Three Overlooked Benefits of Estate Planning

A couple work with a financial planner on their estate planning.

(Image credit: Getty Images)

If you’re like most Americans, you don’t have a documented estate plan. A 2023 survey by Law Depot revealed that 73% of respondents lacked an estate plan. Not only that, but 72% of respondents over age 75 didn’t have an estate plan.

Unfortunately, estate planning is a task that is all too easy to postpone. No one likes to think about death or what will happen before or after death. However, as much as you dislike the thought of death, you probably also don’t want to condemn your family to hours and days of time spent dealing with the mess that a lack of planning will inevitably create.

Losing a close relative is hard enough without the added and completely avoidable hassles that occur in the absence of estate planning. Straightening out a neglected estate is both time-consuming and expensive. That’s why focusing on the benefits involved in estate planning for you and your loved ones may be just the motivation you need to either create and finalize an estate plan or update the plan that you already have.

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ABCs of estate planning

Estate planning involves the creation and execution of the documents necessary to deal with your health care and financial affairs if you become incapacitated and after you die. To achieve this goal, there are a number of documents that need to be created. The names of the specific documents differ depending on where you live, but the intent is similar:

Guardianship. If you have minor children or other dependents, these documents specify who will get custody of your children if you and your spouse pass away
Will. A legal document that provides instructions about the disposition of your assets
Trust. A fiduciary agreement that shields your estate from probate and allows you to customize your estate plan
Durable power of attorney. A legal document that allows your spouse, partner or other third party to manage your finances if you can’t make your own decisions
Financial power of attorney. A legal document that allows a third party to manage your finances
Advanced health care directive. A document that outlines the medical care you want to receive if you can’t make your own decisions
Medical power of attorney. A document that allows a third party to make medical decisions on your behalf
HIPAA authorization. A document that gives others the ability to view your medical records and communicate with your health care providers

You need to do some work before these documents can be created. You need to inventory your assets and decide who will receive them when you pass away. You need to decide who will take care of your minor children, if you have any, and who you can trust to manage your financial and health care affairs should you become incapacitated.

To ensure that the documents you need are correctly executed, you’ll need to hire an experienced estate planning attorney conversant with the estate laws in your state. That individual will work with you to translate your wishes into the appropriate documents.

That sounds like a lot of work — and expense — which is why so many people lack estate plans. But don’t let that deter you. Check out these three important benefits of creating an estate plan:

Benefit #1: Securing management of your health care and finances if you’re incapacitated

No one wants to think that they will ever become incapacitated. But, unfortunately, it happens, especially to older adults. According to the Alzheimer’s Association’s 2023 Alzheimer’s Disease Facts and Figures report, more than 6.7 million Americans age 65 and over suffer from Alzheimer’s disease; of those, 73% are 75 or older. In addition, Columbia University researchers determined that 10% of adults over 65 have dementia — which includes Alzheimer’s disease — while another 22% have mild cognitive impairment.

Other diseases and illness strike older adults with increasing frequency as they age. The U.S. National Institute of Health reports that 85% of Americans age 65 and over suffer from at least one chronic health condition, and 60% have two chronic health conditions. These include cardiovascular disease, cancer, chronic respiratory disease and diabetes. While you may not suffer from cognitive impairment as you age, a combination of chronic diseases can sap your energy and ability to reason and think clearly.

That’s why it’s important to create an estate plan that will allow your family or other designated individuals to step in if necessary. You may, for example, have a stroke and need someone else to make medical decisions for you in the moment. In the absence of the necessary paperwork, needed medical care may be delayed, resulting in a negative outcome that could have been avoided with the right information at hand.

Over the longer term, you may at some point require help paying your bills and making financial decisions. Unfortunately, many older adults are the victim of financial scams as their cognition declines. Having someone you trust backstop your decision-making process can help avoid incidents that can drain your wealth and create financial problems that later have to be untangled.

Benefit #2: Fulfilling your wishes

If you die without an estate plan or a will, your assets will be distributed by whatever laws prevail in your state. Technically, this is known as dying intestate. For example, perhaps you want your spouse to get all of your assets and your children to inherit whatever is left after your spouse passes away. But, if you die without a will in Oklahoma, where I live, your spouse will inherit half of your assets and your descendants inherit everything else.

Here's another potential problem that crops up frequently: Your assets may be distributed wrongly if you fail to update a will that you wrote years ago. Many times, individuals make a will when their children are young and fail to update it. Your life situation may change, but your will may not have changed with it.

Think about it: Maybe you’re divorced, but your first spouse is still named in your will. If that’s the case, you need to get to an estate planning attorney to update it.

There are many other situations where an estate plan needs updating. Perhaps you sold a business, and a simple will no longer do the trick — instead, you may need a trust. Again, consulting with an experienced estate planning attorney can help you decide on the right vehicle to help ensure that your wishes are fulfilled after you pass away.

Benefit #3: Avoiding probate

Probate is a process under which a will is recognized and an estate is administered. Depending on the jurisdiction, probate occurs on a city or county level. A matter of public record, all documents — including a will — that are involved in probate are available to anyone on the internet through a simple search. Probate also involves fees and potentially lawyers. While you can get through probate without a lawyer, it can be a time-consuming and complicated process.

Unfortunately, you can’t avoid probate with a will. Instead, a trust is required. There are a number of different types of trusts that will accomplish this goal.

A trust fulfills a number of estate planning goals, including keeping your private financial and inheritance matters private, ensuring that your assets are distributed in the way you want and placing conditions on estate distributions. Trusts also provide protection from creditors, which can be important for high-net-worth individuals and individuals in careers such as medicine. Finally, trusts can mitigate taxes on future growth of investable assets within the trust.

To fulfill your purposes, a trust must be funded. That means your assets must be titled appropriately so that they benefit from the protection that a trust provides.

Update your estate plan regularly

As mentioned, your life situation can change. External events, such as changes in government laws and tax rules, may also change. That means you need to review your estate plans frequently, such as every three years, to help ensure that you don’t make a potentially costly mistake that would disadvantage you and your family.

Amy Buttell contributed to this article.

Securities and Investment Advisory Services offered through Geneos Wealth Management, Inc. Member FINRA / SIPC.

This information has been provided by an Investment Adviser Representative and does not necessarily represent the views of the presenting adviser. The statements and opinions expressed are those of the author and are subject to change at any time. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy.

Investing involves risk, including possible loss of principal. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. We are not affiliated with any government agency.

Chuck Bigbie and Woodland Wealth Management do not provide legal advice and cannot draft legal documents. We work with experienced CPA’s, tax planners and estate planning attorneys who develop the legal documents that express a client’s estate planning intentions. We are pleased to work with a client’s current estate planning attorney, CPA®, and other advisers.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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With 40-plus years of experience in the industry, Chuck specializes in retirement planning and an outcomes-based approach to wealth accumulation and financial planning. Understanding and thoughtful, he is committed to always put clients’ needs first and providing them unbiased advice. His desire to spread financial literacy and to never stop learning drive him in his everyday responsibilities. He enjoys getting to know his clients and is energized by working with them and helping them find the right retirement strategies for their unique needs.

Licensed Insurance Professional. Respond and learn how financial products, including life insurance and annuities can be used in various planning strategies for retirement.

Securities offered through Geneos Wealth Management, Inc. (Member FINRA/SIPC). Advisory Services offered through Geneos Wealth Management, Inc. a Registered Investment Adviser.