There was a time when reducing a very onerous form of taxation was reason enough to endure the complexities and frequent confusion associated with planning one’s estate. Many of the decisions were focused solely on death, and the process frequently sidestepped the more common and important issues like long-term care, mental incapacity and property ownership.
Currently, only estates in excess of $5.43 million are subject to an estate tax and those who are married can have a combined estate of nearly $11 million. Hence, it turns out the estate tax should not be the main motivation for most of us to do estate planning.
With life expectancies reaching 100, selecting people you trust to make competent medical, legal and life support decisions on your behalf should be the first part of estate planning. Choosing someone who understands how to monitor and control your ongoing health care and is also able to understand your wishes and make decisions for your quality of life is becoming a necessity and not an obscure or unlikely possibility. Giving authority to make judgment calls on your behalf has usually been entrusted to a spouse, but more often than not we see spouses who are incapable of handling these complex decisions. Those selected will be included in your Medical Powers of Attorney, Living Wills and Durable Powers of Attorney.
The process of planning for death, that is, who gets what, needs to be carefully determined. Children often are first in line (after the spouse), but how much to each, and now with children from prior marriages, the flow of estate assets isn’t as simple as we would hope. The use of trusts can offer many solutions to estate planning issues and are not just for the wealthy.
Often when asked to name the beneficiary of a life insurance policy, IRA or retirement plan at work we do so independent of the above considerations. It is important to note that these types of assets pass directly to the beneficiaries you designate and supersede your will.
Perhaps now you can see why all of this requires a coordinated effort, something that we typically don’t want to deal with, but once organized, could provide peace of mind for the future.