“The biggest estate-planning mistake is that people think it’s only about the money,” said Marlene Stum, a professor at the University of Minnesota and author of the “Who Gets Grandma’s Yellow Pie Plate?” workbook and website. “When it comes to their personal possessions, they say, ‘It’s just stuff.’ ”
In my opinion, the personal items in a home is often the biggest source of unhappiness among families when a loved one dies. Without taking the time on how to resolve the distribution of personal possessions, you can unwittingly leave a legacy of rancor and resentment.
Baby boomers surveyed by Allianz Life Insurance Company selected personal possessions six times more often than financial inheritance as important in legacy planning.
Okay, where do we start? How about asking your heirs what items mean something to them? Then keep a list and resolve any overlapping interests.
Next, on a sheet of paper, titled Personal Property Distributions, and upon completion attached to the back of your Will, list who gets what and sign, date and number the sheet(s) 0f paper. While writing the names on the pieces themselves seems like a great idea, it is unlikely supported in the law if there is a dispute on who gets which items.
If you have a lot of sentimental items, and you do not want to list who receives them, perhaps a third party executor or successor trustee that will distribute the personal items will work better since their decisions will not be treated as biased or personal.
Starting the process early leaves time to work out ground rules and deal with different assumptions and opinions. And it can be a chance to see the pleasure your treasures can bring to their new owners if you choose to give them the items you do not need now.
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It isn’t a surprise to anyone that those typically motivated to do estate planning are those that have their mortality staring back at them. Examples include clients preparing for travel, life challenging illnesses or individuals in advancing years.
I don’t need to remind anyone that life can be cut short since all of us have been affected by a passing that came too soon and too fast. In my practice, I’ve had parents pass without making their choice be known for a guardian of their children and recently an individual passed and because she didn’t have a will, it passed to an individual that the rest of the family kept shaking their heads saying “she must be turning in her grave that so-and-so inherited her estate.”
Sure, very few of us like planning for our passing. But often, it is the things we least want to face that end up giving us the greatest peace once faced, tackled and then resolved.
Give us a call and we will be happy to assist you with the process, make the planning and implementation of your estate plan as simple as possible and will guarantee that the burden that gets lifted off your shoulders will give you great satisfaction.
While this is a common misconception, I believe it mixes up two ideas, estate planning and estate tax planning. Estate tax planing is actually a small, but important, part of the overall estate planning process.
Estate planning is about making sure your estate is in order and passes as you wish. Estate tax planning is making sure the government gets as little of your estate as you can.
Estate planning uses a trust, or a will, to organize your affairs and distribute it to who you care about when you die. Estate planning is for tax and non-tax reasons. Of course no one is required to have an estate plan. Many would be unhappy to know that our legislature in Arizona has written an estate plan for everyone that hasn’t written an estate plan themselves.
But wait, there’s more; there’s Loving Trusts, Family Trusts, Grantor Retained Trusts and many more.
Let’s start with revocable vs. irrevocable trusts. These are exactly what they say. The revocable trust can be changed, amended, and even thrown away. The irrevocable trust however rarely can be changed except for very limited circumstances.
The revocable trust is the most common trust, the basis of an estate plan and typically what a client uses in lieu of a Last Will & Testament for the core estate plan. The irrevocable trust is usually a more advanced estate planning trust IN ADDITION to the client’s existing estate plan (using a revocable trust). I will wait for a discussion on when to use a irrevocable trust for a future blog.
What about all the other names? Family Trust, Living Trust, Revocable Trust, Loving Trust, and Grantor Trust are pretty much the same thing. These trusts are great vehicles for holding your assets so that when you become unable to take care of yourself, or pass away, someone you have named can step in and take care of your affairs in your absence. Great tools to avoid probates, conservatorships, court involvement and the best of all, far more private than a basic will.
If we can explain more, please feel free to call our office at 480-345-0444.
“Putting my child’s name on an asset avoids probate”
This is how the conversation usually goes: “someone told me if I put my child’s name on my bank account, upon my death it goes to that child and I avoid probate.”
This particular myth is a real “land mine” waiting for an unsuspecting person to step on. Some assets do pass by title and by operation of law, most notably bank accounts and real estate, and therefore escape the need for using a Will or trust to transfer to the surviving joint tenants, at least until the death of the last surviving tenant on the asset. After all, your estate is going to them after you die anyway, right?
First, if you add a child as a joint tenant on your account or home, you have potentially made a taxable gift to that child. If gift tax is to be paid, it is the donor who pays it, not the recipient.
The bigger issue is your child is now on title with you. This means that your home (or other joint account) is now exposed to what might go wrong in the life of that child. What happens to your home if your child declares bankruptcy, and is listed as an owner on your home? Maybe it’s not a bankruptcy, but an auto accident where your child is “at fault”, and the resulting settlement exceeds the liability limits of your child’s auto insurance. Might your home or other assets potentially be at risk due to the joint tenancy title arrangement? The answer is yes.
Notwithstanding the liability issues discussed above, your child is under no legal obligation to share this distribution with the other children, and could simply keep the entire balance of the joint tenancy property. No one would ever do that, would they? I leave the reader to answer that question.
In conclusion, before you think of using Joint Tenancy as the “simple” or “easy” way to avoid the need for a formal estate plan, consider some of the issues just covered. Is that something you are willing to risk, just to avoid drafting or revising a Will or trust?
I am unsure how this mistaken belief ever came about since a Will is almost synonymous with probate.
By way of background, using a Will as your primary estate planning document, your estate may be probated. Without a Will, your estate will still go through the probate process, but the state laws of intestacy, discussed before in this blog, are applied to your estate and possibly overcome your wishes.
Probate is a court supervised proceeding, where your Will is “proven” in court. If the Will is proven to be valid, then title on your assets, after payment of your debts and expenses, can be legally transferred to your heirs according to your wishes. Since this is a court supervised process, it is also a public process, meaning the full details of your Will are public and available to anyone wishing to view the court records. This includes the information about who your heirs are, where they live, and often the assets of the estate.
As if the public airing of your final wishes and disposition of your assets is not bad enough, notices must be sent out to all parties with an interest in your Will, usually to all family members, to your creditors, and public notices of your death must be posted. This is to notify and allow anyone who may have a claim against your estate the time to file that claim and have it included in the probate process.
Further, for those individuals with property in more than one state, upon death there will not only be a probate process in the state of residence, but also the need for what is known as an “ancillary probate” in each of the other states where property is owned.
Because of this, most people would choose to avoid probate if they could. Why would anyone voluntarily choose to allow their estate to be probated? There are other methods to use, such as using a living trust as your primary estate planning document instead of a Will, which can avoid most of the time, expense and publicity associated with the probating of a Will.
In short, using a Will as your primary estate planning tool will not keep you, or rather your heirs, out of probate. It does mean however, that your probate will likely be more organized than it otherwise would have been had you died without a Will.
(This is the first in a series of estate planning misunderstandings.)
The fact is, if you are an adult, you already have an estate plan. We all do. It was drafted on our behalf by the legislatures of the state in which we reside, and is governed by the state laws of intestacy. If you die “intestate”, meaning without a Will or a trust, these laws govern who will inherit your assets. If you have minor children, these laws also govern who will be chosen to be their guardian and the trustee of their inheritance until they reach the age of 18. It will also give your children complete and unfettered access to their inheritance upon reaching that age. Might it be harmful to an 18-year-old to have unrestricted access to any significant sum of money? As you might imagine, the state laws of intestacy might not arrive at the same choices that you would make.
It may also mean that your family may also have to endure a lengthy, public and possibly costly probate in order to administer the estate. Additionally, all of the proceedings and the choices made by the probate court will be public record, open to review for anyone who cares to.
If instead you may want to take control and create your own plan, one that reflects your choices and your wishes. Then regardless of your net worth or age, estate planning in some context is appropriate for you. It may involve little more than drafting a Will to distribute your assets according to your wishes, and appointing a guardian in the Will for any minor children, along with Powers of Attorney for Health Care and for Finance (two separate documents).
Kevin P. McFadden, Knollmiller & Arenofsky, LLP
Special thanks to attorney Robin C. Bevier from Northern California where I shamelessly relied upon his excellent article.
We avoid what we don’t know. For many financial, insurance and accounting professionals, they feel they ought to know estate planning better than they think they do. They also feel they should be assisting their clients in getting their estate’s in order but due to the professional’s discomfort with estate planning, put off discussing this need with their clients. This is completely understandable but also leaves the client with an unmet need.
To be frank, most attorneys that do not practice in this area of law are intimidated by estate planning and these are men and women that learn this area of law in law school! I am not surprised that non-lawyers often feel the same way.
I don’t want to go into a big estate planning lesson here even though I hope through time this blog provides some education to these professionals. Instead, may I suggest various way to connect the client with an estate planning attorney.
Our office has three was of meeting the estate planning needs for the clients of the professional. All depending on the involvement the professional wants to be in the process.
The first way is direct involvement. Our office for example has an online procedure for creating an estate plan. The process walks the client through the questions, with simple explanations, followed by a recommendation from the law firm of the appropriate estate plan. The client will speak to an attorney, either on the phone or in person. The professional is facilitating the discussion but is protected from any suggestions that he or she is practicing law. This may be a good approach to some but most prefer the next option.
The second approach is a legal assistant that facilitates the entire process. The legal assistant meets with the client. The client can be at the professional’s office or at their home. The client will speak to an attorney during the process and a signing appointment for recommended estate planning documents is either handled at the professional’s office or at our office. With this approach the professional and client are assisted during the entire process.
The third approach is the traditional referral to a law firm.
As you can see, at no point in time is the professional put on the spot to fully explain estate planning. He or she merely facilitates the process and gets to choose his or her level of involvement. Most importantly, the client’s estate planning needs are met as a result of the professional’s service to their entire financial, estate and tax needs.
Kevin P. McFadden, Knollmiller & Arenofsky, LLP 480-345-0444
This was a column in a local paper that got me thinking that this is actually a very commonly asked question. First, it doesn’t all go the State. It may but this is very unlikely.
Basically, the State of Arizona has written a Will for you if you fail to do one yourself. If your wishes are not the same as the one written into statute, you will need to do a Will, or a Revocable Trust, to spell out your own wishes.
The State’s “intestacy” statute basically states your estate will go to your spouse if you have children that are also the children of your spouse. Otherwise, it is divided between your spouse and children from a prior marriage. If you are unmarried and without children, to your parents, and so on.
If you have remarried, a blended family, have a significant other or have other heirs you want to leave part of your estate to, you need to overcome this statute by creating your own Will or Revocable Trust. It is actually quite simple to do.
Kevin P. McFadden
Knollmiller & Arenofsky, LLP
Avoidance of probate. In particular, a revocable living trust can avoid expensive multiple probate proceedings when you own real estate in several different states, as well as the publication of the otherwise private financial details of your estate.
Avoidance of conservatorship. A revocable trust can avoid the additional cost of a conservatorship in the event of your incapacity.
Efficient distribution. A revocable trust can reduce delays in t istributing your property after you die, although delays caused by filing an estate tax return cannot be avoided.
Confidentiality. Generally the terms of your living trust are confidential, with only your named beneficiaries and trustee having access to that information.
Continuity. A trust can provide continuity of management of your property after your death or incapacity.
Disadvantages of a Revocable Living Trust
Expenses of planning. A revocable living trust can be a little more complicated than a will to draft, and asset transfers can take time and can result in additional costs.
Expenses of administration. If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying). Of course if you do not use these services, this additional expense will not apply. Setting up a revocable living trust will not eliminate the need for professional services of attorneys and accountants in the future.
Inconvenience. Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee. Again, this is not a large issue but certainly is something to consider.
Unforeseen problems. Revocable living trusts can raise a variety of new problems regarding the ability to borrow against property, title insurance coverage, real estate in other countries, Subchapter-S stock, certain pension distributions, and many other issues. Only a skilled attorney familiar with estate planning can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets.
In this author’s opinion, the advantages far out weight the disadvantages
This is based on an posting by the Oregon State Bar