My Parents Didn’t Have an Estate Plan, Why Do I Need One?

No two people are the same, meaning no two estate plans will look the same, either. But when it comes to making your own, it’s natural to compare your needs with others. You may find yourself thinking:

• “Our dad didn’t have a trust, so why would I need one?”
• “My best friend’s mom got by with just a will, and everything turned out fine.”
• “My grandma’s estate didn’t need to go to probate court, so why should I worry about it?”

The reality is your estate plan should reflect your individual needs—not others’. Remember, there are three core planning elements to keep in mind when establishing a tailored estate plan: honoring intent, maximizing efficiency, and minimizing taxes.

So, why are we saying you could benefit from a custom estate plan when others before you have skated by without one? Great question; let’s discuss.

You Might Not Realize How Much You Actually Have

One of the biggest reasons people don’t create estate plans is because they’re under the impression they don’t have or make enough to warrant one. But for most, that’s an oversimplification.

If you’re still doubtful about your need for an estate plan, make a list that includes the following:

• Assets you own: Houses, cars, a business, boats, art, or other collectibles.
• Your investments: Retirement accounts, brokerage accounts, real estate investment trusts, etc.
• Life Insurance: This is often overlooked.
• Any other income: Savings account, bank accounts, annuities, insurance policies, etc.

Once you get a clear picture of what you have, it may be easier to understand the benefits of a custom estate plan.

Estate Plans Aren’t As Simple As You Think

Just because your intent is simple doesn’t mean your estate plan will be simple.

Most people want to keep things easy from a distribution standpoint. For example, if you die first, the assets go to your surviving spouse before being split evenly among your children.

This is a relatively straightforward request, but the process of actually getting those assets to the right people efficiently may not be as easy as you might assume.

Why? 

Because there are several ways to achieve your distribution goals. Working with an estate planning attorney, tax professional, and financial professional is critical during the estate planning process. They’ll help review your options and find an appropriate path forward to help you meet your needs.

As you get started, ask yourself some questions like:

• How can I make the process efficient and streamlined for my family?
• How can I minimize the overall tax impact of the wealth transfer process?
• Does using a trust to put parameters on an inheritance make sense?
• Should I try to side-step probate as much as possible?

How you answer these questions can serve as a springboard for your estate plan.

Three Core Estate Planning Principles to Evaluate

Remember, your estate plan often hinges on three driving tenets: intent, assets, and circumstances.

Understanding each helps your estate planning attorney determine the type of wealth transfer vehicles that could be best for you, like a trust, beneficiary designations, joint ownership, etc. The combination of your intent, assets, and circumstances tends to dictate the extent to which you need to include the tools in your plan.

#1: Intent

As mentioned, your intent could be simple. Even so, it’s important to put your final wishes in writing. Will everything go to your spouse, or do you want to donate a portion of your assets to charity? If you have a blended family, will all children receive an equal share of your estate? 

Essentially, you must decide what you want to happen to your assets after your passing. To take it a step further, consider why your chosen action is important to you.

#2: Assets

Next, consider the assets themselves. What do you have in your possession, and how would you like each one accounted for in your estate plan? For example, you likely won’t handle the transfer of an IRA the same way you’ll manage a life insurance policy.

It can be helpful to divide your assets into two categories: easy money and hard money.

Easy money: This refers to assets with little or no tax consequences during the transfer process. Examples include real estate, savings accounts, and life insurance policies.

Hard money: These assets will likely have tax consequences when distributed after your passing. Examples of hard money include IRAs, annuities, and 401(ks).

In general, easy money may be most easily transferred through joint ownership or naming a trust as the beneficiary. On the other hand, hard assets tend to benefit from naming direct beneficiaries (like a spouse or child).

#3: Circumstances

Your estate plan should reflect your unique circumstances. Common examples of things that impact your final intent include the relationship you have with your children or step-children, if there’s a charity you’re passionate about, or if your grandchildren are under 18, etc.

This is why it’s imperative not to create an estate plan based on what you’ve seen others do in the past. Everyone’s unique, and to operate efficiently, your plan must reflect your final wishes.

Why Developing a Relationship With a Trusted Professional Can Help

All of this to say, estate planning isn’t necessarily an intuitive process. It’s hard to get all the information you need to make an informed decision, and that can cause anxiety for loved ones left behind.

At Legacy Wealth, we’re always here to serve as a resource for you and your surviving family. We understand the importance of having a trusted professional to prevent anxiety at a time when your family is already emotionally and financially overwhelmed. 

Wherever you are in the estate planning process, please don’t hesitate to give us a call. We can connect you with an estate planning attorney who can review your current state of affairs and provide tailored guidance.

Disclaimer

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.