5 Reasons Why You Can’t Afford to NOT Have an Estate Plan
Sometimes people realize how important estate planning is to do, but they think they just can’t afford the time or the dollars to do it right now. There’s a lot going on in their lives and doing their estate planning just keeps getting put on the back burner.
But it’s important to keep in mind that there’s a cost to not doing your estate plan that will likely outweigh the cost of actually doing one. There are real-life consequences of not having an estate plan in place like the lack of protection for you and your loved ones and the costly expenses the estate will incur down the line.
While it’s true that each estate and family are unique, the following is likely to happen if you don’t create an estate plan:
1. Your estate will go through probate court. If you don’t have any estate planning, or if you only have a will, your estate will have to go through the probate process when you die. Probate is a court-supervised proceeding in which a will is verified (if there’s a will), assets still titled in the name of the decedent are identified and appraised, and debts and taxes for the estate are paid.
Probate can be a slow process that takes a lot of time. It can take 12-18 months, or even more if someone is contesting the distribution of the estate. That means the people you want to inherit your assets, will have to wait quite a while to get them.
Probate can be quite costly. There are attorney’s fees, accounting fees, court fees, appraisal costs, surety bonds, and possibly executor’s fees. All of those costs will be taken out of your estate, leaving less for your loved ones.
Probate makes your estate public. Once your estate is filed in the probate court system, your estate becomes public knowledge. In general, what goes through probate is a matter of public record–meaning your personal, financial matters can be seen by anyone who asks.
Probate can cause your family anxiety and frustration. Losing a loved one is an emotional experience. It’s a lot to ask that your family deal with a challenging court system while they are grieving. Research data has shown that 40% of people saw their mental health decline while dealing with administrative tasks associated with bereavement.
The expense, time, and frustration of probate can be avoided by doing a trust. When using a trust, when you die your assets pass directly to the people you choose, without the need for any court process. When you’ve done the proper estate planning, all of the issues associated with probate are avoided.
2. Your estate may pay more in estate taxes. In 2023, the Massachusetts estate tax exemption is $1M. When you die, if your estate (gross amount plus taxable gifts) is valued at $1M or under, your estate pays no estate tax. If it’s valued at over $1M, your estate is taxed on the ENTIRE amount, not just the amount that is over.
With the cost of real estate property rising in the past years, it’s not difficult for estates to exceed the $1M threshold. In addition to real estate, your estate may include:
- Annuities
- Life insurance proceeds
- Business interests
- Retirement accounts
- Vehicles
- Stocks and bonds
- Bank accounts
- Equity in real estate
- Personal property
You’ve worked hard for the assets you have. Your goal is likely to pass your assets on to your loved ones, not the state of Massachusetts. By planning ahead with the right estate planning, you may be able to lower the tax burden on your estate to reduce the chance estate taxes will be owed when you’re gone. By doing this, you’ll be able to pass on more to your loved ones.
3. You’ll lose control over who inherits your assets. If you die without any estate planning, you die intestate. Marital status, children, and living relatives are all important factors in determining who inherits. That means your assets will be distributed by the court according to Massachusetts intestate succession law, without any regard for how you want your assets to be distributed.
If you have young children, not doing an estate plan that protects them could cause some issues. If when you die you have children who are very young adults, they will get their inheritance all at once. So, if you have a 21-year-old son, he could inherit a good amount of money even if he’s not good with finances. It would give him the opportunity to frivolously spend his inheritance quickly in a way you wouldn’t approve of. This could lead also him into some trouble as he could become a target for people to take advantage of.
4. You’ll lose control over what happens to your minor children. In the best-case scenario, your children will still have your spouse or significant other to care for them. Without that person, they may be left with your parents or siblings. However, would those be the people you would want to raise your children? Your children could end up in the custody and care of someone you would never want.
Your children could also be placed into the care of Child Protective Services. Even if it’s temporary, it’s still not something you want your children to have to go through.
5. You’ll lose control over your medical, financial, and legal decisions if you become incapacitated.
It’s something nobody likes to think about, but it’s essential to have a plan in place just in case you ever become incapacitated by an accident or illness—even if it’s only for a short period of time.
If you’re unconscious in the hospital after an accident, who would make medical decisions for you? If you’re unable to pay your bills, who would take care of them? Without having a health care proxy and a power of attorney, your family would have to petition the court to appoint a guardian or conservator to manage these matters and others for you. The court process can take quite a while, cost a good deal of money, and cause some trauma for everyone.
If something does happen to you, you want someone you trust to be able to step in immediately. You can name the people you trust in legal documents and provide them with guidelines on how to make decisions according to your wishes. This is especially important when it comes to your medical care and even an end-of-life situation.
So, Why Are You Procrastinating?
There are many benefits that doing an estate plan will provide you. Putting a plan in place can save your estate money and will work to best protect you and your loved ones. As a skilled Massachusetts estate planning attorney, I can work with you to create an estate plan that meets your goals and wishes. Contact us today for a free consultation.
