January is a time to make resolutions to do things better in the new year.
Here are five resolutions to make to ensure your estate plan is where it should be in 2021.
- Resolve to Have an Estate Plan
Most of the clients I meet who do not have a Will, Power of Attorney, or other estate plan documents know they should have them, they have just put off this task – sometimes for much longer than they should. Sometimes it’s the first time they have done any estate planning or spoken with anyone about Wills and Trusts.
If you are similarly situated, make it one of your goals for 2021 to get an estate plan in place.
A simple plan (Will, Power of Attorney, Health Care, or Legal Guardianship documents) is better than nothing at all.
If you have young children or assets in excess of HK$8 million, a trust may be advisable to meet your planning goals.
If you already have estate plan documents in place (good job!) resolve to review those documents this year to make sure the documents still reflect your wishes. If it has been more than five years since the documents were signed or you have had changes in your personal or financial situation, it may be a good time to review.
- Resolve to Get it Done Right
Making sure your assets go where you want them to go at your death, managing them properly for young beneficiaries, protecting assets for your family, avoiding probate, and saving your beneficiaries as much income and estate tax as possible are important goals.
The way your estate plan is carried out will have a significant impact – positive or negative – on your family or other heirs. When something is this important, make sure it’s done right.
The temptation to draft your own Will or other legal documents is there and is frankly a poor planning option. In my 35 years of practice, I have yet to see a Will drafted by a client that will work as intended and will not create more problems than it solves (missed beneficiaries, wrong beneficiaries, unclaimed assets…etc)
Get it done right, and you will have the peace of mind that crossing this task off your list will bring.
- Resolve to make sure your Beneficiary Designations are Up to Date
Many of your most significant assets – life insurance, retirement accounts, annuities – will be paid to a designated beneficiary at your death. Properly designating those beneficiaries is more complicated than it may appear. Understanding the implications of certain beneficiary designations is crucial.
For example, this can be especially significant in estate planning for a minor or disabled child. A trust for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian and in avoiding the loss of public benefits a disabled beneficiary may be receiving.
Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the size, frequency and income tax payable on those distributions is crucial to making appropriate designations.
Ensuring your beneficiary designations are consistent with your overall estate plan is critical to accomplishing your estate planning goals.
- Resolve to have Incapacitation documents in Place
Much of the estate planning you do is for the benefit of your family or other heirs and will never impact you as they relate to your demise.
Creating a power of attorney document that reflects your wishes financially and medically is one area of estate planning that will directly and significantly impact you if you experience a mental illness prior to death.
Many people deliberate over this document more than their will as the “attorney” you appoint is someone that look after your finances and health care decisions whilst you are still alive, but no longer able to act on your own.
- Resolve to Make Sure People You Care About Have a Plan Too.
Estate Planning is important for anyone over the age of 18. College-aged children and elderly parents should have powers of attorney and health care documents that will allow someone to make financial and health care decisions for them if they are ill or incapacitated.
Parents of young children should name guardians for their children and create a trust to manage assets for young beneficiaries to avoid a child receiving control of inheritance at age 18.
Parents who will leave a significant inheritance to their children should consider asset protection planning to protect inherited assets from a child’s creditors, divorcing spouse, etc.
Older couples or others with large estates can save their heir’s significant estate taxes in certain parts of the world with proper planning.
Elderly parents may want to plan to protect assets from long-term care liability.
If a friend or a family member needs some inspiration to make estate planning a 2021 resolution, share this article with them.
Happy New Year!