Aloha. I’m attorney Scott Makuakane with the Law Firm of Est8 Planning Council. Welcome to the Honolulu Elder Care Channel. I’d like to talk to you for a few minutes about why we do estate planning. Very often when people come to see us, they know two things: they want to avoid taxes, they want to avoid probate.
Now, we all know what taxes are and very often people aren’t really sure what probate is, but they just assume it’s really, really bad. And, the good news is that probate isn’t always a bad thing. It can be, but generally speaking it is a worthwhile thing to try to avoid. So, tax planning and probate avoidance really are important in the estate planning process, but they’re not the most important things.
If truly avoiding taxes and avoiding probate are all you want to accomplish in your estate plan, I can give you the perfect estate plan. It works every time, and that is give everything to charity right now. That’s right, just give it all away. If you do that you aren’t going to have to worry about probate, you not going to have to worry about taxes, because you won’t own anything. But, you going to have to worry about taking care of yourself for the rest of your life. What assets are you going to have to pay for your own expenses? So, obviously there are things that are more important than simply avoiding taxes and avoiding probate, and I would like to suggest what some of those things might be.
First of all, most of us really want to be in control of our stuff. That is, everything we own. We want to say who is going to be in control now, who is going to be in control if there comes a time when we become incapacitated or when we die. So, control really is for most of us, far more important than probate avoidance, far more important than tax planning. We all want to be in control of our stuff.
Now, the next step is just thinking about, “Well, who do we want to take care of in our estate plan?” And, I would like to suggest to you that you really need to take care of yourself in your estate plan to put yourself in a position to be able to take care of other people, to take care of your significant other, your spouse, your family members, even your pets, your favorite charities. Once you have accomplished those goals, then considering the probate avoidance and tax planning aspects of your estate plan really starts to sort of fall into place with the rest of your estate plan. So, let me offer this definition of estate planning. Point one, I want to control my stuff when I am alive and all, and if there ever comes a time when I am not able to control my stuff, I want to say who is going to be in control. Point two, I want to plan for myself and my loved ones in the event that I become incapacitated. Now, incapacity planning is one of those things that is often overlooked in the estate planning process, or at least it isn’t given enough attention and there’s lots of reasons for that.
I mean, when I started practicing law back in 1983, we didn’t worry about incapacity planning that much, because people did things differently back in 1983. They lived and then they died. We don’t do that anymore. For a growing number of us, because of wonderful advances in medical technology and the ways that medical science can keep our hearts going and can keep our lungs going, we live longer. Unfortunately, medical science hasn’t figured out how to keep our brains going to keep up with the rest of us. So, the net result is we live longer, but a growing number of us is going to spend a certain amount of time completely incapacitated before we die. So, we need very much to plan for that possibility. Now, the current statistics that we hear from the folks who sale long-term care insurance is that 60 to 70% is going to need some kind of long-term care before we die. Now, given those odds, you better think about incapacity planning, and then ultimately our estate plans need to provide for how we are going to give our stuff to who we want, when we want, the way we want. And, when we die, we make sure all of those things happen with a minimum loss of privacy, loss of taxes, avoiding unnecessary trips to court, and just making sure that transition is as smooth as possible. So, there are some thoughts about how to approach the world of estate planning.