Eliminating the “what ifs” through end-of-life planning 

Most people don’t spend too much time thinking about end-of-life planning on a daily basis. If you do, you may be Eeyore from Winnie the Pooh, or you are just a generally well-prepared person. That being said, even if you aren’t personally planning for these eventualities, you may have loved ones who are. While it’s not pleasant to think about, you may be the one who ends up having to sort out their affairs. There will also come a time when you need to think about yourself and your own family.    

Simply put, estate planning is writing down what you want to happen after you pass away. This is commonly accomplished using Wills, trusts, advance directives and beneficiary designations on accounts. If you don’t have an estate plan in place, you force people to guess what you wanted, which can add a lot of additional stress to your loved ones during an already emotional time. By creating an estate plan, you generously give your family steps to take to make sure you are honored properly.   

If you’re still hesitant, below are four reasons why you should have an estate plan: 
 

1. An estate plan allows you to allocate your assets according to your wishes.
   If you don’t have an estate plan, your money and property may not go to the correct person. Also, some people who receive their inheritance in one big sum, may have the potential to spend it pretty quickly. By creating an estate plan, you’ll identify specific inheritances for certain beneficiaries, especially those who might be young, immature or irresponsible. In addition, if there is not a Will when you die, it is called dying intestate. Each state has a succession formula for who receives money and property left behind. In most cases, if the state can’t find anyone, it goes to the state where you passed away.
    
2. An estate plan defines who cares for your minor children. 
   While no one wants to think about leaving their young children early, families with dependent children should take great care to make a plan for childcare if both parents pass away. It’s important to make sure that if you have minor children, you’ve named someone as their legal guardian. Although it can be uncomfortable having the conversation on who this will be (your parents or your spouse/partner’s parents, for example), setting up an estate plan can prevent arguing among family members and, potentially, custody battles.  
3. If you die without a will, your estate will go through probate. 
   The probate process in most states takes a minimum of seven months to allow creditors to put through claims. In addition, it’s a public hearing, which allows your personal business to be aired to everyone and anyone. The process can also be expensive, and legal costs will reduce the amount your loved ones inherit. Essentially, the probate process gets in the way of a smooth transition of your assets to your loved ones.  
4. Some advance planning can save your heirs from getting a high tax bill. 
   For example, depending on whether or not your heir is a spouse or non-spouse (and subject to certain rules), they may need to pay income tax on the money they inherit and withdraw from a traditional IRA. However, if they inherit a Roth IRA that was funded for five years or more prior to your death, distributions can be taken tax-free. Also, based on 2022 Internal Revenue Service figures, if you plan to leave behind an estate in excess of $12.06 million, you need to make a plan for estate taxes, or the so-called “death tax.” Some states also have an estate or inheritance tax with a different threshold. The best way to plan for these taxes, and possibly reduce them, is to have an estate plan in place. There’s too much to lose not to. 
   Kevin Grant, Financial Advisor with Tompkins Financial Advisors, Pennsylvania.