Benefits of Proper Estate Planning

What is Estate Planning?

Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.
When that happens—and it is a “when” and not an “if”—you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.
That is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die. However, good estate planning is much more than that. It should also:

• Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
• Include instructions for your care if you become disabled before you die.
• Name a guardian and an inheritance manager for minor children.
• Provide for family members with special needs without disrupting government benefits.
• Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
• Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
• Provide for the transfer of your business at your retirement, disability, or death.
• Minimize taxes, court costs, and unnecessary legal fees.
• Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.

Estate planning is for everyone.
It is not just for “retired” people, although people do tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages.
Estate planning is not just for “the wealthy,” either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.
Too many people don’t plan.
Individuals put off estate planning because they think they don’t own enough, they’re not old enough, they’re busy, think they have plenty of time, they’re confused and don’t know who can help them, or they just don’t want to think it. Then, when something happens to them, their families have to pick up the pieces.
If you don’t have a plan, your state has one for you, but you probably won’t like it.
At disability: If your name is on the title of your assets and you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. The court, not your family, will control how your assets are used to care for you through a conservatorship or guardianship (depending on the term used in your state). It can become expensive and time consuming, it is open to the public, and it can be difficult to end even if you recover.
At your death: If you die without an intentional estate plan, your assets will be distributed according to the probate laws in your state. In many states, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.
Given the choice—and you do have the choice—wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?
An estate plan begins with a will or living trust.
A will provides your instructions, but it does not avoid probate. Any assets titled in your name or directed by your will must go through your state’s probate process before they can be distributed to your heirs. (If you own property in other states, your family will probably face multiple probates, each one according to the laws in that state.) The process varies greatly from state to state, but it can become expensive with legal fees, executor fees, and court costs. It can also take anywhere from nine months to two years or longer. With rare exception, probate files are open to the public and excluded heirs are encouraged to come forward and seek a share of your estate. In short, the court system, not your family, controls the process.
Not everything you own will go through probate. Jointly-owned property and assets that let you name a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, etc.) are not controlled by your will and usually will transfer to the new owner or beneficiary without probate. But there are many problems with joint ownership, and avoidance of probate is not guaranteed. For example, if a valid beneficiary is not named, the assets will have to go through probate and will be distributed along with the rest of your estate. If you name a minor as a beneficiary, the court will probably insist on a guardianship until the child legally becomes an adult.
For these reasons a revocable living trust is preferred by many families and professionals. It can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets at incapacity, bring all of your assets (even those with beneficiary designations) together into one plan, provide maximum privacy, is valid in every state, and can be changed by you at any time. It can also reflect your love and values to your family and future generations.
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending.
A living trust is more expensive initially than a will, but considering it can avoid court interference at incapacity and death, many people consider it to be a bargain.
Planning your estate will help you organize your records and correct titles and beneficiary designations.
Would your family know where to find your financial records, titles, and insurance policies if something happened to you? Planning your estate now will help you organize your records, locate titles and beneficiary designations, and find and correct errors.
Most people don’t give much thought to the wording they put on titles and beneficiary designations. You may have good intentions, but an innocent error can create all kinds of problems for your family at your disability and/or death. Beneficiary designations are often out-of-date or otherwise invalid. Naming the wrong beneficiary on your tax-deferred plan can lead to devastating tax consequences. It is much better for you to take the time to do this correctly now than for your family to pay an attorney to try to fix things later.
Estate planning does not have to be expensive.
If you don’t think you can afford a complex estate plan now, start with what you can afford. For a young family or single adult, that may mean a will, term life insurance, and powers of attorney for your assets and health care decisions. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced attorney will be able to provide critical guidance and peace of mind that your documents are prepared properly.
The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does strike. Don’t wait. You can put something in place now and change it later…which is exactly the way estate planning should be done.
The best benefit is peace of mind.
Knowing you have a properly prepared plan in place - one that contains your instructions and will protect your family - will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.

Trust Based Estate Plans vs. Will Based Plans

Many people now choose a revocable living trust instead of relying on a will or joint ownership in their estate planning. A living trust that has been properly prepared and funded with your assets can provide many benefits for you and your loved ones.

How many of these benefits of a revocable living trust are you familiar with?

• Avoids the time and expense of probate when you die.
• Avoids multiple probates if you own assets in more than one state.
• Provides easier, more efficient administration of your estate.
• Prevents court interference at incapacity.
• Gives you and your family maximum privacy by avoiding public court processes.
• Minimizes emotional stress on your family.
• Brings all of your assets into one plan controlled by one set of instructions.
• Prevents unintentional disinheriting.
• Makes it easier to make equitable (fair) distributions to your beneficiaries.
• Lets you keep assets in the trust until your beneficiaries reach the age(s) you want them to inherit.
• Can continue longer to provide for a loved one with special needs.
• Assets can remain in the trust and be protected from beneficiaries’ creditors, spouses, divorce proceedings, irresponsible spending and future death taxes.
• Prevents the court from controlling inheritance of minor children.
• More difficult than a will to contest.
• Provides effective pre-nuptial protection.
• Can be changed or cancelled at any time.
• Allows for professional asset management with a professional trustee.
• Can include tax planning to reduce or eliminate state and/or federal estate taxes.
• Lets you keep maximum control while you are living (even if incapacitated) and after you die.
• Peace of mind.

It will probably cost more initially to set up a well-drafted living trust than to have a will prepared. One reason is that a living trust usually has more provisions because it deals with issues while you are living as well as after you die, and a will only deals with issues after you die. When comparing costs, remember that the true cost of a will must include the costs of probate when you die, of a possible conservatorship if you become incapacitated and the costs of a guardianship if you leave assets to minor children.

After weighing the costs and benefits, it is easy to see why so many people and professionals prefer a living trust.

The Costs and Consequences of not having a Will

Estate planning is one of those things everybody knows they should do, but a surprising number of people put it off until it’s too late, or do it wrong in the first place.

Too many people of all ages hesitate to have wills drawn up. There is no good reason to do that. If you die without a will, you will have lost the right to specify who inherits your property. In this situation, the state decides how your property will be distributed, and it is unlikely the allocation will match your preference. Moreover, in many states, the law will allocate your property in a way that may be not be fair to your spouse.

Some individuals feel that because they are married and own their property jointly, there is no need for a will. What if you and your spouse die together in an accident? Who will receive your property? If you have young children, who will become their guardian? If your young children inherit property, who will manage it?

It is important to know what property passes by will, and what does not. Any property owned with “rights of survivorship’’ goes to the other owner(s). Property with a named beneficiary goes to the party named. Any property disposed of by contract goes to the named owner(s). The provisions of your will do not override the preceding specifications. Any property you own individually that does not have a named beneficiary passes by will. Your will can also cover property you may not be aware of. For example, if you receive an inheritance or a legal settlement, the provisions of your will can address these assets.

Many advertisements suggest you can avoid legal fees by purchasing books, legal forms, or computer programs to create your will. In my opinion, that is foolish. If any mistakes are made, the will can be disallowed. A straightforward will is not expensive, and many attorneys won’t charge for an initial meeting. Reputable attorneys will provide you with a cost estimate after you provide basic information.

Is a Will Based Plan or a Trust Based Plan Better for Me

     Often clients will seek my estate planning guidance and a common initial question is whether a Will or a Trust is a better fit for them.  The answer, as you may imagine, is completely dependent on what the client wishes to accomplish and in what manner.

    A Will is able to name an executor of your estate, the beneficiaries of your estate, guardians for minor children, among other things.  I always say a first basic goal of estate planning is to avoid probate.  Why you might ask?  To most clients surprise, everything that passed through a Will is in fact subject to the probate process.  This means all assets that pass through your Will must be supervised by the probate court which involves probate costs to your estate or your heirs.  Additionally, probate is a public process and notices are published in newspapers and other materials to notify all heirs and potential creditors that they may be able to take a bite at the apple, your estate, by filing a claim against it.  Lastly, probate can take up to 12 months to formally close, which could result in up to a 1 year delay in your beneficiaries using and enjoying your property (assets, real property, personal property, etc.).  These are some of the downsides to a Will based plan.

     A Trust on the other hand (living trust, revocable trust, revocable living trust) is what I describe a Will on steroids.  It accomplishes everything a Will does, with some added protections.  A successor Trustee is named (called an executor or personal representative in a Will), beneficiaries are names, guardians for your children, etc.  There is no probate process with a Trust based plan, thus avoiding probate costs, avoiding any delays in distributing your assets to the trust beneficiaries, and the terms of the Trust are kept private and confidential.  There are some addition protections in a Trust based plan.  You can elect to stipulate to whom, in what manner, and when you beneficiaries receive the Trust proceeds.  It can be left outright to the beneficiary, or it can be kept in further Trust so as to allow beneficiaries to access their share at different stages or ages in life.  You can continue to "control the purse strings" of your estate well after your death.  Special needs provisions, estate tax savings provisions, and many other client specific interests can be provided for in a very efficient manner.

     After a brief discussion together we can discern whether a Will based or Trust based plan better fits your situation.  If you have no other estate planning documents, I always advise, whether a Will or a Trust is selected, looking into a package of ancillary documents which often include a Durable Power of Attorney, Massachusetts Health Care Proxy, Living Will, Homestead Declaration, and /or a HIPAA release.