What Exactly Is Estate Planning?
Estate planning is the process a person undertakes to arrange their estate in order to manage it and to determine how it is disposed of after their death. There are as many goals in estate planning as there are people, and there are many ways of arranging it. Some people don’t think of themselves as having an estate but everyone does. An estate is comprised of everything one has accumulated during their lifetime. It can start with the first Barbie doll you get. I think of estate planning as expanding beyond that into life planning and the impression are you going to have on your heirs in the future. Is it just about money? Is it just about things? No. In fact it is about who you are; your identity. What you leave behind has meaning beyond these things.
What Happens To Our Assets When We Die Without An Estate Plan Or Even A Will In Place?
If you’re a US citizen and don’t have a will or estate plan then the state you live in will determine where your assets go. That’s is one of the downsides of not having made an estate plan; somebody else will make that decision for you. If someone dies without a will and hasn’t done any other kind of estate planning then the person is said to have died interstate. What that means, is that the state laws will come into effect and cause the assets of the person to pass according to what the state has decided is the right way. It gives you an idea of what the public policy for each state is and what they think is important to the average person. In Massachusetts, if a person dies and is married, then it’s typical for all the assets to be passed to the surviving spouse under the intestate laws. That is what many people want to happen. However, if there isn’t a spouse then the assets may pass to the deceased’s surviving children. If there weren’t children then it would go to siblings and if no siblings, up to parents. Which seems odd to me, why would you pass it up a generation? But that is how the law in Massachusetts is written. One of the problems about not having a plan is that you can end up with a huge tax liability. In Massachusetts and now federally the exemption amount is so high that it isn’t typically a problem for the average American with an $11.4 million exemption per individual and for married couple that equates to $22.8 million. Most people don’t have that kind of money. However, you have to think about the fact that the law is going to sunset in 2026. Who knows what the exemption amounts are going to end up being when it comes time for the unfortunate demise of each individual who’s reading the estate. The other caveat, in terms of estate taxes, is each state has its own estate tax laws. Some states don’t have one but Massachusetts does. The exemption amount in Massachusetts is $1 million for an individual unless you’re over by any amount, even a penny. Anything over $40,000 gets taxed at the marginal progressive estate tax rates that max out is about 16 percent.
How Often Should People Maintain And Update Their Estate Plans?
The amount of time that should pass before you maintain or update your estate plan will vary according to law firms. What we do as a firm is a little different than others. We provide someone who works with us with a review in three years after we’ve done the original plan for free. That’s part of what we provide. We think it’s important that the trust’s been established properly. We also believe in funding it, not because we like people to do living trusts rather than using wills. We think every three years at a minimum is critical. This is because there are changes that occur over time. For example, births, deaths, health issues, and aging can all have an impact on what you need to have as part of your plan. If there are major life events that are major then we think you should come in and have us look at it and decide whether there needs to be a change or not. It never hurts to do that checkup in that event.
Also, there could be changes in law. One of the things that we provide for clients is to send out a newsletter. However, if there are major changes in law we might make an appointment to come in and make sure that everything in your plan is up to speed with a change in law and the current political climate. Who knows what the law changes are going to be in the next 10 years. If there are changes that have a major impact on the financial or economic means of individuals then we want to have a look at the plan and see if there is something that needs to be done. As a firm, our philosophy is that we want the plan that you’ve paid to have completed, works when you need it to work.
That’s huge. I see so many people who come in and they want us to review their documents. Then when we look at the documents and say, “You have a trust in here. Have you put anything thing into this trust? It’s a living trust and there is nothing in it. Nothing’s even tied to it” I’m usually thinking that trust they paid $3000, $4200, or whatever amount they paid for it. It’s not even worth the paper it’s written on because it’s useless. In terms of getting back to the checkup that is critical. You should talk to someone at least every few years. Even if you don’t think you need it.
For more information on Estate Planning In the State Of Massachusetts, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (617) 924-0300 today.