Do you need estate planning? Estate planning is about so much more than documents. In this episode, I'm going to talk about 14 main considerations. Everyone needs to think about. Many of which I can tell you from experience, people don't think about.
But that's what this podcast is all about. Helping you make good decisions and choices through smart planning this is the smart planning 101 podcast.
From Honolulu, Hawaii. Aloha everyone. I'm Nicole Wipp, and I'm your host.
When people think about estate planning, the first thing that comes to mind is the what do I need? Do I need a, will a trust or neither? But the question of what you really need is actually secondary to the most important issue. Why do you need it? Because here's the thing, you are not a cookie cutter person with a cookie cutter family or cookie cutter finances. Your finances, your family, and your values and motivations are different than your sister, your brother, your neighbor, your best friend.
Each family, the dynamics, the money, the values are all different. So in this episode, I'm going to talk about 14 of the major considerations you should be thinking about when you're considering whether you should plan no matter what your age. Now just be aware, this is of course not legal advice. This is just general information and you really should get with a qualified estate planning or elder law attorney if any of these issues apply to you.
Number one is time. The question here becomes, does your family need access to the full amount of money that you have right away? Or do you want them to have full access? Do you want your family to be in control? Or do you not care if the court is in fact in control? Because without good estate planning, the control will be with the court versus control with your family.
The second issue is related to minor children, and or grandchildren. And their ability to receive money at a time that you can control. So the default is that if a minor child inherits, they're going to automatically get that money at age 18. Most people in my experience, absolutely don't want that to happen.
And so if you are a parent with minor children or you are a grandparent with minor children, even if you don't intend to leave the money directly to your grandchildren, but let's say you plan on leaving it to your child, and then only God forbid, if something happens to your adult child, will it go to the grandchildren? If the grandchildren are young. You want to be considering when you want them to be getting that money. And because the default is 18, if that's not what you want, you definitely need to get some estate planning in place.
Also, related to children is number three. And this is for people that are divorced, or unmarried with children. So if you are divorced or have an adult child that has been divorced and there are children involved, or you're just simply not married and there are children involved. One of the big considerations is if something happens to the parent, so you or your adult child with your grandchild, then, what's going to happen to your money as it relates to your child or those children. And the main thing that can, and most likely will happen is if you don't plan for it, then the other parent, the divorced parent or the parent that's not involved, is going to be in charge of that child's money.
And so if that's something that's acceptable to you, then I guess that's fine. But for majority of my clients, they would much rather leave the control of the money with somebody that is not the other parent. And if that's you, then you should definitely get some estate planning in place.
Also the issue of being married, number four and even with adult children. A lot of my clients that have adult children that plan on leaving their money to them, and if their children are married, don't stop to consider the fact that it is possible that their child could become divorced at some point. Or, if something happened to their adult child, that the money would automatically go to the spouse. Now absolutely, some people are fine with this. But a lot of my clients would much prefer to skip the spouse and go to the children, the grandchildren. Or they want to make sure that the money is used for the grandchildren.
And so if you don't want to inadvertently leave money to your in-laws. Or some of my clients would say, Outlaws, Then you should definitely get some estate planning in place.
All right, so that leads us to number five, which is about blended families. And so here we're talking his and hers, children, you. Have children from a previous marriage or relationship, and you're bringing those children into this relationship. And the problem here is that most families are not like the Brady bunch.
The Brady bunch, they all had each other's backs. They were really a close, tight knit family. We all grew up watching that. But that's not the truth of most American households today, especially when people get married later in life to one another, and they have adult children as blended families.
One of the things you want to consider. And this is actually one of the most ripe issues for litigation. It's one of the places where the hard feelings come in all the time. Is really thinking about how are we dealing with the, his and hers children issue. How are we making sure that our money goes to the people that we want it to? And how do we make sure that we're quote unquote fair to everyone involved? This is something that is really important to get right, if you don't want to have a bunch of bad blood left behind you at your death.
Number six is about having a life partner or no, not married, same-sex relationships, non-traditional households. These are all really important relationships that require good estate planning.
Because if you have a person in your life, that is not legally bound to you, then you must make sure that you're taking into consideration what you may or may not want to do for them upon your death. If you share a house, if you own the house and they live in it. If you want to make sure that there's money left behind for them, if you want to make sure that person is the one that helps make your medical decisions or make your financial decisions, if something happens to you while you're still alive. The issue of having life partners or being non-married or having non-traditional household is absolutely one where estate planning is necessary.
Number seven is about privacy. And one of the things that a lot of people don't think about is, how important is privacy to you? And this isn't really necessarily about privacy while you're alive, although that can come into play here, but it's also about privacy after you have passed. And what people don't realize is the vast amount of information that becomes public upon your death. If you don't plan to keep it out of the public arena and some of you might be thinking yourself I don't really have that much. And I don't really care, I don't have anything to hide, and my children are smart. They can handle things and I don't really care. I'm you know what happens after I'm dead? I'm dead. And all of those things, I understand why you might be thinking any of those things.
But here's the problem, there's a vast. Industry out there right now, you guys, that is completely geared toward preying on people after somebody has died and tricking them into giving money and all kinds of things. It's a very, very interesting and disturbing industry, but we get calls about it at my office every single day. And so why would you want to leave behind that kind of mess for the people that you love? Why would you want to put them in the position? Being potentially harassed, or tricked by these people who are quite professional in their approach, by the way. And so if you don't want to open your family up to privacy or a breach of their privacy, Then estate planning is very important.
Number eight is really about painful financial problems. We all know people in our families, every family has a person that's just financially irresponsible. You give a buck, they spend 10, they can't hold on money to save their life. It just runs through their fingers like water. We all have those people.
And so one of those questions is do you want to just leave money to them and let them run the money through their fingers, like water? Some of you may not care, but some of you may. If that's the case, then you want to be dealing with it through a good estate plan.
However, there are more important, and difficult, financial problems that a lot of families face that are like the secrets or the family. So family members with addictions, gambling problems, debt that's related to extreme poor decision-making. Things like that, where your adult child, you love them to death. They're a good person. This isn't about punishing them.
It's about recognizing the fact that they have some type of problem and that you may need to protect them from themselves by not giving them money to go out and wreck their life even further. And so if that is something that is on your mind related to one of your, or several of your family members, then absolutely good estate planning is right for you.
Here's a subject number nine, that's near and dear to my heart, which is being a business owner. One of the things that I find fascinating, is how few business owners have any type of estate planning. And certainly do not have estate planning that's geared toward protecting their assets or geared toward making sure that the right people are left behind to deal with the issues and the business that will necessarily be needed to deal with. Or not having the right people to leave behind to make sure that the necessary business issues that must be taken care of can be taken care of properly. So listen, if you are a business owner please do yourself a favor and get a state planning around your business in place because, that is definitely one of the places that we see a big gap in estate planning right now today.
Number 10 is about having disabled loved ones. So if you have a child with disabilities or an adult with disabilities, disability law is very complex. And you need to have the right plan in place. I have clients that come to my office all the time. That have plans that are nonsensical. For their disabled loved ones. And so really getting somebody that specializes in disability issues is really important. If you have disabled loved ones and you want to make sure that money is left behind to take care of them and to make sure that they have some decent quality of life after you're gone.
Number 11 is about nursing home poverty. And so this is slightly different than just having disabled loved ones. This is really about that time in your life later, where you may need nursing home level care. I talk about this a lot, and you can find a lot of information about this issue and other episodes that I've done. But the thing is that the rules and the law are very stringent when it comes to how you have to spend your money. And there are legal ways to get around the legal requirements, but you have to pursue those legal things. If you are at all concerned about nursing home poverty, then absolutely good elder law and estate planning is necessary for you.
Number 12 is about estate taxes. In today's world, if probably, even if you're listening to this podcast to state taxes, don't even apply to you because our estate tax limits are so high, at the federal level, especially that estate taxes are not going to be important to you now, for some of you, you may live in a state where the state tax limit is different than the federal estate tax limit. And you may have issues with the state taxes. So it's really important to understand that states and the federal government have different levels for estate taxes. You should know what your state's estate tax limits are. And you should find out if you are within them or if you're going to potentially exceed them during your life. That being said, state taxes fluctuate, right? And Congress can change the estate tax limit at any time right now, or a state tax limit is so high, it affects less than 1% of the American public. But in the future that could change. And so estate tax issues are not necessarily a one and done thing within your lifetime, and you definitely want to pay attention to a state tax limits in your state and at the federal level to make sure that you have the right estate planning in place in case it does affect you or your loved ones.
Number 13 is also about taxes, but from a different perspective, in one, that's actually way more important to most of you. And here we're talking about tax deferred investments. IRAs, 401ks, 403Bs. So one of the very interesting and complicated things, when it comes to death and taxes is the difference between estate taxes and income taxes. And when we look at assets like IRAs 401ks and 4 0 3 B's, these are tax deferred investments. That get our taxable upon distribution. Now, the law has been fluctuating on this issue over the last several years. And so what I can tell you though, Is that, uncle Sam is going to take far more money from you or your family member, in income taxes related to your tax deferred investments at death. Then you most likely will ever pay an estate taxes. So a lot of people, a lot of you, when you're thinking about taxes, your focus is on the wrong place. Your focus is on estate taxes and needs to be for most of you on income taxes from tax deferred investments. And how you leave those to the generation behind you.
And this is a topic that I'm definitely going to explore much more in the future because there's so many issues related to tax deferred investments that people just don't think about. And it's a subject that's really near and dear to my heart as an elder law attorney. So I want to just put a pin in that and tell you to keep a lookout for that episode. That being said. If you have tax deferred investments, you really should have good estate planning around those investments.
Number 14 is having non-disabled dependent adults. What do I mean by this non-disabled dependent adults. I am consistently shocked by the number of people that have adult children that live on them or that they give money to very frequently because the adult child, who's not disabled, has a dependency on the parents. And so this is a place of a lot of family pain. This is a place of a lot of difficulty. When it comes to needing longterm care in the future, there's a lot of things that are tied up with this.
But I will say that if you are a parent of a non-disabled dependent adult, It's really important that you sit down with a good estate planning attorney and have conversations about how that's going to be dealt with in the future, because this is also an area, where a lot of bad feelings and bad blood does crop up among family members upon death. Adult children don't talk about it that much while you're alive.
But it all comes flaring up upon your death and a lot of resentment and things like that come into play. So you want to have a good plan in place and make sure that you've put a lid on whatever kind of resentments that might occur and just make sure that your wishes are very clear about how you want that handled.
Okay. So that was 14 major considerations that you need to think about when it comes to the question of whether you need estate planning. And some of the things that I really recommend that if they apply to you, you make sure are handled within your estate plan.
These are just, to be clear, this is not an exhaustive or all inclusive list of things. These are just considerations that in my experience, get glossed over or completely ignored and most estate plans. And yet, when people are faced with these questions, they care very much about them. They do want them handled. They do want to talk about it. And they do want to have a proactive plan around them.
If that's you, if you're the type of person that likes to do smart planning, Then these are considerations that are absolutely going to make a difference to having a really good estate plan or having no estate plan and will also inform what you need when it comes to your estate planning.
Thank you so much for listening. And if you have a question that you want answered on this podcast or an idea for an episode, I would love to hear it. Visit smartplanning101.com/connect and make sure to subscribe.