There are people who go through life without an estate plan, and there are various reasons for this inaction. Sometimes individuals assume that there are laws in place that will magically facilitate efficient asset transfers, regardless of the circumstances.
In fact, this is simply not the case. Even if your situation is relatively simple and straightforward, it is unlikely that the outcome would be consistent with your true wishes if you die without any estate planning documents (this is the condition of intestacy).
Facilitating the preferred distribution of assets is only part of the equation. Let’s look at some of the other consequences of inaction.
Nursing Home Expenses
The majority of elders will need long-term care at some point in time. Medicare will provide health insurance for most seniors, but this program does not pay for living assistance, and it is very expensive.
Depending on where you live, a year in a nursing home can easily cost you over $100,000, and people often require multiple years of care.
This situation certainly comes into play when you think about the estate planning consequences. If you do nothing to prepare for possible long-term care costs, everything that you accumulated during your lifetime could go to a nursing home. Your family could ultimately receive nothing.
A well constructed estate plan will address latter life incapacity. Many elders become unable to handle all of their own affairs at some point in time, and under these circumstances, a guardian could be appointed by the state.
A court appointed guardian could wind up managing your affairs if you do not have an estate plan in place that contains an incapacity component. To avoid this, you could execute durable powers of attorney. With these documents, you name agents to handle your affairs in the event of your incapacitation.
The last consequence that we will look at in this blog post is the matter of asset erosion. High net worth families must be aware of the potential impact of the federal estate tax. Though most people are not exposed, the tax carries a 40 percent top rate, so it is something to take very seriously.
If you have been very successful from a financial standpoint, and you take no steps to gain estate tax efficiency, a significant portion of your wealth could be absorbed by the tax man.
These are just some of the consequences of inaction, but there are others. If you are currently unprepared from an estate planning perspective, you may want to act sooner rather than later, because your loved ones would be the ones who ultimately pay the price.
Our firm would be glad to help you put a plan in place if you are convinced. We provide no obligation consultations, and you can contact us through this page to set up an appointment: Indianapolis IN Estate Planning Attorneys.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.