Top 5 Reasons to Plan Your Estate

Let’s face it, we rarely believe that something will happen to us this year..but what if it did? Are you confident in what the outcome will be for the people that you love the most?

There are plenty of reasons to plan your estate now. I have listed five of the top reasons below. Although numbered, they are in no particular order of importance because everyone has different priorities and concerns.

If anything on this list strikes you as a concern, imagine the effect on your loved ones if you fail to take action. This should inspire you to make a firm to commitment to resolve this as soon as possible. Pick a date this year in which you will commit to competing your estate plan, and stick to it!

Okay, here are the top 5 reasons…

1)      Protect your family in the event of your incapacity. Without a properly drafted estate plan, your family will likely have challenges in managing any assets in your name, including your home. A court supervised conservatorship (otherwise referred to as a living probate) in which all of your transactions are recorded and affirmed through a series of court hearings will generally be required.  This public process goes on indefinitely, and requires your family to convince a judge (and in some cases even a jury) that you are unable to manage your own finances.

2)      Make your wishes known regarding distribution of your assets in the event of your death. Without an estate plan, any assets left in your name alone at your death will be left up to state law, and the probate court system, to determine who will receive those assets. 

3)      Avoid the delay and expenses of probate, and keep your affairs private with a living trust. Even if you have a valid will at the time you pass away, a court supervised process called probate will be required to inventory everything that you own and approve its distribution to your beneficiaries (spouse, children etc). The probate process is a public process in which anyone can review your probate file and determine what you have, who is scheduled to receive it, and when. Especially in today’s society, many people prefer to protect their loved ones by keeping their affairs private, which can only be accomplished through a properly drafted (and funded) living trust.

4)      Protect assets and keep them in the family.  Many people are concerned that property left to a child will be inherited by his or her spouse if that child were to die prematurely, or if the couple were to divorce. Leaving property to a child in trust helps ensure that those assets are kept separate and pass according to your wishes (i.e. to grandchildren).  These trusts may also protect asset from creditors if a child is ever involved in a lawsuit (business or personal) or collections effort. 

5)      Protect minor children by designating a guardian. Parents with minor children must ensure that they can decide who will raise their children if they die before those children become adults. Without a proper estate plan, a judge will make that decision under his or her own discretion. 

What is Estate Planning?

Let me start by describing what estate planning is not. I was having lunch with a financial advisor last week, who shared with me a great story about an event that occurred during his career in the military. Before troops were being deployed into hostile territory, they were summarily interviewed by a base attorney who filled in Will documents for them. The substance of the discussion was getting a response to the question, “How do you want to leave your stuff?”

Although that story certiainly (and bluntly) illustrates one element of one of the issues addressed in developing an estate plan, proper estate planning accomplishes so much more than just that.

Essentially, proper estate planning is taking responsibility for your finances, your person, and the well being of your loved ones at three critical times:

(1) Now, During Your Lifetime:

• What do you own? All that “stuff” (along with everything that you acquire in the future) is “your estate.” However you perceive the size and nature of your estate is irrelevant to whether or not planning should be done. It is simply a factor to help determine what type of plan will best suit your present situation and future goals.

• Is your estate exposed to unnecessary financial liability by the way that you hold title to real estate and other important assets?

• Who is on your team? Do you have an attorney you can trust to guide you through these important matters? How about complimentary professionals like insurance, financial and tax advisors? Bottom line, are you receiving the service that you need and deserve?

(2) If You Become Physically or Mentally Disabled:

• Who will manage your finances (i.e. pay expenses, endorse a check, withdraw funds, reallocate investments, sell property, etc) if you cannot do it yourself? Someone else must have legal authority to do it on your behalf.

• Who will make medical decisions for you if you can’t communicate? Will they have legal authority to do that? Will medical information privacy laws like HIPPA put them in a “catch 22” by preventing them from accessing medical information they might need?

• Who will take care of minor children if you (or a spouse) cannot? Again, someone else must have legal authority to act as a guardian. You have two choices here: You can name someone that you want, or you can leave it for a court to determine. Who knows your children and the people closest to you the best .... you, or a judge you have never met?

(3) When You Pass Away:

• What will happen to your property if you do no planning?

• What if you write a Will? Does that cover all of your assets? Hint: It probably controls very few of them.

• Do you want a court to have to approve the transfer your assets, or would you prefer to keep matters private?

• Who will be given the authority to care for minor children?

• How should you leave property to your children and other loved ones?

As you can see, estate planning involves very real and delicate issues that affect everything that you have, and everyone you love most. This planning is not automatic. You must choose to take control. If you are working with the right people, it’s a process that will empower you.

Where Do I Start?

You start by simply making a decision to complete your estate plan. Give yourself a firm deadline that you believe you will stick to. Make sure the deadline is early enough to cause you to stretch, as doing so creates urgency that will propel you through your planning. Once you have made that commitment, follow the 2 steps below to get started on the right foot with your initial appointment:

• Decide which estate planning attorney you'd like to work with. You should meet and feel a sense of trust and rapport with your attorney before you ever get "on the clock." In fact, you should be able to get a flat-fee quote during your initial meeting (i.e. there is no "clock"). Fees quoted may or may not be indicative of the attorney's ability or quality of service (you have to trust your gut and / or your referring source's endorsements). In any case, you'll want to hold the initial meeting with your attorney at least four weeks before your deadline. Beware: Not all attorneys will have your documents prepared for signature in a prompt manner. Some attorneys and firms get must very busy in order to meet revenue demands and can have a tendency to let files "sit in the office" for literally months before something is actually done with them (long after the details of the plan have faded in memory or been passed on to an associate to piece together). With our process,you documents are guaranteed to be prepared within four weeks, and its usually more like two or three. The details of your plan are arranged in our system within 48 hours of meeting with you, when details are fresh.

• Show up to your meeting having prepared in advance. Request a questionnaire from your attorney early on, and set yourself up to have it filled out and submitted to the law office three days before the meeting. You don't need to provide account numbers if you aren't comfortable doing so. Just the name of the financial institution, who's name it's in, and the approximate balance will suffice. You don't need to provide a copy of the deed to your home, but you should bring in a property tax statement so we can identify the property for you legally.

Once you have accomplished the above, you will be well positioned for an effective attorney-client meeting where you can actually design and understand your estate plan.

Wills in 3 Minutes (Video)

You've probably heard that everyone needs a will. Here is an explanation of what wills do, and why they are important.

http://video.about.com/wills/What-Is-a-Will-.htm

Trusts in 1 Minute (Video)

The video below provides a helpful overview of how trusts differ from wills and demonstrates how they are superior planning vehicles.

http://video.about.com/wills/What-Is-a-Will-.htm

Estate Planning Video for Parents

This interview with a colleague of mine was featured on the Today Show last spring. It is a worthwhile 4 minutes for any parent.



Nicely done Alexis!

A Trust is Like a Business

For many people (and myself for a period of time), understanding the concept of a trust can be difficult. It need not be. Think of a trust as being a business. You are creating a new legal entity. If you create it during your lifetime, you don't even have even get a separate tax id number for your trust. Instead, much like a sole proprietorship or partnership, your trust will be treated as an extension of you as an individual (or individuals in the case of a joint trust).

• Business Plan: Your trust document will contain your business plan. This plan will include important components to ensure its success both now and into the future. For example, your plan will probably provide that you will be in full control of your property while you are alive and well. It will also provide for a seamless transfer of control over your affairs should you become disabled at any point in your life (and that trasnsfer should be structured in a way that excludes lengthy and expensive court involvement). Finally, you'll have instructions that give whatever property you have in your trust to whom you want, when you want, and in the way you want. Some people even take the extra step of documenting some of the key values and principals they want to pass on, including how they feel about their loved ones.

• Finances & Management: Once your trust is established (either now by signing it in front of a notary in the case of a living trust-based plan, or upon your death upon order of the probate court in the case of a will-based plan), you start funding your trust with of all of your assets (except for retirement accounts). For example, your trust will own the interest in your your house, land, bank accounts, investments, and life insurance. Again, remember that while you are alive and well you have full control to manage your trust assets just as you're used to doing right now. You can also change the terms of your trust document (or business plan) anytime that you want to while you are alive and well. Regardless of whether or not you make any changes, it is important to briefly review your plan every year to make sure it stays on track with your life situation.

• Succession & Transfer: If you become disabled during your life, your successor trustee (the person you named in your business plan to succeed you) will be able to manage your affairs on your behalf. When you pass away, your trust doesn't die, but lives on to provide for the transfer of your assets in any way or over any length of time that you desire. Children's inheritances are protected from creditors as long as their property stays in the trust as opposed to being owned in their own name (kind of like a corporation or an LLC). My trust by the way, provides that my children's shares will remain in their trusts until they are 40 years old. I've drafted many that gave it all outright, and many that included lifetime trusts for each child. There is no right or wrong way to do it, just find the way that suits your values and your personality.

That's pretty much all there is to it. Trusts are really pretty simple creatures when compared to a well organized business.

Asset Protection For Your Loved Ones

There are two ways to leave property to your loved ones. You can leave it: (1) Outright; or (2) In Trust.

• When you leave property outright to your spouse or children, you leave it to them with "no protection" from: Creditors (a lawsuit brought against them or a business partner, a bankruptcy), Predators (a divorce), or Themselves (youth, lack of financial responsibility, etc.).

• The best way to provide asset protection for your loved ones is to leave your property to them in a trust. These trusts can be structured to be very simple and flexible (leaving the beneficiary with full control), can contain significant detail to accomplish certain legacy goals (such as helping children learn to manage money well by providing them with structured distributions), or do just about anything in between.

• Trusts can be created through will-based estate planning, or living trust-based estate planning. There are advantages and disadvantages to both types of plans, and a qualified estate planning attorney will assist you with finding the right fit based on your individual situation. The only wrong decision is the decision not to plan.

With a proper estate plan, you can have full control over your assets during life (nothing changes) and give your beneficiaries the gift of asset protection by leaving their property in an ongoing Trust after you pass on.