By Attorney Jennifer Imediegwu
When people think of estate planning, there is a flurry of misconceived notions that often dance around one’s mind. A common misconception is, “I don’t have an estate.” It’s common to think “rich people” have an estate, but the “average person” does not.
The truth is that everyone has an estate, the only difference is size. Your estate simply is all the property owned by you at the time of your death. This includes real estate, bank accounts, investment accounts, retirement accounts, life insurance policies, and personal property like automobiles, jewelry, and artwork. This is not an exhaustive list of assets that makes up one’s estate, but it certainly is a good starting point.
As you can see, these are assets commonly held by most families. Despite the fact these are commonly held assets, African Americans in particular, do not do enough to protect their assets and transition wealth to the next generation.
In 2015, Earl Graves Sr., the Founder of Black Enterprise Magazine, wrote an article entitled, “Lack of Estate Planning Puts Black Wealth at Risk.” He states: “We as African Americans have the capacity to pass on more wealth than any previous generation– wealth needed to continue to finance the progress and empowerment of future generations. But this potential cannot be realized if we don’t collectively commit to estate planning. Merely buying enough life insurance to cover the costs of our burials may have been acceptable for our parents, but it’s not even close to good enough for our children and grandchildren.”
He goes on to say that nearly 70% of African Americans have no Will or estate plan in place. That is an alarming statistic because so much is at stake.
What, in particular, is at stake?
There are more than 2.6 million African American owned businesses nationwide at risk of being lost without planning. When we look specifically at Wisconsin, there are more than 40,000 minority owned businesses, just over 9 percent of all small businesses in the State. Minority business ownership increased 55.6 percent between 2007 and 2012. In the previous decade, African American owned enterprises more than doubled, from 1997-2007.
Estate planning is important for everyone; however, for business owners it is critically important. Given that most African American owned businesses in the Milwaukee area are overwhelmingly “Mom and Pop” operations, estate planning is especially important for this demographic. Nonetheless, too often, this critically important planning goes ignored and these businesses disappear upon the death of the owners.
Estate planning is the process, during life, in which an individual or family arranges their affairs and determines who will make healthcare and financial decisions in the event of incapacity (a time in which a person can no longer make decisions independently) or in the event of death, how assets should be distributed. A basic estate plan typically consists of at least the following: a Durable Financial Power of Attorney, a Healthcare Power of Attorney with Living Will provisions and HIPAA Authorizations, and a Will or Trust. These documents not only help to provide control over one’s estate, they also are critical to preserving and protecting one’s estate. Additionally, powers of attorney will usually avoid the need for an expensive court guardianship.
Everybody at least needs a Will, but depending on the circumstance a Revocable Trust might be the better planning vehicle. Size and complexity would be the biggest two factors to consider in distinguishing between whether a Will or Trust is appropriate. If your estate is small, say less than $100,000, and your wishes and life circumstances are simple- for example, to a surviving spouse and if your spouse predeceases you, to your two children in equal shares, then a Will may be a good fit.
However, if your estate is much larger or your situation is more complicated like wanting to provide for step-children, foster children, grandchildren, a disabled child or grandchild, or make a financial gift to your church or favorite charity, then a Trust would be a better vehicle to facilitate such wishes. If there are minor children or you do not want your children to get everything outright and you would rather space out distributions, a Trust will allow you to do that. If privacy and ease of administration are a priority, then a Trust would be preferable.
Another distinguishing feature between a Will and Revocable Trust is that a Will only “speaks” at death.
However, a Revocable Trust is a “living” entity and can be utilized during life for asset management purposes and funded during life for ease of administration of one’s estate upon death. The alternative to having a Will or Trust in place is having a judge decide who gets your property, which will always be your legal next of kin and will not take into consideration close friends, charities you care about, step-children or foster children you raised as your own, or biological ones you are estranged from and wish to disinherit.
Whether we look at individual families or take a 30,000-foot view of our community, Earl Graves Sr. is right, there is a lot at stake and his words ring true now more than ever: “Working hard your whole life to create wealth, achieve professionally, build businesses, and provide for your family, only to die without a Will simply does not make sense. Wealth building is not just about financing our lives; it’s about leaving a legacy for our children, and their children, to build upon.”
So I leave you with a question, how will you protect your legacy?
Jennifer Imediegwu is an Estate Planning and Elder Law Attorney with Moertl, Wilkins & Campbell, S.C. in Downtown Milwaukee. Jennifer is a member of the Wisconsin Association of African American Attorneys (WAAL), the Milwaukee Chapter of Jack and Jill of America, Incorporated, the Association of Women Lawyers (AWL), the Wisconsin Chapter of the National Academy of Elder Law Attorneys (NAELA), and she is actively engaged with the Milwaukee-Waukesha Aging Consortium (MWAC). She can be reached at (414) 276-4366 or firstname.lastname@example.org.