When the calendar turns over, people look at the event as an opportunity to get a fresh start, and they make resolutions. You may resolve to try to overcome some unhealthy proclivities, and there are those that decide that they will tie up some loose ends once and for all.
As estate planning attorneys, we urge people to take action in 2021 to protect their assets and preserve their legacies, because procrastination is all too common.
Most People Are Unprepared
Caring.com has been conducting surveys on an annual basis over the last few years to measure estate planning preparedness. According to the 2020 study, 68 percent of American adults do not have any of the necessary documents in place.
You would assume that this figure is driven by very young adults, but this is not entirely true. Yes, only 16.4 percent of people between the ages of 18 and 34 have estate plans, but the figure is a mere 27.2 percent for individuals in the 35 to 54 age group.
The most surprising discovery may be the fact that most people that are 55 year of age and older have done nothing to prepare for this inevitability. Just 47.9 percent of these folks have wills or trusts, but at the same time, most of them say that estate planning is important.
Core Responsibility of Adulthood
When are going through life without an estate plan, you are shirking one of the basic responsibilities that you assume when you become a self-supporting adult.
Granted, if you have very sparse resources and no one is depending on you, it may not be a priority. This being stated, married couples and people in committed relationships have responsibilities to one another, and this dynamic is amplified for parents of dependent children.
Many people between 35 and 54 are the parents of minors, so the widespread unpreparedness among these folks is quite disturbing.
Estate Plan Basics
Even if you are relatively young, you should have a basic estate plan in place to provide essential protections. It will start with life insurance that will act as an income replacement vehicle, and you should name a guardian for your children in a will.
The plan should also facilitate effective asset transfers after you pass away. If you are a single or divorced parent, you have to account for the management of funds that would be inherited by a minor.
You should also include a document called an Advance Directive. In this document, you name someone to make healthcare decisions on your behalf in the event of your incapacity.
You should add a HIPAA release to give the agent the ability to speak freely with your doctors. Without it, they would be bound by privacy protections that are included in the Health Insurance Portability and Accountability Act.
Estate Plan Reviews
Estate planning should be viewed as a fluid, ongoing process. Your first estate plan will be based on the details of your life at that time, but the only constant is change.
Things that happen to you personally can trigger the need for estate plan updates, and changes to relevant laws frequently come down the pike.
For example, the estate tax exclusion is the amount that can be transferred before the remainder would be subject to taxation. In 2001, the federal exclusion was $675,000, and it will be $11.7 million in 2020. If there are no changes in the meantime, you will go down to $5 million adjusted for inflation in 2026.
We also have a state-level estate tax here in Vermont that is subject to change via legislative mandate. And of course, there are other issues that are relevant to estate planning that are not related to estate taxes.
You should schedule reviews on an ongoing basis so you can keep your plan up-to-date at all times.
Take Action Today!
If you are going through life without an estate plan, or if your existing plan could use an update, action is required in 2021. You can set up a consultation appointment if you give us a call at 802-879-7133, and there is a contact form on this site you can use to send us a message.