April 20, 2010Why Estate Planning is Essential in Worsening Economic Times
Most Americans now realize their children and grandchildren will face the most severe financial challenges since the Great Depression. All the facts and figures seem to point to more turbulent times ahead. Some of the grim realities the next generation will face include:
Rising tax rates that will drastically reduce the amount of personal income available to pay for basic living expenses;
Uncertainty in how health care will be provided and what health care will cost;
Difficulty purchasing a home or car due to tightening credit standards;
The potential loss of social security and Medicare benefits due to the anticipated bankruptcy of both government programs, combined with the elimination of pension plans by most employers;
An inability to rely on the growth of investments, such as real estate, stocks, and bonds, to fund retirement as the performance of all assets seems unpredictable; and
The likelihood of sustained long-term unemployment as more American jobs are eliminated or relocated outside the U.S.
Because these financial pressures are only predicted to increase in the future, estate planning is now an even more critical part of protecting your family. The assets you bequeath to your heirs are no longer something that will simply make their lives a little easier. Instead, the inheritances they receive may make the difference in their survival. However, if you donít use the right strategies to pass on your wealth, the primary beneficiaries of your estate may be the federal and state government.
By consulting an estate planning attorney and a financial planner, you can learn whether you should take any of the following steps to provide more financial security for your spouse, partner, children, or grandchildren:
1. Creating an estate plan that minimizes the amount of your estate that will be taken by estate taxes, gift taxes, and generation-skipping transfer taxes;
2. Purchasing life insurance or making a life insurance trust to provide for your loved ones;
3. Purchasing long-term care insurance to prevent the property you have accumulated over a lifetime from being swallowed up by long-term care expenses;
4. Establishing a dynasty trust or spendthrift trust to pay for living expenses, education, and medical costs for your children and grandchildren, especially if you have a financially dependent child;
5. Creating a business succession plan to create a secure income stream for your family;
6. Using your gift tax exemption amount to help your children and grandchildren;
7. Making a will or living trust that protects the inheritances of your children from a prior marriage if you are part of a stepfamily; and
8. Executing a financial power of attorney, living will, and living trust so your assets will not be wasted on costly litigation or probate fees.
With the economy in a downward spiral and new legislation creating even more uncertainty, most Americans think estate planning is something they should put off until things improve. This is a huge misconception. In fact, estate planning is one of the most important things you can do to provide more financial security for your spouse, children, and other family members to help provide them the resources they will need to survive the troubled times ahead.