Estate Planning ROI: What’s the cost of NOT planning?

How Estate Planning Can Save Your Loved Ones From Financial and Emotional Turmoil Later

When was the last time you thought about your hot water heater? Unless you’ve had a recent problem, it’s probably been a while. Sure, it will break someday; hot water heaters generally only last 10 to 15 years. But life is stressful enough already, so you’ll deal with that when it happens.

Except one day, it will break – and when it does, it will probably cause a minor flood that damages your floor, walls and anything else in the vicinity of the heater. You’ll also go without hot water until you buy a new one and get it installed. You’re looking at a long, expensive, messy fix. If only you had replaced the water heater before it failed.

The fallout can be a thousand times worse if you take the same approach to estate planning. No one wants to think about dying and what will happen to their loved ones when they’re gone… but putting off making plans only kicks that can down the road. The consequences can be devastating, both financially and emotionally. If you don’t get your affairs in order now, the people you leave behind will lose out.

Weighing the Options: A Case Study

To demonstrate just how catastrophic those consequences can be, let’s take a look at a (fictional) couple named Karen and Joe. They have two kids and own a $700,000 home in Sudbury, with a $400,000 mortgage. Joe has a 401(k) worth $400,000 and Karen has an IRA worth about $20,000. They have $30,000 in savings and a $50,000 investment account. They each have a $1,000,000 life insurance policy.

If Karen and Joe are killed in a car accident without having done any estate planning or created a will, it falls to their families to make financial and legal decisions for them. If both families want custody of the children, that battle will involve huge legal fees and emotional turmoil for everyone involved. Without planning ahead, their estate will have to go through probate – a process that takes months. In the meantime, their families have to pay the mortgage and other expenses related to the house. Worse, Karen and Joe had a taxable estate worth $2,800,000, and now Massachusetts is looking for 15% estate taxes on that amount – a total of $420,000. Karen and Joe’s families were already grieving their sudden deaths and trying to care for their orphaned children, and now they have to deal with this crisis.

Now, if Karen and Joe had established wills and trusts before their car accident, everything would be different. They would have named their chosen guardian in the will, so the family wouldn’t have to enter a contentious custody process. Their families would be able to sell their house right away. Their attorney would have helped them created a trust that kept their life insurance policies from being counted toward their estate taxes, which means that their estate wouldn’t be worth enough to be subject to estate taxes.

The financial ramifications break down like this:

Estate planning isn’t just important for people who have minor children, though.

Creating a will means that you can make sure your beloved antique car goes to the relative who will cherish it most, or that a portion of your estate will go to benefit your favorite charity. Other aspects of estate planning may protect you while you’re still alive. For example, establishing durable power of attorney and naming a health care proxy protects you if you’re critically injured or become too ill to make your own financial and medical decisions.

Yes, establishing durable power of attorney, creating a will and making other estate plans does require some upfront spending. Yes, you might have to make some hard decisions. And yes, it’s uncomfortable to think about and talk about your death. But it’s unavoidable, so putting protections in place now is the responsible and loving thing to do.

We know that estate planning can be emotional, nerve-racking and complicated. Choosing experienced, empathetic attorneys takes the intimidation factor out of this process. Contact Ladimer Law today to start preparing for your future.