In the past few years, many services have sprung up that offer to help people create their own estate plans—such as by offering them downloadable forms. These services are often inexpensive but also risky.
You can find a lot of advice on the Internet that will tell you that estate planning really is not that complicated. In a sense, that advice is correct. The core of estate planning can be very simple. However, that advice makes it too easy to be deceived into thinking that you can create your estate plan on your own without the help of a professional. What an individual client has to do to create an estate plan can be—and often is—simple, but that is only because experienced estate planning attorneys do most of the complicated work. Recently, the Northwest Indiana Business Quarterly discussed the problems of creating an estate plan on your own in “Dangers of DIY Estate Planning.”
The article discusses many potential pitfalls of creating your own estate plan, but they all essentially boil down to the simple proposition that if you do not have professional expertise in estate planning, then you are likely to make mistakes that could cost you and your family. These mistakes can range from very simple oversights, such as not knowing how many witnesses are needed to make a will effective, to very complex mistakes, such as failing to properly understand how your estate planning choices effect the taxation of your assets after you pass away.
It actually does not matter very much whether the mistake you make is simple or complex because dealing with the mistake will almost always cost your estate more money than you saved by creating your own estate plan.
Do not risk these mistakes. Meet with an experienced estate planning attorney to discuss your needs.
Reference: Northwest Indiana Business Quarterly (July 25, 2016) “Dangers of DIY Estate Planning”
If no changes are made, then eventually the Social Security trust fund will run out of money. One of the commonly proposed solutions is to increase the amount that the wealthy pay in taxes. But will it work?
Because of America’s changing demographics and aging population, it is expected that the Social Security trust fund will be depleted by 2034 if current trends continue. That does not mean Social Security will cease to exist, but the benefits given to seniors would have to be reduced to meet the program’s income. Politicians have proposed several different solutions to this expected problem. Recently, Trust Advisor looked at one of them in “Can Taxing The Wealthy Save Social Security?”
The reviewed proposal is a simple one: raise taxes. Currently, any income an individual makes that exceeds $118,500 is not subject to the payroll taxes that fund Social Security. Politicians have proposed eliminating that cap and taxing all income. According to the findings of the article, the proposal would not solve the entire problem, but it would reduce the expected shortage by 88%. However, that number has been disputed. If different assumptions are made, then different results can be produced concerning the effectiveness of the plan.
Something will have to be done about Social Security, and it is likely that many different solutions will be offered in the coming years. It will be important to continue to assess whether the proposals could be effective or whether they are merely being made for political reasons.
Reference: Trust Advisor (July 14, 2016) “Can Taxing The Wealthy Save Social Security?”
Even though you might not realize it, you do have an estate. You should plan for what will happen to it.
The word “estate” conjures up certain ideas in the popular imagination. The term has connotations of mansions with well-manicured lawns. Estates are where the very rich live secluded from the day-to-day world of ordinary people.
The Rockefellers and Carnegies of the world had estates. People of more ordinary means do not think that the term applies to them.
However, as Detroit Lakes Online points out in “Help your loved ones: Get ahead on estate planning,” almost everyone alive has an estate.
Estates are not just something the very wealthy have. The term refers to the totality of everything you own when you pass away. Even if you live alone in a small apartment, you have some possessions. Homeless people often own something, even if it is nothing more than the clothes they wear. In fact, very few people can claim not to own anything at all.
The fact that you have an estate, no matter how large or small, means estate planning is appropriate for you. Estate planning lets you determine who gets all of the possessions that make up your estate. It also lets you plan for who will handle things for you should you be unable to handle everything for yourself.
Even if you do not care who gets your possessions or who handles your affairs, you probably have people in your life who will care. If you do not make those plans, then they will have to clean up a potential mess and have a much more difficult time doing so.
Unfortunately, that mess likely will be cleaned up in court—unless you take steps now to plan around it.
Reference: Detroit Lakes Online (July 5, 2016) “Help your loved ones: Get ahead on estate planning”
The next few decades will see a tremendous transfer of wealth from one generation to the next and then to the next. It is important to have an estate plan to make sure that everything goes smoothly within your family.
In the next few years an extraordinary amount of wealth is expected to be transferred to the Baby Boomer generation by their parents. It is then expected that the Baby Boomers will be retiring in ever greater numbers and passing that wealth on to their children as Huffington Post Canada discusses in “Estate Planning For A Significant Demographic Shift.”
While the article is about Canada, the exact same shift is going to occur in the U.S.
This demographic shift and the transfer of wealth it will bring makes estate planning more important than it has even been at any previous point in human history. Americans are more prosperous than any other people in history. Billions of dollars’ worth of real estate and financial instruments will be changing hands between generations.
Families that have not planned regarding how that generational transfer will occur risk losing a lot of wealth, if not all their wealth, as the legal system sorts out who gets what. In Maryland, in 2016, if you leave more than $2 million to your heirs, without estate planning, you will pay estate taxes on every dollar over that threshold. And the $2 million includes the total value of your home, regardless of your mortgage. With the cost of housing, life insurance policies or retirement accounts easily could make you eligible forMaryland estate taxes. Your children may have to sell the family home you leave without careful estate planning. To learn strategies for leaving more to your children and less to Maryland estate taxes contact my office.
Since you know the transfer of wealth will occur, make plans for it. Decide now how your assets will be transferred to your children and other heirs.
Planning for it will take a lot less time and cost a lot less money than not planning for it and letting the next generation sort it out with the assistance of probate courts.
Reference: Huffington Post Canada (July 11, 2016) “Estate Planning For A Significant Demographic Shift”
Adults who have never been married and who do not have children often think that they do not need estate plans, especially if they are not wealthy. However, estate planning is for everyone, and even lifelong singles can benefit from having an estate plan.
A common misconception is that if you are a single adult with no children, you will not need an estate plan.
Recently, the NWI Times wrote about one such case in “Single childless adults need to plan too.”
As the article points out, if such a person passes away without an estate plan, his or her assets will go to the closest living relative. That means if either parent is still alive, then the parent will get everything.
For some this default approach might be acceptable, but others will want estate plans so their possessions can be inherited by friends or other family members.
Power of Attorney – Maryland
Estate planning is also not only about what happens to your possessions after you pass away. One of the most important aspects of estate planning is determining who handles your affairs if you become incapacitated and are unable to handle them yourself.
You need a general durable power of attorney in Maryland so someone can handle your financial affairs and a health care power of attorney in Maryland so someone can make any necessary health care decisions. Because you are an adult, your parents will not have an automatic right to help you and handle everything.
Thinking about death is not enjoyable, but just because you do not have a spouse or a child does not mean you do not need to think about it at least long enough to get an estate plan.
Reference: NWI Times (July 17, 2016) “Single childless adults need to plan too”
Some people wonder what time of year is the best time for them to get estate plans. There are several possible answers.
At first glance it might seem like an odd question, but it is one that gets asked with some frequency: What is the best time of year to plan for my estate?
The simplest and probably best answer to that question is that the best time to plan for your estate is whenever estate planning is on your mind. If you are thinking about getting an estate plan, then you should do so no matter what time of year it is.
As the Lowell Sun points out in “Summertime is right time for estate planning,” other answers are also possible.
The article suggests that getting an estate plan in the summer is good because many estate planning attorneys also handle real estate transactions. The summer is generally a slow period for real estate, so attorneys might have more time to focus on your estate plan.
That is all true, but many attorneys only do estate planning and elder law so the advice might not be applicable for the attorney you want to use.
Getting an estate plan when you do your taxes is also considered to be a good time of year since you will already have many of your financial documents easily accessible.
The best answer, however, is still the first.
If you are thinking about getting an estate plan, do not worry about what time of year is best to get one.
Get an estate plan as soon as you think about getting one.
Reference: Lowell Sun (July 17, 2016) “Summertime is right time for estate planning”