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I encourage my clients to plan for the future when it comes to their money and property by creating, and then occasionally updating, their estate plans. But often, clients have a “one and done” philosophy and don’t think they need to update their documents. Others think they don’t have enough money to need an estate plan or are too young to worry about passing away. This column will provide you with some useful arguments to make when dealing with clients that have any of these mindsets.
COVID made things clearer
The COVID-19 pandemic highlighted for many families how quickly things can change. Two out of three, or 63%, of adult Americans have not completed an advance directive, according to a study from the Perelman School of Medicine at the University of Pennsylvania. Advance directives are the primary tools for individuals to communicate their wishes if they become incapacitated and are unable to make their own health care decisions, particularly near the end of life.
Many families were caught off guard during the pandemic when a loved one became incapacitated and it wasn’t clear who legally had the authority to make medical decisions on their behalf. Restrictions on visitors at health care facilities further complicated the situation. Taking time to update their powers of attorney, health care directives and last wills and testaments will help ensure that doesn’t happen to your clients’ families. Remind them of how quickly things happened in the early days of the pandemic.
When to create (or update) your estate plan
Your clients’ lives don’t stay the same, and neither should their estate planning documents and strategies. Any significant life changes could prompt document updates or the need for additional legal documents and planning. Reach out to your existing clients to ensure they have the best documents and strategies possible for this point in their lives.
Your clients might push back and say there’s no need to update their documents or create new ones. Here is a handy checklist of life transitions to share with your clients to prompt them to consider creating (or updating) an estate plan.
• Property ownership: As soon as a person acquires real property, they should create a will to designate where this asset will go if they pass away.
• Creating a bank account: Is there cash in a bank account? Investments in stocks and bonds? Consider how these assets will be distributed when one passes.
• Marriage/divorce: Whether someone is newly married or newly divorced, that is a great time to create an estate plan that reflects the new family situation.
• Birth of a child: Whether it is a first, second or third child, Hoosiers should consider updating estate plans as soon as the child is born.
• Extensive travel: If someone plans to embark on a long trip, updating their estate plan before leaving is recommended.
• Inheritance acquisition: Anytime a person is the beneficiary of another’s estate, they may want to reflect any new property in an estate plan.
• Retirement: Upon retirement, a financial situation may change significantly, and that may prompt changes in their plans.
Estate planning helps others
An area that clients sometimes overlook is the importance of incorporating charitable giving into estate plans. As income grows, this may become more important to clients than when they were young or struggling. While charitable giving benefits others in need, it’s important to remember it can benefit the donor, as well. Charitable giving can positively impact your clients’ tax burdens right now, over their lifetimes and after death.
Here are four ways clients can start planning their estate giving now:
1. Charitable gift annuity: Clients can donate one lump sum to a charity. They receive a fixed percentage each year from the annuity, and the rest is received from the charity after their death.
2. Gift assets: The charity can sell the assets without paying capital gains tax. Examples of assets to donate include real estate, vehicles, stocks and more.
3. Leave a bequest in their will: The client shares the specific charity they’d like to support, the amount and the purpose for the charity to use the donation. When doing this, it’s encouraged to contact the charity’s development office to be sure the request is something the charity is able to achieve.
4. Creating a charitable remainder trust (CRT): Benefit a charity and a family member. A family member will receive annual payments from the CRT for a set period of time; afterward, the remaining amount is distributed to a charity the client chooses.
It’s important to stress to your clients that without a plan, the state of Indiana will control how their assets are distributed after they pass away, and the state is not interested in making sure the clients’ wishes are carried out. A variety of advanced estate planning tools and strategies can help Hoosiers accomplish a wide range of goals and save them a lot of money in the end, and their families a lot of headaches.•
Lisa Dillman is an attorney at Applegate & Dillman Elder Law. The firm specializes in elder law and life care planning, a holistic approach to deal with legal, financial, medical and emotional issues involved in growing older. The firm has offices in Indianapolis, Carmel and Zionsville. Find out more at www.applegate-dillman.com. Opinions expressed are those of the author.
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