It should come as no surprise that, as an estate planning attorney, I feel like everyone should have a proper estate plan put in place. I’ve been to court more times than I can count over people who died without ever having created an estate plan or who failed to manage and update their plans as their lives changed. The resulting consequences have ranged from unpleasant and frustrating to nightmarish for the families of those who died without proper planning and it adds insult to injury when the family often discovers how easily many of these issues could have been avoided. I believe in the old saying “an ounce of prevention is worth a pound of cure” and I rarely miss an opportunity to caution someone about the potential pitfalls they can run in to if they don’t plan ahead of time for either a loss of mental capacity or their own passing. I find that I frequently hear five different reasons why people haven’t put an estate plan in place and, to be frank, all five of them are misguided. I’d like to offer an attorney’s rebuttal to these reasons and hopefully allows readers to give some thought to their own estate and the need for proper guidance and planning. There’s a good chance that your family will appreciate it later on.
Reason 1: “Estate Planning is For Rich People”
Out of all of the reasons I hear, I feel like this one upsets me the most. Estate planning has gotten a reputation among the average person for being only for the wealthy and they believe that it exists only to help millionaires and billionaires shelter their money from taxes, particularly the estate tax, or set up elaborate trusts and estate plans to make sure their vast sums of money are managed in incredibly complex ways to keep building on itself forever. The truth is that the vast majority of estate plans out there will not be drafted to account for the Illinois or Federal Estate Tax. In Illinois an individual gets a lifetime deduction of 4 million dollars for the Illinois Estate Tax and a lifetime deduction of 11.4 million for the Federal Estate Tax (22.8 million for married couples). In keeping with those numbers the vast majority of individuals will not have to worry about the Illinois Estate Tax and even less will have to worry about the Federal Estate Tax (It’s estimated only .07% of estates will have to pay the Federal Estate Tax). As for other taxes, a good estate plan and accounting advice can help one get the best possible tax treatment they can under the current tax laws, but to “dodge” taxes is unethical and most estate plans can be unwound by the government if there are taxes that need to be paid. Don’t get me wrong, wealthy individuals do need special estate tax planning to make sure they receive the best tax treatment they can, but, whether wealthy or not, all properly executed estate plans serve the same purpose, to help someone set up there affairs for when they pass away or as a contingency for if they are incapable of making their own decisions. These are concerns that everyone should plan for, regardless of income.
Reason 2: “I Don’t Have Anything to
Put in a Will/Estate Plan”
A lot of people I talk to feel like they don’t have “anything of value” to put in a will or an estate plan. While there is objective “value” like money, real estate, or stock in a corporation, there is also subjective value like personal effects, family heirlooms, and items of sentimental value. One of the first estate plans I ever drafted was for a man who had a net worth of close to zero, but had a multitude of personal effects from a long and storied life he had led to give to his children. His estate in this instance, consisted of things like articles of clothes, mail he had received, and personal knickknacks he had picked up throughout his life. The cash value of all of these items was almost certainly minimal, but his family was extremely grateful to receive the items he had left them. They had meant the world to my client and, perhaps because they knew how much my client treasured them, they meant the world to his family. When I hear people say they have nothing to leave via a will or estate plan, I challenge them to really think about everything they own and tell me if there is truly nothing they wouldn’t mind their family losing forever. I find after people give this matter thought they come to surprising realizations. There are some items in our lives that don’t fit into the standard definition of wealth and finance, but are invaluable all the same.
Reason 3: “I Can’t Afford an Estate
feel that misinformation regarding attorneys is the root cause of people saying
they can’t afford estate planning. We’ve all heard about the “$2,000.00 an hour
lawyer” or some friend who had to “sell everything they own” to pay legal fees.
The truth is, not all lawyers charge the same and the pricing structure for
different fields of practice can be radically divergent. The price for estate
planning documents can vary depending on the experience and knowledge of the
attorney, the complexity of the estate plan, and how much time and preparation
goes in to drafting some of the more complex documents, such as trusts. Many clients
find, however, that simple wills and powers of attorney are relatively
affordable. Further, even if it’s an upfront cost, not setting up a proper
estate plan can be far more costly for one’s family down the road. It’s
generally more expensive to go through the probate process then to draft a will
or other basic estate planning documents. When considering the cost of estate
planning it’s important to keep in mind that the goal of the estate plan is to save money in the long term.
4: “I’ve Heard the Law Gives Everything to My Wife and Kids Anyway”
I often hear people say “I just want to give half of my things to my spouse and the other half to my kids”, doesn’t Illinois law do that anyway? The too short to be entirely accurate answer is “yes”. Illinois law provides for people who died “intestate” (meaning no formal estate plan was put in place) and provides for half of their belongings to go to their children and the other half to go to their spouse. Seems simple enough, but the reality of this is often more complicated. What happens when the spouse/descendants want to get in to the deceased’s bank accounts and the bank turns them away? What happens if there’s a house that needs to be retitled? What happens if an unexpected creditor comes forward saying they’re entitled to some of the deceased’s belongings? What happens if there is a disagreement amongst your family about how your assets are to be distributed or when? Any number of things can go wrong during the administration of one’s estate and the best solution is often to open a probate, or a probate will be required by law. That means that whoever wants to administer the estate will have to post a surety bond with the court before they can begin the administration process (similar in some ways to a posting a bond to get out of jail). That bond is twice the value of the estate if you wish to post it yourself or 1.5 times the value if a bond company posts it for you…and charges you a hefty premium. It can become extremely expensive and often eats up much of the estate’s value. Also, if the administrator doesn’t hire an attorney they can be personally liable for not fulfilling the legal requirements of a probate. So the longer answer is yes, but the process goes much smoother if there’s at least a will in place, even if the distribution of your estate would be the same.
5: “I Don’t Want to Share my Finances/Assets With an Attorney Because He/She
Will Judge Me”
I take it back, this response is the one that upsets me the most, and it’s one I have heard more than once. I’ve drafted estate plans for clients who have millions and for clients who have only a few personal effects, like the example I gave above, and I have never judged anyone for their supposed financial value or “lack thereof.” We all have different lives and different stories and I recognize that when working with my clients. No two estate plans are exactly the same because no two people are exactly the same and I always tell my clients that what they say to me is kept in the strictest confidence and I don’t judge them for how they want their estates distributed or for what they wish to have distributed. I can only speak for myself but this fear, at least as it pertains to me and I imagine most other lawyers, is unfounded and is a terrible reason to forego speaking with an attorney to go over estate planning.
this article helps people rethink their needs for estate planning. If you want
to talk about drafting an estate plan or even go over general questions feel
free to contact me at 815-239-0200 or at email@example.com. We
here at Lythberg Law have knowledge and experience on our side with regards to
estate planning and are ready to help you take the next step to protect you and
your loved ones.
Date and conclusion taken from The Tax Policy Center webstite: https://www.taxpolicycenter.org/briefing-book/how-many-people-pay-estate-tax