Estate Planning

What You Don't Know Can Ruin You (And Your Heirs)

by Bhavik Patel

I’m an estate planner. What does that mean? Good question. I get it all the time, whether by a prospective client or a neighbor or somebody sitting next to me at the bar.  My answer: I make things easier for families during some of their worst possible circumstances.  Whether that is a result of a loved one dying, becoming incapacitated, getting divorced…

For many of us, it’s unfortunate circumstance like these that make estate planning so difficult to think about. It’s sad. Even morbid. And it’s easier to put off than to confront. In the haunting words of John Lennon, “life is what happens to you while you’re busy making other plans.” And so goes life, and death. But life without a plan can mean disaster in the end, financial and otherwise.

Allow me to share the many things that can go wrong if you don’t have an estate plan, something I call the Did You Know list.
Did you know that without proper planning…

-    In Missouri and many other states, if you die without an estate plan (a Will or Trust), your separate property passes 50% to your spouse and 50% to your children?
-    Transfer on death, payable on death, and beneficiary designations trump your Will or Revocable Trust?
-    The estate tax rate is 40%?  
-    A Will DOES NOT avoid probate?
-    A minor child cannot receive an inheritance without strict court supervision?
-    The death benefit of life insurance is potentially subject to estate tax upon your death?
-    Your child with disabilities will be disqualified from public benefits?
-    Wills generally do not contain estate tax planning?
-    If you die before your divorce is final, your spouse will still inherit from you?
-    If estate taxes are due, then sometimes the taxes are not equally shared by all the beneficiaries?
-    Assets left to your children may be subject to creditors or potential ex-spouses?
-    Jointly held property could be subject to creditors or liabilities of either joint owner?
-    If a person dies while on Medicaid, the government can take your home?
-    Probate is public, expensive and lengthy?
-    No adult (spouse or anyone else) can make medical or financial decisions for you?
-    If you own more than 50% of a company and that company owns life insurance on your life, the death benefit of such life insurance will be subject to estate tax?
-    Retirement benefits will be subject to estate tax upon your death and also be subject to income tax when such benefits are distributed to your beneficiaries?
-    Forgiveness of debt is a gift, subject to gift tax?
-    Transfers to grandchildren may be subject to an additional tax known as the generation skipping transfer tax?

Bottom line is that with a proper estate plan all of the above unintended consequences can be alleviated, easing the tremendous burden on your family.  Before more time slips away, get your estate plan in place, it’s easier than you think.  You owe it to yourself and your loved ones.

Bhavik Patel is a shareholder, Business Group Practice Leader and Wealth Planning Chair at Sandberg Phoenix & von Gontard law firm. 314-446-4328. bpatel@sandberphoenix.com.