Leaving a Legacy

What does it mean to leave a legacy?

We have a biblical responsibility as wise believers to leave an inheritance to our kids, grandkids, and so on. This preparation allows you to do the maximum good in this life and after you’re gone.

Let me share some reasons why an estate plan is important to get in place right now. First, we had a wonderful passage of a law called ‘The Tax Cuts and Jobs Act’ several years ago that’s set to expire in 2025. As a result of that law, people with large estates need to realize that the estate tax exemption will drop.

You may be thinking, “What exactly does that mean?” Right now, if you own a larger estate, you’re able to pass on up to 12.6 million in 2022 per spouse. That’s 24.12 million without dealing with the state tax, which is currently at 40%. If you go over that 12 or 24 million, you will leave behind nearly half in federal estate taxes, which doesn’t include the other kinds of state taxes, as well as potential income taxes.

Second, weaknesses of wills. An estate plan usually goes beyond a simple will. Here are a few problems with wills all by themselves: they usually do not guarantee who receives your property, they’re easily contested and they go through an expensive process we call probate, which is essentially determining the validity of your will.

Many people downplay how high probate can cost, but in the Colorado area, it’s between $3,500 to $5000. You can spend that money now and avoid your heirs having to spend that out of your estate and pick up the pieces. And your will could become public so it lacks the privacy you would be looking for. There’s a limited ability for you to control your assets upon death.

You may be asking “But why would I want to do that?” Maybe there’s a unique situation where you want your assets to go to certain kids in certain proportions. Or perhaps you want it to go to kids and not the wife or vice versa. Perhaps you’re in a blended family and want to keep it on one side or the other. We encounter this almost weekly at Lord and Richards.

We want to look beyond the will and establish something a little more sophisticated. Joint tenant with right of survivorship transfer on death, certain types of life insurance, beneficiaries of the will, all of these need to be kept up to date.

Here’s a third consideration. In addition to the potential changes in the law that we’re going to see, and the weaknesses of the wills, we have the looming issue of health care. Besides the need for normal legal documents, you need to begin planning for what happens when somebody gets sick. Many of you have had to deal with this and it’s a tremendous burden to handle the technical, legal, and financial matters of the situation.

Is it possible that you could protect some assets, so they’re not absorbed by nursing homes and hospitals? Is it preferable for some of your assets to go to family or charity? That’s a significant question and one I’ll address in my next blog.

And finally, there is a Medicaid asset protection plan you can put in place, so that instead of leaving all your assets to hospitals and nursing homes, you could gift your assets to a special trust that still takes care of your needs, provides income and support. We call it health, education, maintenance and support.

So, I would say the answer to the question, ‘Do I really need an estate plan over just a regular will?’ Absolutely. And it’s worth a conversation. A service we provide at Lord and Richards is a meeting with an attorney at no cost, which allows them to walk through your situation and find out if you might benefit from an estate plan. They will then put that estate plan into a comprehensive financial plan that includes all areas you should explore in order to be financially independent. Give us a call today!

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