Pass the Assets on the Left Hand Side – You Do Need an Estate Plan

Planning is not my thing. Any time I try to go against this nature and plot out steps, timelines, and milestones I get bored, distracted, or over it and abandon the plan halfway to completion. Wait, is that why it’s so hard for me to stick to a budget?Wait-lemme-think-GIF

I have a tendency to get an idea in my head, immediately act upon it, and figure things out as I go. That’s how I wound up applying to business school, buying my first home, working for my maybe not soon to be ex-employer, buying my second home, running my first marathon, dating my ex, and other life decisions. Winging it has tended to serve me well in most contexts because I tend to give all of my energy, effort, resources, mindshare, and more to whatever is currently capturing my imagination. However, there is one part of life where I am determined to have everything laid out in perfect order. Death. Or rather, the aftermath of it. A year ago I established an estate plan. what for

Truth time. I am a know it all control freak who likes to get her way. When it comes to my assets and possessions, since I can’t take them with me when I die, I want them to be used and managed in the way that I best see fit. An estate plan allows me to do that. Thanks to television and movies, when most people think of estate plans they envision wealthy people gathered in the parlor for the reading of father’s will and the inevitable outrage sparked when it’s announced that the patriarch left everything to the butler, rendering his wife and child penniless. Because of this depiction a lot of people assume that they don’t need an estate to plan and that wills are only for the wealthy. To them I say You're wrong

How To Tell If You Need An Estate Plan

Do you have children, own property, have investment accounts and savings, feel strongly about supporting a cause, have pets? If you answered yes to any of the above then this applies to you. In my opinion, everyone over 18 years of age needs an estate plan. Although the word estate can seem imposing all it means is “the things you own.” However, estate planning isn’t just about who gets your Stuart Weitzman boots and IKEA furniture. A thorough estate plan gives direction about who will be responsible for making decisions if you’re incapacitated or disabled, names guardians for children, details how debts will be paid, names your beneficiaries, and more. Unfortunately, the majority of Americans (56% according to a 2016 Gallup poll) do not have an estate plan, which can ultimately be costly and lead to unnecessary family chaos.

Dig if you will a picture…you are happily living your life. One day you unexpectedly suffer from cardiac arrest and are rushed to the hospital. The doctors are able to revive you but your brain was deprived of oxygen for so long that you now exist in a vegetative state. Your loved ones vehemently disagree about your longterm prognosis for recovery. Your next of kin wants to remove care and allow you to pass away naturally. However, your other family strongly feel that you simply need more time to recover and want to continue your treatment. The conflict reaches a point where neither side will relent so the case is taken to court. After many years, appeals, and thousands in attorney fees it is determined that life sustaining support will be removed. Unfortunately for Teri Schiavo’s family this was not just a visioning exercise. This was their lives from 1990 thru 2005. It all could have been avoided if she had had a living will or healthcare directive.

The healthcare aspect alone is enough to justify the need to prepare estate documents. Accidents can happen to anyone at any age. It is much better to have decisions made ahead of time without the panic, fear, and emotions that these situations bring. I have lived alone for the majority of my adult life. It tends to lead to the occasional morbid thoughts of falling, hitting my head, and winding up in a coma for months. It was that paranoia that first led me to estate planning. However, the transfer of generational wealth is what made me hire an attorney and get it done.

Estate Planning and Generational Wealth Transfers

In addition to wage discrepancies, home ownership and valuations, and investment choices, wealth transfers are also a major driver of the racial wealth gap. The median Black household with a college degree holder currently owns $23,400 in wealth (7.7 times less than the median white family), while the median Black household with a graduate or professional degree has $84,000 in wealth (3.5 times less than the median white family). Housing equity makes up about two-thirds of the typical household’s wealth. Without estate planning the little wealth that we do hold as a community is at great risk. According to a 2015 Black Enterprise magazine article nearly 70% of Black Americans have no will or estate plan in place. We are also 40% more likely than White Americans to come from households with five people or more. If you watch Queen Sugar like I watch it

then you know the complexities of multiple people having equal stake in inherited assets.

Black families are five times less likely than white ones to receive large gifts and inheritances so when we do receive them it is important that we are prepared. Land and real estate assets can be particularly tricky, especially if family members are not in the area to reside in or manage them. Too often these wealth transfers are passed to next of kin with no plan for taxes, maintenance, or other expenses. Many overwhelmed families do exactly what mine did when we inherited my grandmother’s home: sell it and split the proceeds amongst multiple stakeholders. Other times it takes years to get multiple sibling’s consent to move forward with any action on a property. Even worse, when ambiguity surrounds the title dozens to hundreds of heirs can have equal claim to houses, land, securities, and more with very few people knowing exactly what they are entitled to where. Heck, last week I learned that my maternal grandmother’s family owned land in Georgia but no one knows where it is, who it was deeded to, or if we still have any ownership claim. Unfortunately this situation is not uncommon.

In the four decades after the Civil War freed slaves and their descendants accumulated about 15 million acres of land across the US. However, due to lack of legal resources roughly 81% of land owners died without an estate plan, leaving land with no title to their heirs. This land became heirs’ property. Most heirs’ property exists in the South and more than 50% is owned by Black Americans. Heirs’ property is vulnerable because any co-owner can sell their share – or even bring the entire property to auction – without the consent of the other owners. A 2001 report showed that over 80% of Black owned land in the South had been lost to these partition sales since 1969. That is hundreds of millions of dollars of Black wealth lost in little more than a generation.

How To Get Started

Estate planning is important for all families, but it is particularly critical to Black families who often have a tenuous, at best, grip on financial security. Even small wealth transfers can have a significant impact in people’s lives. These are the steps I recommend taking to ensure that your assets are preserved for your family:

  1. Get enough life insurance. Whether you decide on term, whole, or a combination of both will depend on your preferences, income, assets, marital and parental status, and financial obligations. Personally, I purchased a combination of term and whole life policies and made my closest loved ones the beneficiaries.
  2. Talk to your parents, grandparents, and great-grandparents about their estate plans. This is not always an easy conversation but it needs to be had. This is especially important if you only have one living parent and they become incapacitated. I know from personal experience that it is nearly impossible to get access to bank accounts, medical records, and more while a relative is still alive. You do not want to have to go through the process of acquiring power of attorney rights when your parent is alive but not lucid. These bills don’t care if mama thinks its 1956, they still have to be paid and you can’t do that without access to her accounts. Additionally, if they have not done so already, convince elder family members to designate someone they trust as their healthcare proxy. Ask them to detail their wishes on life saving measures and end of life care. When it is all in writing ahead of time the decision is made for you should the worst happen. Plus you will know you are abiding by wishes your loved one made while of sound mind and body.
  3. While you’re having that chat with the elders about their medical wishes and power of attorney, also see if they have an estate plan for property and assets. Many Baby Boomers and members of the Silent Generation are homeowners. Have them outline what they want done with their home once they are deceased. If they want the home kept in the family make sure they have provisions for property taxes, insurance, maintenance, remaining mortgage payments, etc. If you have multiple siblings it is probably a good idea to designate one person for the title. For example, I left my condo to my younger brother with stipulations for paying off the mortgage and guidelines for it not to be sold for a specified length of time. Your parents and grandparents can dictate whatever wishes they see fit, but it’s very important that they do it.
  4. Whether single, partnered, married, parent, or childless you have to get your estate plan in order stat. I recommend the site Get Your Shit Together to start. It provides a checklist of everything needed to put together a complete estate plan. It goes into depth about the differences between wills and trusts, has state forms, and an attorney directory. A friend put me on to it after I got all of my documents together, but it covers all of the steps that I went through so I’d say it’s pretty thorough.
  5. Get an estate attorney. While TV would have us believing that lawyers can do everything from set up your LLC to get you off for that bank heist you pulled, in actuality lawyers have specialities. Your friend who is a criminal defense attorney is not the person to go to get your will done on the cheap. Those online forms are not the move either. Is hiring an attorney expensive? Yes ma'am.gif But it is absolutely worth every penny. Shop around for prices and someone who makes you feel comfortable. I consulted with two attorneys before settling on one. Prepare yourself for some very personal conversations about your assets, your family, and your mortality. Take the time to give a lot of thought to who you can trust with what. The person who you want to care for your children may not be the same person you want managing the money you leave them. Consider how much power you want to give to your executor should you be incapacitated. Figure out what your definition of incapacitated is and who should be able to determine that. I’m going to keep it a hundred and tell you that these documents give certain people in your life a great deal of power and it can be a lot to absorb when signing these documents.
  6. If you have over six-figures of assets (which most homeowners do) I strongly advise that you opt for a living, revokable trust over a will. While a trust will cost more up front to set up and is a pain in the ass to fund, it will keep your assets out of probate. Probate is the judicial process where a will is verified in court. Depending on the complexity of your estate and if there are any contestants to the will probate can be a timely and costly process, taking thousands of dollars which could have passed to beneficiaries. Trusts bypass the probate process allowing property to flow straight to those whom you designate. I went with this option due to Illinois state laws, wanting greater control over what my beneficiaries can do with what I left to them, and the size of my estate. The attorney that you retain will be able to recommend the best option for your situation.

I would like to say that once you’ve established an estate plan your work is over. However, life changes and so should wills, trusts, power of attorney, etc. along with it. I know that my executors and beneficiaries will change once I’m married and have a spawn or two. I may outlive some of my current beneficiaries. The good thing is that once the foundation is built changes are usually pretty painless to make. That reminds me, it’s been over a year and I still haven’t put my home into my trust. I’ll be at City Hall on Monday.

oh joy

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