Not Your Father’s Estate Planning

by Eric M. Schorr

So, you think because Congress wants to do away with the Federal Estate Tax you don’t need to do estate planning… Think again! Although reducing potential Estate Tax is certainly a valid reason to plan, it’s certainly not the only reason. And, chances are, Estate Taxes don’t even affect you! Even with the current Estate Tax Exemption ($5.49 million) only about 1 in 700 estates pays Estate Tax.

Your estate is the result of a lifetime of hard work and thrift. You want to make sure that it is passed down and protected for future generations. In years past, this transmission could have been accomplished with a simple will, but the world is a much different place than it was 50 or 100 years ago. Our seniors, as well as our young people, have a new set of challenges than did their parents and grandparents.

Consider the following:

• The United States has one of the highest divorce rate rates in the world. The divorce rate is almost 50% for first marriages; 67% for second marriages; and 73% for third marriages. It is not uncommon to know people who have been married and divorced multiple times.

• Alcohol and drug addiction are becoming more prevalent. Addiction is no longer restricted to seedy bars and alleyways. Today the problem is more commonly addiction to pain-killers and prescription medication. According to the Substance Abuse and Mental Health Services Administration, 23.5 million persons need treatment for drug or alcohol abuse.

• Medical breakthroughs and advances in healthcare mean people are living longer, but those extra years will not be care-free. With increased age comes a new set of potential problems including decreased mobility, Osteoporosis, vision/hearing loss, Alzheimer’s disease and dementia.

So what does this have to do with your estate plan? Well, as it turns out, a lot! Traditional estate planning would have you leave everything to your surviving spouse, and on the death of that spouse, then to the children. That worked fine when families were solid, divorces were rare, and life expectancy was shy of 70 years. Using yesterday’s estate planning techniques in today’s world can lead to unexpected, sometimes disastrous outcomes.

For example:

• A surviving spouse leaving her assets (including those she inherited from her first husband) to her second husband, or to the children of a second marriage, thus circumventing the first spouse’s intentions and denying his children their intended legacies.

• A child commingling his inheritance with his spouse’s assets, then losing half of his inheritance when the marriage ends in divorce.

• Being disqualified from means-tested governmental benefits because no one planned for assisted living or nursing home care.

• Enduring an expensive and emotionally wrenching interdiction proceeding because no provision was made in the event a parent became incapacitated.

All of these issues can be effectively addressed with the proper, well-thought-out estate plan, but a solid estate plan takes time, effort and commitment, and it should not be taken lightly. To learn more, don’t hesitate to call or email me, and I will send to an invitation to one of our upcoming free workshops.

This article was originally published in Senior Living Magazine

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