Why Estate Planning is Important

Daniel M. Surprenant, Managing Partner, CELA

Essentially, estate planning is the process of determining, through legal guidance and documents, who will receive your hard-earned assets.  Estate planning is very important because it also determines how your life savings, home and personal items will be spent or saved during your lifetime, and then passed along (or not) at your death.  Good estate planning can be the difference between leaving your hard-earned assets to your children versus to others. That may include the state, the federal government, a nursing home, home care costs, probate costs and lawyers, or maybe your child’s divorcing spouse.

While it would be impossible to relay all of the ways in which estate planning is important, let me briefly lay out some of the more common areas in which good estate planning can make a real difference.

Saving Estate Tax:  Did you know that your life insurance and IRA are part of your taxable estate?  Including those assets and everything else you own, if your estate is over $1,000,000 then you will owe Massachusetts estate tax.  This tax starts at roughly $33,000 and is often $100,000 or more.  Good estate planning can minimize or even eliminate both Massachusetts and federal estate tax.

Saving from Probate Cost, Delay and Publicity:  If you’re not careful (and even sometimes if you are), your assets may pass through the probate court system when you die.  The probate process in Massachusetts typically takes at least one year (often longer) and costs several thousand dollars to complete.  The costs and delay increase if anyone objects or the family is fighting.  In most cases, avoiding the cost and delay of the probate court process is desirable and achievable.  

Protect from LTC Costs:  The cost of nursing home care in Massachusetts averages around $12,000/month (or $144,000/year).  Home care costs can be less, or even more if 24/7 care is required.  Planning for this issue varies from case to case, but often clients are able to protect assets from these high costs through a variety of strategies and/or products.

Avoid (or minimize) Family Fighting:  More than money, family harmony is important to clients.  Good, clear guidance to the children, including earmarking certain items for certain beneficiaries, can reduce or eliminate uncertainty and argument over who gets what. 

Save the Family Business:  Without proper planning, a family business can be jeopardized when the business is valuable but there is not enough liquidity to pay the estate tax at death.  Also, children may have different ideas about whether they will have the benefit of a family business after you pass.  Clarity in planning can help keep the business, and the family, running.

Save from Divorce and Creditors:  With the high divorce rate in the United States, inheritances can be lost to your child’s ex-spouse, who was never intended to have your hard-earned assets.  Good planning can prevent your child’s inheritance from being gobbled up in divorce.

Protect Special Needs Children:  Your special needs child or grandchild may need assets more than your other beneficiaries.  However, leaving assets directly to a person with special needs may lead to mismanagement of the funds or loss of important needs-based government benefits like SSI or Medicaid.  A special needs trust can allow for a non-countable pool of funds to pay for things that government benefits do not.

Provide Peace of Mind: Lastly, estate planning can provide peace of mind.  To say that differently, it can greatly relieve the stress and anxiety that is often associated with a death, divorce, the need for long-term care, or the sale of a home.  Many times clients have expressed great relief and gratitude that we have been able to guide them through complex situations.  We are happy to practice in an area of law that provides this valuable service.