By Rich Best
If ever there was a subject most people would prefer to avoid thinking about, it’s planning their estate. The notion of bequeathing riches upon loved ones is wonderful, but seriously contemplating the interim step this largesse usually requires isn’t usually top of mind.
Yet mortality is something adults should probably get comfortable with if they are to make educated decisions about the future they want for their family. According to the US Centers for Disease Control, average life expectancy is now 78.8 years, but this same data source* provides other, less optimistic statistics worth considering.
- There were 2,596,993 deaths in 2013.
- 1,450,211 of these deaths were people aged 75+, meaning everyone else who died did so well below the average life expectancy.
- 263,872 of these were people aged 50-59. In other words, pre-retirees who were likely still planning for their golden years.
- There were 821.5 deaths per 100,000 people in 2013.
- While we all spend a lot of time and effort worrying about preventable illnesses and causes of death, 130,557 Americans died in accidents, which are by definition difficult to predict.
The somewhat unpleasant possibility of an early demise should be plenty of reason to start and maintain an estate plan, but if you still aren’t convinced, then consider the potential legal and tax consequences of procrastination.
Control from Beyond the Grave
Without an estate plan your final affairs may be determined by the laws of your state. For individuals or couples who are concerned with who gets how much, what assets get sold, and what assets are preserved into the future, this is not a desirable outcome. Odds are you can do a better job of disposing of your estate than the state can.
For business owners, the lack of an estate plan can wreak havoc on a business that was meant to live on. If there is not enough liquidity in the estate for settlement costs, debt payments, taxes, and distributions, the business would have to be liquidated for capital. Business owners should coordinate their estate plan with: (1) a business continuation plan that provides a plan of succession; and (2) the life insurance funding to buy out the estates of the partners.
Insurance, Trusts, and Advanced Tax Planning
Life insurance, when integrated as part of an estate plan, can help make sure that the mortgage is paid and children are able to afford college expenses. Insurance is also a good way to preserve a family business for the next generation.
Trusts and advance tax-planning strategies, while not necessary for every estate, are a good way of accomplishing multi-generational objectives. For those who wish to see their estate benefit children, grandchildren, and preferred charities, it is especially critical to plan early, as these complex scenarios require time to execute properly.
Regardless of how big or small your estate planning needs look today, one thing is clear: There are significant benefits to starting a plan today, and by avoiding delay you may save both heartache and money for those you leave behind.
Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.