As estate planning attorneys, we all know the many tax reasons to do estate planning. For example, doing annual exclusion gifts may reduce or eliminate state and federal estate taxes.
But, there are substantive reasons to plan, besides keeping the taxman at bay. It’s good to remember these reasons in order to remind clients and prospects of the reasons they need to plan, even if they aren’t concerned about taxes.
- Incapacity. This may be the most important reason to plan—for themselves! Without planning, health care decisions may not default to the people they want. By doing a Health POA, or similar document in your state, they can designate who will make decisions for them if they are unable to do so. Expressing their preference regarding end-of-life decisions typically is done in a separate document, which is also important. A Property POA would provide some incapacity planning for their property, even in the absence of a trust.
- Divvying Up Assets. This is often the first thing that leaps to most people’s minds, so we cannot leave this off our list of non-tax reasons. This is especially important if they are overriding the list of intestate heirs provided in the state. For example, if a prospect or client wants to leave assets to their unmarried partner, friends, or a charity, this simply will not happen without an estate plan.
- Avoiding Conflict. A well-drafted estate plan can go a long way to prevent family discord, especially when the assets are being divvied up in a non-traditional manner.
- Guardians. A Will is the proper place to nominate guardians to care for minors or incapacitated people (like parents or grandparents) close to them. While they may not care about taxes, they will likely want to protect those close to them.
- Managers. An estate plan is how you designate who is to control the assets left behind. This can be done with a continuing trust that is set up via a Will or a Trust. For example, they might leave assets in trust for a beneficiary until the beneficiary attains a certain age. Maybe they want their sister to manage the assets until the beneficiary reaches that age.
- Probate. In some states probate is a cumbersome process. It’s a very public process by its very nature. When clients and prospects discover the disadvantages of the probate process, many want to utilize a revocable trust during life to manage the assets. Many prospects know that an intervivos trust avoids probate at death. They may not know that a trust also assists with incapacity planning.
- Coordination. A good estate planning attorney will consider the coordination of the estate plan they draft for the client with beneficiary designations that have been or are suggested for certain assets. For example, if the client wants the assets to go 50% to A and 50% to B, simply stating that in the Will or Trust is not sufficient. If beneficiary designations leave the assets in a different proportion or to someone else, those designations will control and the wishes expressed in the Will or Trust will be thwarted. Most people are unaware of this fact.
While taxes are an important element of estate planning, especially for those subject to state or federal estate taxes, the most important reasons to plan are non-tax reasons. Remind your clients and prospects of the non-tax reasons to plan.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
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