It is perplexing how few people sit down and organise their estate planning at any point in their lives. Unfortunately, more than 68% of Americans have no planning whatsoever which could be detrimental when they pass.
So, what’s all the fuss about? Why should you sit down and organise or update your planning? What’s the impact of not planning?
When I moved to the United States, back in 2013, meeting with local counsel to focus on our planning was top priority. Completing our planning was not driven by a desire to reduce our IHT (Inheritance tax), but on ensuring a smooth transition of wealth after our passing.
The first step in estate planning is to sit down with your partner or spouse and map out your objectives. What assets, if at all, do you want to go to your children, grandchildren or family members? Do you prefer to give to charity, and if so, which ones and in what proportions?
We have no control over our lives or that of our children, but by putting the right planning in place, we can make the unexpected easier to manage. When we updated our planning and put in place a living will and our health surrogates, we did not expect it would be something we would ever need to think about until
the unthinkable happened and my wife had a stroke. All of a sudden, I was asked about whether we had advanced directives in place, which fortunately we did. Imagine being in a situation, when you are at yourmost vulnerable and you need to focus on loved one, not financial and health plans. By that time, it may betoo late and steps taken may go against the wishes of your loved ones.
Putting a will or trust in place may have some tax benefits, but for the majority of people whose assets are below the lifetime gifting allowance, this is about passing on your legacy and reducing family conflict. Mostimportantly, it will keep your assets from getting stuck in a tax limbo, otherwise known as probate.
In passing assets to the next generation, you can plan to the level of detail that you desire but understand that this will take more time and hence be more costly. That said, you can prepare for the worst, such as your entire lineage being wiped out, so that your money goes to charity and not the IRS.
Most trust and estate professionals will approach your planning as a package deal: will, trust, health surrogate, durable power of attorney and advanced directives (also known as a living will). In many cases, the documents are cookie cutter to start until you begin personalising them.
It is important to have an independent advisor by your side to guide you through this process. We believe that having the insight into best practices and ensuring you cover all the bases is critical to complete planning.