The Winter Olympics are finished and we are fully immersed in our tax preparation process.
We’ve been enjoying the opportunity to reconnect with so many longtime friends from Chicago who trust us with their most sensitive financial details — and we don’t take that privilege lightly.
And because I don’t take this lightly, I also want to take the opportunity to urge my Chicago clients who have NOT prepared for every eventuality for their family to consider using this season as a time to take care of another significant financial “preparation” as well.
I wrote a little about this last week, and I’m wrapping up my thoughts on this particular topic here this week.
We’d be glad to help you and point you in the right direction for this process.
3 More Reasons Why More Chicago Families Don’t Have Estate Plans
“You don’t choose your family. They are God’s gift to you, as you are to them.” -Desmond Tutu
Last week I wrote about a couple of the bad reasons some Chicago families use to not do basic estate planning.
In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.
Much of this is because of misconceptions about estate planning, and I dealt with two already:
1. “Only rich people prepare estate plans.”
2. “Everything goes to your spouse, if something happens.”
Well, I have three more for you to chew on, and dispense with.
Bad Reason 3. “After I create my will or living trust, there’s nothing else to think about.”
Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.
On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.
In fact, it’s a good idea to re-evaluate your plan every 3 or 4 years to make sure your plan is fully up-to-date.
Bad Reason 4. “If I have a will, my estate automatically won’t go through probate.”
Well, again — that’s not the case. In fact, ALL wills are subject to “probate”. This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.
So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.
Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush. Which is why it’s important to walk with a competent guide on these matters.
By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.
Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.
Bad Reason 5. “I could be held responsible for a deceased parent’s debts.”
No, you’re not responsible for credit card debts from your parents.
In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.
So really … there is no “great” reason to avoid this kind of planning. And it just so happens to be something that would make a great addition to your tax preparation process. So, let me know if you’re interested and we’ll help you get started on the right track.
EZ Tax and Accounting Service, Inc.