I wrote previously about the likelihood that the Federal Estate Tax will be repealed at some point in the near future as a result of Donald Trump's recent election and the retention of the House and Senate by the Republicans. So, with threat of Estate Tax likely to no longer be an issue, you may be asking yourself, "What's the point of Estate Planning?" There's no great place to begin, so here it goes:
1. Your Kids Need a Guardian
If something happens to you (and your spouse/partner), someone is going to have to care for your children in your absence. Guardians are appointed either in a will or in a document that follows the same formalities of a will (signed, witnessed and notarized). This has nothing to do with taxes. Without a will (or stand-alone guardian appointment), the Clerk of Court will decide where your children will go. How's that sound? Not great, huh?
2. Your Family Needs a Game Plan
What should happen to your money, your things, your pets, your home, your debts? By this point, your family will have just suffered a great loss (YOUR DEATH) and the last thing they're going to want to do is to go on a wild goose chase trying to located all of your assets and debts, and determine what's supposed to happen to all of it. Have you ever helped settle an estate through the probate process? It sucks. You know what's worse? Settling an estate without a game plan or rule book.
3. Life is Going to Continue to Happen After You Pass
Disability, divorce, creditor issues - you never know what life will hand to your loved ones. No plan for your assets = no plan for your family's creditors or their need for supplemental support while on means-tested benefits. You wouldn't intentionally put your family at risk, so why would you roll the dice and hope for the best when you can take matters into your own hands and protect your family's future long after you're gone.
4. Your Family May Blow Your Hard-Earned Money
You've probably seen people in the news who have received large sums of money unexpectedly. It can be a curse. It can inhibit your children's personal and professional growth, it can lead to infighting between parents and children, or between siblings. And, to make matters worse, research shows that there is a strong likelihood that your family will not be responsible with this "found money." 1/3 of all inheritances are spent within 3 years. You can all but guarantee these were not smart spending decisions. No plan = no structure for your family.
5. Your Business Will Die With You
For many small business owners and solopreneurs, they are their business. If something happens to them, their business will crumble. If they don't have family members legally and physically capable of running the business, your hard works over the years will not just die with you, but any value it may have had will not be able to flow to your family. Creating a business succession plan, along with a Buy-Sell Agreement, can protect your business and your family's livelihood should something happen to you.
6. No Charitable Giving at Death
The Clerk of Court isn't going to donate to your church for you. If you want to leave value of any kind to a charity or nonprofit that is important to you, you're going to have to plan for it. Intestacy (the rules that control when you don't have a will) never provides for a charitable gift.
7. Your Child with Special Needs Won't be Protected
Complex planning is required in order to plan for the care and sustenance of your child with special needs after you're no longer able to care for them. You've supported them your whole life - what's going to happen when you're no longer there? You can't just hope for the best and assume someone will have the financial and emotional wherewithal to pick up where you left off.
Planning Still Matters Greatly
None of these issues have anything to do with Estate Taxes, and yet they are all incredibly important reasons to plan for the unexpected. If you care about your family, your business, and what will happen to both after you're gone, estate planning is the answer.