the importance of estate planning and planning ahead.
The Value of Estate Planning
As mentioned earlier, one of the main reasons American families do not have estate plans is a self-perceived lack of assets. However having an estate plan offers a lot more value than providing a mode to transfer assets, including:
Beneficiary Protection: An estate plan can protect the people who receive your assets after your pass away (i.e., beneficiaries). For example, if a beneficiary has medical bills or owes money to creditors, a trust can protect the beneficiary's share from those claims.
Defined Plan: Even if you do not have many assets, having children or family members as potential beneficiaries invites conflict when it is time to divide up your assets. Clearly defining your decisions can prevent future headaches, time and money. In addition, since trusts are private documents kept out of court, beneficiaries are incentivized not to challenge a trust or they risk losing their share of the estate.
Flexible Asset Distributions: Having an estate plan allows you to distribute your assets however you want. Trusts are highly flexible and allow you to place just about any restriction. For example, you can restrict that a beneficiary must complete college before receiving anything. You can also have distributions made at different times of the beneficiaries' lives.
Liability Protection: Some trusts offer protection for your assets from lawsuits.
Tax Benefits: Some trusts offer tax shelters. For example, if certain conditions are met, a trust can shelter assets from estate tax after your death.
Young Married Couples Benefit from Estate Planning
If you think estate planning is only for older folks, think again. Young married couples gain a lot from having an estate plan. Having a plan for distribution if one partner passes is life-changing. Unfortunately, it is common for only one of the partners to know the details of an estate plan. When that's the case, the surviving partner is at risk of being in the dark as to what to do and must figure it out for themselves when they are on their own. At Jabbour Law, we work with all necessary parties to ensure this does not happen. Additionally, if children are in the picture, guardian designation ensures that children will be taken care of and assigning Powers of Attorney through the estate planning process ensures you can make decisions for a loved one when they cannot make decisions for themselves.
Conclusion
Having an estate plan does more than provide a mode to transfer assets. Estate planning involves planning for the worst so that you and your loved ones are ready when the unthinkable happens. To learn more, contact Jabbour Law today at (313) 504-4704, or check us out on our website at JabbourLawFirm.com