New Years Resolutions
No one thinks to add estate planning to their new year’s list. Lose weight. Exercise more. Eat better. Maybe take on a hobby. New Year’s Resolutions come in different shapes and sizes but at their core, represent a desire to make ourselves better in one way or another. One person’s “better” may mean being thinner or more fit, while another’s may be living a healthier lifestyle or being more well-rounded.
It is rare for someone’s New Year’s resolution to include the words “estate plan” or “long term care plan” but to be honest, it should be a much more frequent desire. Deciding to be proactive about setting up (or updating) your estate plan or long-term care plan requires one to think about getting older and eventually, (gulp) dying. We are all going to die one day. There, I said it. One hundred out of one hundred people are aware of this fact of life but only a fraction are proactive in creating an estate plan. The excuses for why people do not plan are plentiful. Most people give some version of “I don’t like thinking about that stuff.”
I certainly can empathize with those that feel that way. After all, I spend my entire day talking to clients about the realities of getting older and eventually, not getting older. It is no more fun than talking about root canals or chest pains but unlike situations involving acute pain and discomfort, there are no obvious signs that you (a) you need to have a comprehensive estate plan and (b) you need to make sure it is up to date and reflects your stage in life.
When Estate Planning is Avoided
Make no mistake, failing to plan for an advancing age and for death can be much more painful to your family down the road than a toothache or chest pains and is more similar to failing to save a nickel for retirement. Consider the following reason to add estate planning to the top of your to do list:
You already have an estate plan and long-term care plan. Did you know that? It’s true. In New York, there is already a default plan in place for each and every one of us. When it comes to estate planning (who gets what when we die), New York law states that your assets, absent other direction by you, will pass to a certain class of relatives. Which relatives? That depends on what your family tree looks like at your death. Most of the time it means the money goes to a spouse, children, or some combination of both. However, sometimes it means that money goes up to your parents, or to your siblings, or even to grandparents, uncles/aunts, cousins, and so on.
The problems start there. Absent a plan, your assets may go to your children. Well, what is wrong with that? If you are me, that means a 7 year old and 17 month old will inherit property and money. Not exactly a good idea. Now, before you start thinking that my children would put Toys R Us back in business with their inheritance, they wouldn’t actually have the money in their little hands just yet. Something worse would happen… they would turn 18 one day. Eighteen is the age of majority, not maturity. They would be considered adults and would be old enough to decide to waste the money I worked hard for on new rims for their car or decide college is maybe not for them, after all, they have money in their pocket.
We have had instances where the elderly mother inherited from a daughter who was spouse-less, child- less and estate plan-less. Not awful until you realize Mom was in a nursing home when her daughter predeceased her and thus, Mom’s inheritance threw her off Medicaid benefits and the inherited money was spent-down until she once again qualified for Medicaid, tens of thousands of dollars later.
Estate Planning Can Save You Money!
Having a comprehensive estate plan can avoid guessing games about who gets what, when they get it, how they get it, and even what they can do with it. It can mean making sure that beneficiaries of your estate get money at the right time, or even better, not at the wrong time. It is not uncommon for estate planning documents to have general provisions that will prevent beneficiaries under the age of say 25 to receive assets outright or for beneficiaries in skilled nursing facilities to be skipped in order to make sure that public benefits being received are not jeopardized. It can also mean avoiding a costly and time-consuming probate proceeding after death.
Estate Plans with an eye toward during life long term care considerations can likewise help protect assets so that your hard-earned assets are preserved for the next generation or for charities or whatever your plan happens to be. The default long-term care plan is spending all of your assets until you qualify for Medicaid to pay your costs. A well thought plan can protect your assets from long term care costs while allowing you to continue to enjoy and control your assets at all times. No, resolving to create/update an estate plan is not as headline grabbing as starting a new diet or joining a fitness center but the ramifications of having a comprehensive plan will positively impact you and your family for years if not generations to come. Believe it or not, resolutions are not mutually exclusive and you are not limited to one. Come April your diet may be long gone but an estate plan will stand the test of time.