Top Ten Reasons to Complete Your Estate Plan

by Jason Hanna and Blaire Farine

Estate planning is not only for millionaires. There are numerous reasons to create an estate plan that have absolutely nothing to do with how wealthy you may or may not be. Some of the most common reasons we see include owning your own home, having special needs heirs, having minor children or grandchildren, having adult children who are married or may be facing divorce, having been divorced yourself, owning your own business, or expecting to receive an inheritance from a loved one. If any of the above describe you, then you should seriously consider planning your estate today, regardless of its value.

To help you plan your estate, the following are some critical issues that should be on at the forefront of your estate planning discussions. These are what we call the Top Ten Reasons to Complete Your Estate Plan.

  1. Blended Families. Current studies show that roughly 40% of Americans are forming blended families in 2020, that is where at least one spouse has children from someone other than the other spouse.[1] Perhaps there was a first or second marriage or perhaps children were born to each of those marriages and Dad is now reconsidering a third marriage. Whatever the scenario, proper estate planning must account for the rights of the intestate heirs and special precautions are often needed to protect the children’s interests. Conversely, if your primary interest is making sure your spouse is cared for should something happen to you, with minimal interest in protecting the inheritances of any children from a prior marriage, then again, estate planning must account for the various competing interests coupled with your wishes for your estate. With blended families, not planning your estate can lead to disastrous effects for your surviving spouse and children.
  2. Incentivize Heirs. Estate planning can be used to encourage or incentivize your children or grandchildren to achieve certain life goals you feel are pursuit worthy. For instance, a grandchild’s inheritance can be conditioned upon his or her successful completion of a four-year degree or vocational training. You can also guard against the possibility that the inheritances are spent unwisely or otherwise squandered, by dolling out fractional portions of the inheritance over a stretch of years or at certain milestones in life, such as the birth of a child or purchase of one’s first home. With proper estate planning, you can ensure the inheritances you leave your loved ones is spent prudently and wisely.
  3. Maintaining Control. With your estate plan, you can designate who will manage your financial affairs if you become disabled. You can also designate who will manage your affairs when you die. If you have minor children, you can decide who will raise them and even how if something happens to you. If you do not designate these individuals yourself, then a court of law will do it for you. It is often better for us to make these types of decisions ourselves, instead of leaving it in the hands of others. Thorough estate planning allows us to better control how we want our estate to be handled.
  4. Medical Costs. According to the US Department of Health and Human Services, someone aged 65 years or older has about a 70% chance of spending some amount of time in a nursing home prior to their passing.[2] The costs of long-term care can be disastrous to the estate we intend to leave to our heirs, often costing more than $100,000.00 per year. As a result, many Americans rely on Medicaid to finance their long-term care, especially for conditions such as Alzheimer’s Disease or other dementias. However, the Medicaid Estate Recovery Program also presents complications for those leveraging Medicaid benefits to defray the costs of long-term care. Luckily, estate planning can tackle these challenges and help preserve and protect your hard-earned life savings, both for the spouse of an ailing senior and for their heirs.
  5. Special Needs. If your loved one has special needs, then he or she may qualify for certain state and or Federal benefits programs on account of the disability. However, if that same individual were to then receive a cash inheritance, then there is the very strong possibility that the individual would be kicked off any means-tested benefits programs he or she may be qualified for such as Medicaid or CHIP. Proper estate planning can provide a special needs trust for your loved ones that will prevent their inheritances from negatively affecting their receipt of benefits. More reading is available on special needs trust on our website, Special Needs Planning.
  6. Probate Court. A common misconception is that no probate is needed if an individual writes a will prior to their passing. This is the furthest thing from the truth. Once an individual dies, his or her will must be given to the court.[3] Whether probate needs to be opened on the estate is another matter altogether, but the important point is that if you write a will, your loved ones must offer it for probate after you die. If you want your estate to avoid probate upon your death, then a revocable living trust estate plan or other special actions may be needed to stay out of probate court.
  7. Preserving Protections. If a loved one left you an interest in trust, it is likely shielded with protections from lawsuits, divorces, and other creditor claims. Those protections are valuable and can be preserved for the future benefit of your heirs, but expert legal guidance is needed to ensure those protections remain intact. In other scenarios, you may have a power of appointment over those trust funds, or the power to decide who benefits next from the trust. If you do not exercise that power, the default provisions of the trust will kick in, sometimes awarding portions of the trust estate to individuals that would otherwise not inherit, such as former spouses or in-laws, creditors, or the IRS, and oftentimes terminating any protections afforded by the trust instrument. Thus, receiving an inherited trust is often strong encouragement for getting one’s own house in order and finalizing your estate plan, because trust beneficiaries quickly realize they want the same asset protections created by the trust for their own heirs. More reading is available here: Asset Protection.
  8. Challenges. Just about anyone can challenge your estate plan after you die, provided there are justifiable grounds to do so.[4] However, your estate plan can be drafted to discourage or sometimes outright prevent challenges to your estate plan.Establishing a revocable living trust can also provide a more robust defense of your estate plan if you suspect the possibility that it may be challenged upon your death. Expert legal guidance is needed to ensure your goals are met in these often complex and sensitive situations involving a potential and foreseeable challenge.
  9. Remarriages. If your spouse is younger than you, it is important to consider the possibility that he or she may remarry after you pass away. When this happens, the inheritance earmarked for you and your spouse’s children may become jeopardized on account of the new marriage and the legal rights of the new spouse. An effective estate plan can protect your surviving spouse and ensure that the inheritance does not pass to the surviving spouse’s new spouse. Proper estate planning can ensure the inheritance passes to the children as often is originally intended.
  10. Charitable Giving. Charitable giving is sometimes hard to do, especially with the constraints and restraints of modern living. Nevertheless, charitable giving is an important aspect of all our lives that is sometimes overlooked when completing an estate plan. A thorough estate plan can help make charitable giving easier, and depending on the value of your estate, there may be some substantial tax advantages to doing so.

Many of these Top Ten Reasons to Complete Your Estate Plan may be a good starting point for you and your attorney to discuss these critically important issues affecting you, your estate, and those you leave behind. Not everyone is affected by each of these Top Ten Reasons, but chances are you are affected by at least one. If so, call our offices today for a legal consultation to discuss these issues and their effect on your estate plan.