Estate Planning

October is National Estate Planning Awareness Month! Here’s how the right plan can help you protect your family.

Estate planning is only for the extremely wealthy. I don’t have enough assets to need a will. My family will figure it out. Things will sort themselves out. I’m way too young to start thinking about a legacy plan. Making an estate plan is just too expensive right now. These are just some of the most commonly believed myths about estate planning we hear directly from our clients. But the fact is, they’re just that: myths. They hold little weight and don’t account for the true value of estate planning, which goes beyond asset total, age and what’s going to happen to your possessions after you pass.

An estate plan is about so much more than money. It’s about retaining your autonomy and continuing to have a positive influence on your family, your business and the world. You also might be surprised to discover just how easy and affordable it can be to develop an efficient and effective estate plan. Here are just a few ways a legacy plan can provide more than just financial protection.

1. Peace of Mind for Your Family

It can be extremely difficult to lose not just a provider but a valued, trusted and loved head of a household. An estate plan can give your loved ones a bit of peace of mind when you pass, no matter how much money or which assets you plan on transitioning to them. Your estate plan can save them from being thrust into the emotional turmoil that can come with facing costly and time-consuming probate courts and distributing what remains of any assets themselves. It can also prevent potential inter-family battles over property, money and possessions. While it’s not uncommon to find that heirs would rather receive items with sentimental value than monetary value, disputes can happen within even the most normally-agreeable family members during this stressful time. An estate plan can give final directives that outweigh any arguments between beneficiaries.

2. Protection for an Uncertain Future

It’s important to remember that no one can predict the future, and while we can weigh options and place ourselves in advantageous positions or mitigate the potential of risk, there’s always at least a semblance of uncertainty. An estate plan can protect against the worst-case scenario, especially for those who are newly married, just starting their careers or in the beginning stages of building a family. Of course, it can be difficult to have the conversation about what will happen if a provider unexpectedly passes, but it might be worth it to know that you won’t be caught off guard. It can also be helpful during periods of uncertainty in tax legislation and regulation. One of the most common uses of an estate plan is to mitigate tax obligation, and it may offer strategies that can help more of your hard-earned wealth land in the hands of those who are important to you.

3. Security for Your Dependents ^[1,2]

Though the last will and testament is the most well-known document in an estate plan, your plan should also include medical powers of attorney, guardianship, durable powers of attorney (related to financial decisions), and potentially a trust or trusts depending on your situation. These features of an estate plan offer different protections and levels of security for your dependents in a variety of ways. A revocable living trust, for example, is a trust that allows assets to be added or removed at any time while you are still living. Often included in an estate plan, it can give the trust owner full control over their assets, potentially making it easier to manage and update. A trust can continue to distribute assets to heirs based on a time schedule created by the original trust owner, as it also includes a successor trustee who would manage the assets after the owner passes or if the owner were unable to make decisions on their own behalf. Another popular type of trust that can potentially act as a tax mitigation strategy is an irrevocable life insurance trust, or an ILIT, which is a trust that holds life insurance policies. Though the policyholder would no longer be able to leverage the policy for living benefits, it can pay out a tax-free death benefit by excluding the policy from the grantor’s estate, saving beneficiaries from the stress that could come with being forced to sell major assets to cover estate taxes.

4. Direction for Your Business

An estate plan isn’t just for your family. It can also offer directives for your business should something happen to you by appointing a financial power of attorney, which can be important even if you haven’t passed. Maybe your health has rendered you unable to make financial decisions on behalf of your business. In that case, the person with financial power of attorney can make those choices. This gives you even more say when it comes to your business, as you can appoint someone who follows your thought process and philosophy. An estate plan can also include a plan for succession, dictating who will be entrusted with your business when you pass or exit. Furthermore, your business might be your legacy, so being able to choose who takes over in the CEO chair can give you the power to hand the keys to someone who you know will keep your business moving in the direction you always envisioned.

5. Commitment to the Causes You Care About

While a key objective of an estate plan can be helping your family navigate a tumultuous period, it’s also possible to help the organizations and foundations you believe in with a significant financial contribution. You can make the decision to contribute to different charities or support causes you’re passionate about like education, the environment, social initiatives or animals. Again, this allows you to have even more decision-making power over your own estate while also amplifying your voice in the fight to make a difference, even when you can no longer lend your valuable time. For some, this is the greatest legacy of all, opening the door for change on any scale. At the same time, it’s possible that charitable contributions can trim your tax obligation and help your family avoid estate taxes on major transitions of wealth, which again, alleviates some of the pain that comes with losing a loved one.

If you have any questions about estate planning and how you can plan to protect your family or business, we can help! Give us a call today to explore your options. You can reach Drew Capital Group in Tampa at 813.820.0069.

Sources:

1. https://www.metlife.com/stories/legal/revocable-vs-irrevocable-trust/
2. https://www.northwesternmutual.com/life-and-money/what-is-an-irrevocable-life-insurance-trust/

This article is not to be construed as financial advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment decisions, or any changes to your retirement or estate plans. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.

A proper estate plan can protect your assets and your family. Here are some answers to questions you may have!

October is National Estate Planning Awareness Month, so now is the perfect time to discuss the importance of having an estate plan. We get it. It’s something nobody wants to think about, especially your loved ones, who can’t imagine living without you. But estate planning is a necessary part of the financial planning process. It helps ensure that everything you’ve worked so hard to accumulate gets passed on according to your desires in the most tax-advantaged manner possible.

Moreover, no financial plan is truly complete without an estate plan. The ideal financial plan preserves and protects your assets throughout your life all the way through your retirement, helping ensure that you don’t outlive your resources, but it also accounts for your legacy and wealth transfer at the end of your life. Without an estate plan, your assets, whether that be money, real estate, possessions or even precious family heirlooms, could end up in the wrong hands.

Let’s go over some commonly asked questions to make the estate planning process more understandable and easier to approach.

What is an estate plan?

An estate plan is a detailed, documented plan for what will happen to your assets when you’re gone. It’s intended to ease the transition following death by directing the transfer of your things. The most commonly known document in an estate plan is your last will and testament, which specifically lists and designates all of your assets to your beneficiaries. It also names an executor who is in charge of making sure the beneficiaries listed in the last will and testament receive what they are entitled to and that all of your final affairs and financial matters are settled. In the case of minor children, your last will and testament also specifies who you wish to raise your children in the event that both you and your spouse have passed away.

Additionally, an estate plan can contain other documents like trusts, health care directives or living wills, and powers of attorney. Your comprehensive estate plan is essentially a plan for the worst, should you be unresponsive, unable to make a decision or deceased ^[1].

Why is it important for me to have one?

There are many reasons to have an estate plan, the most important of which likely being the bequeathing of your assets to specific beneficiaries. Without proper documentation, the best-case scenario sees the correct distribution left up to chance, the courts and your heirs. The worst-case scenario means all-out war inside your surviving family.

An estate plan can also save your family from unnecessary tax burden. Oftentimes estate plans and financial plans come together to determine the most tax-efficient distribution of your property and accounts. You’ve worked so hard your entire life, both for your family and for yourself. Chances are, you’d love to see that money in the hands of those you love rather than in the pockets of the IRS ^[2].

Aren’t estate plans only for the ultra-rich?

A common misconception is that estate plans are exclusively for those with multiple million-dollar estates, priceless artwork or valuable shares in major companies. But that just isn’t true. In fact, those with fewer assets may have an even greater need for tax-efficient estate planning so that their families are protected during a potentially financially devastating time.

But even the rich are often unprepared. The unfortunate truth is that 67% of Americans don’t have an estate plan ^[3], but anyone with a family or assets should plan for the future, whether you’re handing down the majority stake in a large corporation, a vacation home or the remaining balances of your retirement accounts.

No matter the amount of assets, an estate plan can save your family headaches, time and tears by predetermining ownership before they are thrust into one of the most stressful endeavors of their lives. It’s worth it to strategize in life so that when your time comes, your family can spend their time properly grieving instead of worrying—or fighting—about how to split your belongings.

Things will sort themselves out, even if I don’t have a plan, right?

Well, technically, yes. Things will sort themselves out. But you’ve spent your entire life in the driver’s seat, making decisions that matter for you and your family. If you pass away without an estate plan and legal documents, small decisions are left to your extremely emotional family, and major decisions are left to probate court in what is usually a very costly and lengthy process.

In distributing your assets, courts can often be more expensive and time-consuming than need be. Tack on the fact that the legal system doesn’t understand your family’s history or dynamic, and it becomes a recipe for trouble. As someone who does understand how your family operates, which members deserve which assets and which members are able to be responsible for what they inherit, you can simplify the process by organizing an estate plan while still alive and sound of mind.

How do I start the conversation?

Determining how your family proceeds when you’re gone is no easy task. It can be just as difficult, or maybe even more difficult, for your children who have never been forced to live without you and the support you offer.

In our experience, we’ve found that the earlier the conversation begins, the easier it is to have. It’s always simpler to plan out of luxury than necessity, and estate planning is no different.

Communication is key. Talk to your heirs and loved ones about what your desires are, and ask them about theirs. You may be surprised to find out that it’s the sentimental items they want rather than the expensive ones. By having a clear plan that’s communicated well beforehand, years prior to any eventuality, you can avoid permanent family rifts and resentments later.

How can I get started with my estate plan?

Once you’ve consulted your heirs, or your parents if you are the heir, it’s important to accept that you’ll need help to complete a legally-recognized estate plan.

Ideally, your financial professional and your estate attorney should work together. Your financial professional can bring an estate planning attorney to the table, or work in conjunction with yours. What the financial professional does is find tax-advantaged vehicles and efficient ways to transfer wealth that an attorney may not know about or have access to, while the attorney brings the legal expertise, knowledge of state laws, and ability to generate all the needed legal documents.

Remember that it’s equally important to revisit and review your estate plan periodically, preferably every year. Life continually evolves as you acquire new assets and your family grows and changes.

If you have any questions about your estate plan, please give us a call! You can reach Drew Capital Management in Tampa, Florida at (813) 820-0069.

Sources:

1. https://www.businessinsider.com/personal-finance/what-is-estate-planning#what-are-the-main-steps-in-estate-planning
2. https://www.investopedia.com/articles/wealth-management/122915/4-reasons-estate-planning-so-important.asp
3. https://www.cnbc.com/2022/04/11/67percent-of-americans-have-no-estate-plan-heres-how-to-get-started-on-one.html

Christopher Drew, the founder of Drew Capital Group, was recently featured in an article from The Balance to discuss the importance of early estate planning.

At Drew Capital Group, we understand that even opening the conversation about an estate plan can be a terrifying idea. It’s a plan for the inevitable, but that doesn’t make it any less vulnerable or unsettling. Nevertheless, an estate plan is extremely important, which is why The Balance turned to our founder, Christopher Drew, for insight, firsthand accounts and testimonials to their value.

As families age, caretaking responsibility often falls on children and other family members. While half of that responsibility includes acts of service, the other half relies on the emotional and mental part of the relationship. Chris Drew believes that family members with a grasp and understanding of their loved ones’ wishes can cut down on awkward discussions they may not be interested in having.

The process can also be simplified by starting the planning process early. First and foremost, as we age, we may experience some sort of physical and mental decline. A great deal of stress can be avoided by getting affairs in order while you or your parents are operating at peak efficiency.

It can also be tremendously helpful to avoid planning out of necessity. For example, a major life event can force some families to confront their problems before they’re mentally prepared to deal with them. “It’s a reality that can make financial futures more complicated, which is why it’s ideal to start discussing financial matters and wishes for after death early,” Drew said.

Other reasons to create and maintain a proper estate plan include the avoidance of court proceedings, the simplification of the process, the preservation of wealth and the closing of the racial wealth gap. A consistent, periodic updating of beneficiaries can ensure that your assets fall into the hands of exactly who you intend to pass them to, and the discussion shouldn’t be avoided out of fear or shame.

The article also notes that simply opening the conversation can be difficult, so it offers a few tips to those looking to get ahead of the curve. First, for adult children, it may be advantageous to consult siblings. Equal division of assets may sound ideal, but it can vary based on needs and desires. Additionally, initiating the discussion could be smoother with a united front.

Dialogue can also begin with simple questions with good intentions, as to show parents that you’re focused on alleviating stress and promoting their legacy. At the end of the day, estate planning is about them, and it should be focused on eliminating difficulty in the planning process as opposed to personal gains. Some strategies to keep the conversation focused include using relatable examples and focusing on tax benefits, assuring them that you’re looking to protect more of their hard-earned money.

To read the entire article and learn more tips about estate planning, click here.

If you have any questions about beginning the conversation or crafting the right estate plan for your situation, please give us a call. You can reach Drew Capital Management in Tampa, Florida at (813) 820-0069.

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. Advisory services offered through Drew Capital Management, a Member of Advisory Services Network, LLC. Insurance products and services offered through Drew Capital Group. Advisory Services Network, LLC and Drew Capital Group are not affiliated.