Understanding Estate Planning

Young smiling businessman wearing eyeglasses and discussing estate planning with attorney.

You may think that estate planning is for the very wealthy; however, for a better understanding of estate planning, you should know that it is actually for everyone. In the eyes of the law, an estate is simply the aggregate of property a person owns, and most everyone owns something. Property ownership includes individual as well as jointly owned accounts, stocks and bonds, retirement accounts, real estate, jewelry, vehicles, your online digital footprint, and even pets. Short of being utterly destitute, you have an estate. Planning for it helps to protect you, your family, and your loved ones.

A hand catching falling puzzle pieces. Problem solving concept.What Is Estate Planning?

Estate planning is the process of outlining specific instructions as to how you want your money and other property dispersed upon your death. It also includes decisions about your medical care and final arrangements. Especially important, estate planning involves naming an agent to make decisions for you if you are incapacitated. Wills, powers of attorney, and medical directives are the three primary estate planning documents you need to understand and put into place as soon as possible.

Last Will and Testament

A will instructs how to divide up assets, debt, personal property, and more. A will can cover all of your estate planning needs; however, it does come with a few limitations. First, a court process called probate must be started upon death if your titled property passes according to your will. During this sometimes lengthy—and often costly—process, a judge oversees the transfer of ownership of your property according to your will. Once a probate matter is opened, the will becomes public knowledge. And usually an inventory of everything the deceased owns is likewise made public. For those who wish to avoid court or who wish to keep their affairs private, a living trust may be the best option.

A living trust takes effect at the moment it is enacted while your will only becomes effective upon your death. Planning with a living trust can be more expensive, but it provides the advantage of usually avoiding probate and can keep your information (and your beneficiaries’ information) private. Further, a living trust can provide for management of your assets should you become disabled.

Power of Attorney

A durable power of attorney covers who will make decisions for you if you are unable to. These types of decisions include financial ones such as banking and investing. Also included are legal decisions such as pursuing or defending a lawsuit. Your agent also has the authority to handle insurance claims, manage businesses, and buy and sell property. It is particularly important to work with an attorney in developing this piece of your estate plan as errant powers of attorney could prevent your agent from doing what's best for you in the case of incapacity.

Medical Directives

Key medical directives involve two areas: a medical power of attorney (also called a health care surrogate designation) and an advanced directive. Both of these, like a power of attorney, are designed to take effect during your lifetime. The medical power of attorney/health care surrogate designation appoints who has the power to make your medical decisions if you cannot. An advanced health care directive stipulates your end of life wishes as well as what should happen if you become incapacitated and unable to make decisions about your medical care.

Who Is Engaging in Estate Planning?

According to Caring.com, overall the number of adults who have an estate plan has decreased. Fewer than 33 percent of adults currently have an estate plan; this is down from 42 percent just four years ago. Surprising to this estate planning attorney, though, younger adults (ages 18-34) are now 63 percent more likely to have an estate plan in place than they were last year. This is attributed to the pandemic bringing about an awareness of the importance of estate planning. Whatever the reason, it is good news for those Americans.

Why Do People Put Off Estate Planning?

Graph Showing Reasons Cited for not Having an Estate Plan According to Caring.com

Graph from Caring.com Showing Reasons Cited for not Having an Estate Plan

In their annual survey, Caring.com posed the question to its participants as to why they have put off completing their estate plan. Overwhelming, the answer was that people just have not gotten around to it. This is so in spite of almost 60 percent of the respondents thinking that planning their estate is either somewhat or very important. But a growing reason is that people think they don't have an estate. Remember: everything you own, from your checking account to your sneakers, make up your estate. And planning for incapacity is important for everyone.

Data shows that as a person's income increases, their likelihood of having estate planning documents like a will, living trust, or advanced health care directives also increases. Interestingly, those earning in the middle income ranges of $40,000-$80,000 show an increase in having an estate plan over last year. Like young adults, this is good news for this group. Still, the number of people with said documents is less than 50 percent, even in the highest income groups. Even those Americans with the resources to create a will feel it is something they can put off until later in life. This can have disastrous consequences for their loved ones in the case of unexpected death.

If you are ready to discuss your planning needs, I would be honored to help. If you have an existing plan, we can review that as part of your consultation to make sure it still works for you given your current circumstances. Please contact McCreary Law Office or call the Jacksonville, FL office at 904-425-9046 or the Houston, TX office at 713-568-8600 to schedule a meeting.