Insights

We know that almost all Americans and their families will benefit from some basic estate planning, yet we read that half of us haven’t done any. And among those who do draw up a will and other key documents, many fail to revisit this work for years, if ever. Without an up-to-date plan in place, winding up your affairs may not turn out the way you wanted and may have a lasting and costly impact on your loved ones.

A recently conducted poll of the nine of us working at Rock Point was revealing – you’d think that each of us would have comprehensive estate plans. The results – five do, four don’t – about the same proportions as our fellow Americans. Despite witnessing the consequences of both good and bad planning, and despite having (collectively) fifteen children, for some of us estate planning never seems to make it to the top of the to-do list.

We hope this note will serve as inspiration to procrastinators everywhere. For those of you who already are on the ball, please check in with your family. Do you have elderly parents? Are your children starting families of their own?

What?

• At a minimum, most all of us need a will (and possibly a trust), health care directives, and an agent or attorney-in-fact (accomplished with a Power of Attorney).
• The companion to a well-crafted plan is a current and accessible repository of key documents and financial records (wills, trusts, insurance policies, real estate deeds, car titles, account statements, e.g.). Consider drafting a letter with instructions to those who will be untangling your affairs after you’re gone.

Why?

• Planning provides assurance that your wishes will be carried out and makes estate administration less burdensome when the time comes.
• In many instances, sound planning helps maximize the amount received by heirs by avoiding probate and may suggest actions intended to reduce the impact of estate taxes.

• We always recommend consulting with an attorney specializing in estate planning.
• Before meeting with a lawyer, think about what is important to you. We encourage our clients to talk with us to learn how their financial and estate planning goals interact and to help prepare them for the planning process.

When?

• Now: get a plan in place that covers the essentials – details can be addressed later.
• Later: revisit the plan periodically and after key life events, such as marriage, divorce, birth of child, inheritance, moving to a different state, significant health issues. 

Did you know?

•   A common misperception about estate planning is the belief that having a will allows your estate to avoid probate – that is not the case. Furthermore, probate can cost in excess of 3% of the value of the estate while legal fees for setting up a trust, wills, health directives and powers of attorney can cost as little as a few thousand dollars.

•   Depending on where you live, you may be able to title real estate and/or cars so they directly “transfer on death” (TOD), thus avoiding probate without using a trust. However, according to nolo.com, only eight states allow both real estate and vehicle TOD designations (Vermont, for example, allows it for vehicles, but not real estate).

•  Laws relevant to estate planning change frequently at the federal and state levels. In 2018, the federal lifetime exemption more than doubled from $5.5 million to $11.2 million per person. In 2020, the Vermont estate tax exemption will increase from $2.75 million to $4.25 million before stepping up to $5 million in 2021.

Source: nolo.com