Knowledge is Power. An estate plan can provide peace of mind by ensuring your assets are protected, plans are in place in the event you become ill, and your property is passed down according to your wishes. Fifty-seven percent of adults in the US have not prepared any estate planning documents such as a last will and testament or a trust despite the fact that almost 80% of Americans view it as important. Why you ask? While I attribute this to the belief that many of us by nature procrastinate if possible on making decisions. It is human nature to deal with things that are directly in front of you only when they are in front of you. The learned skill of planning does not come naturally to most people. When a loved one gets sick or even worse, passes away, that is when it’s in our face. The other time it’s in our face is when we personally get sick. But is it too late then to do proper planning? The answer is maybe.
For many that know me, they will often hear me say that when it comes to estate planning, there are three groups of people. There is a group I refer to as “Crisis Planners”. Many This is approximately 10-20% of people who feel as though they can’t afford estate planning and convince themselves they don’t need it by saying that they don’t’ have any assets that would require them to plan. It is a humbling way to say they cannot afford it. Food on the table is more important than planning what happens after their death. My parents were in this group. Each working 2 jobs to support my sister and me, I can distinctly remember my dad saying that he is fine with being buried in the back yard just so we did not have to waste money. Now clearly, when he died, that is not what happened (thank god), but estate planning was never on his radar. However, shortly after his death, my mom got her estate planning done. His passing was a wake-up call for her and she realized she had a son who was a lawyer and should be able to help her out. Basically, those in the crisis planning bubble are only even remotely looking at estate planning when either they are sick or a loved one is sick and or passes. The problem with this is that crisis planning is not “good” estate planning. Crisis planning is exactly what it seems like.
In a crisis, they come to a lawyer and say, “I need documents” and they quickly throw them together on a whim, and then they hope those documents still work at the time they pass away. Many people under this umbrella, are not up to date on the estate planning laws and may have had parents who passed without wills.
These people tend to be those that look at estate planning as something that only rich people do. Many of these people think lawyers are a luxury and something that you need when either someone dies or is about to die or is in trouble with the law. The problem with crisis planning (which is better than nothing without a doubt) is that laws change, and documents should be updated to reflect those law changes.
These individuals don’t’ have a lot of money and to save a penny on the planning, they end up skipping the scheduled meetings with the attorney who prepared their documents in hope that if they ignore it they won’t have to spend any more money on it. But…is that what they really want? Documents that might not work.
On the other side of the spectrum are those I refer to as the “Legacy Planners”. This 10%er group of people knows about 90% of what estate planning consists of and learned about it at their birth. Many of them were lucky enough to have parents who set them up UTMA accounts or 529 plans (ask me if you have not heard of these items!). Many learned the value of money by having an allowance as a kid and paying rent to their parents to learn that debts are real things to be concerned about when they grow up. Just about all of their parents not only have estate plans but actually, look forward to meeting with their estate attorney to keep their plans up to date since generationally they’ve always had a “family lawyer” who handles stuff like that for them. They were raised with money and you can consider them “old money” people….where they were taught from the beginning how to take advantage of the estate planning laws and tax laws and have learned how to manipulate those laws to their benefit from their parents. These individuals did not really have to “plan” because a legacy plan was in place for them from birth. This is a group that many of my friends in law school were lucky enough to be in, but surely, I was not part of this group even if I pretended to be at times. I learned so much from my best friend in law school who I thought it was the most amazing thing in the world to have a full-time nanny growing up and I couldn’t believe that people in this group knew so much more about the smaller things in life than I did like what kind of sheets to buy or china/silverware, or even clothing for that matter. To me, a suit is a suit. To them, it is all about the material. Many of these people are extremely comfortable with attorneys since they are more likely than not to have had a family lawyer since birth. The problem with Legacy planners is that they never in fact had to learn to plan themselves and planning has not been in their mind.
If a major even changes the way laws work or rules work, they are completely dependent on their expensive attorney and have no choice to put their full faith into that individual.
And…then there is the rest of us. The 70-80% of us in the growth phase. These are truly the people who can benefit from estate planning and being educated about it. Many of us are fortunate to work a full-time job and are growing our wealth in some capacity. Our objective is not survival, but it is to provide for our family and to make our children’s lives at least a little better than ours were when we were their age.
There is so much that we in the 80% do not know about how this stuff works. I eat, breathe, and sleep estate planning yet, every day I learn something from clients that I meet at our signing appointments that build up my knowledge. Every day, I work on leveraging my professional network to grow my knowledge. I like to put my estate in my control and make educated decisions as to why I want something to happen a certain way versus just being told to do it. I deal with estate planning just about every day of my life and yet, even now I am still learning. I admittedly do not know everything there is to know about estate planning, but I pride myself on the fact that I enjoy learning about it and find it interesting. So interesting that at our signing appointments, I enjoy teaching my clients things they may not know that I was lucky enough to learn at some point in my life either through a contact I met or through a book or other source. Many of us in this 80% bubble start in life closer to the line of the crisis planners but we take the knowledge and experiences from others and push our way to the Legacy Planner side of the scale (at least from the wealth perspective).
So what bubble are you in? Are you in the bubble you want to be? So, the question is…what key topics should we consider? Well…. cliff hanger time… Tune in to part 2 early next week for some insight into topics that should be considered.