Is estate planning only for the rich? Do middle class folks really need to engage in estate protection or estate planning?
While there are dozens of reasons people engage in estate planning with estate planning lawyers, this post addresses who REALLY benefits the most from engaging the services of the right estate planning attorney. Let's look at three aspects of estate planning - taxes, probate, and long term care expenses - and see who gets whacked the most from failing to plan.
Let's say Rich and his wife have accumulated $8 million. They never engage in any estate planning because they are too busy sailing on their boat and travelling in the Caribbean. But as they age, they get sick and they spend a staggering $1 million on long term care expenses. Then, they die, and between all the probates in the various states (they own real estate in multiple states), their estate incur a total of $400,000 in probate cost. Still, their two children divide the remaining $6.6 million - each child walks away with $3.2 million - not too shabby.
Now, let's say Middle Class Max worked his tail off to pay off his $350,000 home and accumulated $700,000 in savings. They also neglect estate planning. Later in life, Max has a stroke, and Max's wife has dementia. They too spend $1,000,000 in long term care expenses. They spend their life savings of $700,000, and Medicaid pays the remaining $300,000. They are not forced to sell their home during their lifetime, but Medicaid pursues reimbursement of $300,000 from the estates through Medicaid's Estate Recovery Program. During the probates, the house is sold for $350,000, Medicaid is paid $300,000, and funeral and probate expenses wipe out the remaining $50,000. Middle Class Max's two children are left with zippo, $0, not a thing.
So you tell me, which family would have benefited more from engaging in estate planning the right way? Rich's family or Middle Class Max's family?
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Louisiana Estate Planning Attorney
Phone: (225) 329-2450