The “No Estate” Myth!
Filed under: Blog, Estate Planning
With the troubled economic times we have faced, many people believe that estate planning will be unnecessary. They offer reasons, such as “My house is under water so there will be nothing left,” or “I don’t have an estate.” Especially savvy legal consumers might say, “My estate is worth less than $150,000 so no probate will be necessary.” However, even people in this “no estate” or small estate situation can benefit from thoughtful, advance planning.
Probate avoidance is one of the top-selling reasons for estate planning. The up-front cost of preparing the appropriate documents is usually significantly lower than the cost of administering a full probate estate. However, the misconception that probate avoidance is the sole reason for estate planning can lead people to avoid creating a will or power of attorney, which could help prevent significant family squabbles upon death or serious illness.
First, many people do not die suddenly and without warning, particularly in their old age. As a result, health care decisions must often be made by family members to determine the course of treatment, where to house their elderly, ill relative, and end of life determinations such as whether and when to “pull the plug.” These decisions are deeply personal and disagreements regarding them among family can lead to needless suffering and expense, or even lawsuits and broken family relationships. Creating a healthcare Power of Attorney allows you to direct who makes the decisions and to guide that person about your preferences in advance.
Secondly, while your ongoing health needs are being determined, it is possible that you will begin running out of money to pay for it. In this case, access to your accounts is vital. However, by simply adding another family member’s name to you accounts you may unwittingly disinherit the rest of your family. Additionally, if you own a home, your incapacity will hinder your family’s ability to sell it if they decide that they need the amount of the mortgage payment or the proceeds from sale for your care. Again, proper planning in advance can make the process simpler. In the case of advance Medi-Cal planning using a QMap trust or advance VA Aid & Attendance non-service connected disability pension beneift planning, using a QVap trust, you could even preserve some of the tax benefits of home-ownership for yourself.
Finally, even when considering the possibility of long-term illness seems overwhelming, it is still important to consider the immediate aftermath of your death. Regardless of how long your life has been to date, you have spent it accumulating things that you will leave behind. In Carly Simon’s hit “Like a River,” she sings, “Dear mother the struggle is over now/ And your house is up for sale/ We divided your railroad watches/ Between the four of us/ I fought over the pearls/ With the other girls/ But it was all a metaphor/ For what was wrong with us.” When your property is sentimental to your children and family, it is helpful to direct who should receive it or how the selection of property should be handled in disputes. Your funeral and last illness expenses should also generally be provided for through advance planning.
In sum, it is important to recognize that “estate” does not simply refer to the positive value of your assets and “estate planning” is not simply a method of distribution. Instead, it is a comprehensive method of helping your family cope with an already difficult and emotionally-charged time, while minimizing the possibility of intra-family squabbling.
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