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By Jeffrey R. Wolfe, Senior Vice President, Manager of Wealth Planning Strategies

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Today, October 19, marks the start of the National Association of Estate Planners & Councils (NAEPC) National Estate Planning Awareness Week, the thirteenth year of the campaign. The purpose of the week is let people know they need to implement an estate plan for themselves or assure that their plan is up to date. Doing so allows individuals to control their personal care, care for their finances, and secure how assets will pass upon death.

Unfortunately, the message is still falling short. According to the 2020 Estate Planning and Wills Study conducted by Caring.com, only 32% of respondents said they have one or more estate planning documents. Of those who do have documents, about 24% have a will, 13% have a living trust and only 6% have an advanced health care directive.

Not having a plan is troubling for two main reasons: 1) there’s no plan for what happens if you become incapacitated, and 2) there’s no plan for what happens to your assets at your death. As the Caring.com study confirms, given the fact that many don’t have a plan, your state government has a plan for you, and you probably won’t like it.

Incapacity is generally defined as the inability to make financial or medical decisions. This could be for a short period of time, say due to a car accident, or on a more permanent scale, like dementia. Regardless, your legal, financial and health care decisions will continue to arise, and if you haven’t chosen who will handle these affairs, and how, your state’s laws will control. In most states, this is referred to as a custodianship. Custodianships typically require court approval and ongoing oversight: a slow, expensive and generic “plan.”

To address these concerns, consider implementing financial and health care powers of attorney. In those documents you can name someone to make these decisions for you, without court involvement, and with a plan customized to your desires and needs.

Similarly, if you have no plan in place for your assets upon your death, often called dying “intestate,” again your state will decide where your assets will go. These state default rules generally do not follow what many intend. For example, many states stipulate that if a married person dies with a living spouse and children, then the deceased spouse’s assets must be split between the spouse and the children. In other words, everything doesn’t necessarily pass to the surviving spouse, an outcome often not preferred.

To avoid intestacy, you can create a will to stipulate where you would like your assets to pass upon your death. Another alternative would be to create a living trust, allowing you to avoid probate, provide some incapacity protection, and to stipulate how your assets will pass upon your death. There are other alternatives available like transfer on death provisions in accounts, naming direct beneficiaries in a retirement account or insurance policy, to name a few. Whichever mechanism for transfer that is ideal will be specific to you, so you need to actively implement a plan that meets your goals.

In short, use this week as motivation to create your own customized estate plan so that you take control of your incapacity planning and your legacy. If you already have an estate plan in place, use this week as a reminder to review your plan to make sure it is still appropriate for you. If you need help getting started, work with your financial advisor and your legal advisor to see what next steps may be right for you.

This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.

October 19, 2020 |