Ready for a sobering reminder? It’s nearly halfway through 2022. It appears time is flying by, and soon it will be the Fourth of July. Summer is upon us, and you don’t want to wait until fall or winter to get your estate plan drafted, if you haven’t done so already.
In this article, we’ll discuss the potential ramifications of not having an estate plan, in the hopes of motivating you to get going on this vital legal toolset. Also, if you have an estate plan, you’re not off the hook—there are some maintenance recommendations you should follow.
There is a reason that estate planning is a process often associated with the wealthy: estate taxes. Federal estate taxes only really impact the super-wealthy, as the exemption is $11.7 million. That said, inheritance and state taxes are two other matters. Estate taxes are paid by the deceased’s estate. Inheritance taxes are levied on the heirs of the deceased. Though Florida does not impose either of these taxes, you’ll have to pay quite a bit if you qualify for the federal estate tax.
Estate planning can help you legally maneuver around these taxes through trusts, irrevocable gifts, joint accounts, and more. These remove assets from the estate, but you’ll need a plan to actually execute these documents.
Time and Money Wasted
If you die intestate, your estate will have to go through probate court, an expensive, time-consuming process. While your estate is in probate court, no one can access your assets and carry out your wishes. They are, effectively, frozen until the courts comb through your estate, apply laws, pay debts, and make their own decisions about how to allocate assets. In Florida, probate takes between six and nine months on average. The probate cost ranges from $1,500 to 3% of your estate’s value, depending on the size. Having an estate plan can make this process far less time-consuming and costly.
What About Loved Ones?
As mentioned, when you die without an estate plan, the court makes decisions on your behalf. The court does not know you or your family, and their actions might not align with your wishes. Assets might be passed to the wrong heirs or creditors. Your minor children, if you have them, will get a guardian appointed by the court. This guardian may not have been the one you would have picked. An estate plan ensures your wishes are honored to the fullest extent of the law.
This isn’t just the province of daytime court dramas or Jerry Springer. Family disputes over inheritance and wills do occur, and they can get pretty nasty. An estate plan helps prevent these conflicts (or at least ameliorate them), as the plan will clearly and succinctly lay out what you want done with your assets.
You will be of sound mind when you create the plan, and you can communicate your wishes to your family. Let them express their feelings while you are still alive, as that will allow you to squash conflicts before they can take over the court system. An estate planning attorney is likely well-versed in settling these disagreements; he or she can help. Without an estate plan, your wishes are left up to interpretation (read: disagreement).
Maintaining Your Estate Plan
If you have an estate plan, good job! Note, you’re still not totally off the hook. According to Fidelity, the rule of thumb is to review your estate plan every three to five years. Conversely, you should review it when there is a significant life event (illness, death, marriage, new birth, etc.). Some people choose to go above and beyond, reviewing it annually or semi-annually.
Hopefully, this article has spooked you enough to motivate you to set up an estate plan. Without an estate plan, you won’t just inconvenience your loved ones after you die; you’ll also run into issues if you become sick or incapacitated. Contact an estate planning attorney today to learn more and get this process started.