Most Americans don’t have a will or trust, so if you haven’t gotten around to putting one in place, you’re not alone. Maybe you thought you were too young to need a plan or you’ve known you needed a plan but just haven’t made it a priority. The truth is that regardless of the reason for not having a plan, no excuse will matter if the unexpected happens and you become incapacitated or die. You don’t want to lose control of having things done your way nor do you want your family to have to go to court to be able to take care of you, your finances, or your children. So, here are the answers to some frequently asked estate planning questions to get you moving.
How bad will it be if I don’t have a plan? If you don’t have a plan you lose control. You don’t get to choose who receives your assets and you may not like your state’s default estate plan. You might be surprised to learn that without a plan your spouse might have to split your assets with your children, and if you don’t have a spouse or children, then your assets will likely pass to your parents and then siblings.
Do you have children? Losing control is a huge issue here because it doesn’t matter if you’ve asked key people to be guardians, if you don’t have a will you don’t get to tell the court who you think would make the best guardians for your children. Even if the right people get appointed as guardians, without a plan you’ve lost the ability to specify how assets are used for their benefit. Even worse, once your children reach age 18 they get complete control of anything that’s left and few parents think that’s a good idea.
Another downside to not having a plan is that handling your affairs will be more difficult and expensive than if you had a plan in place. An estate plan prevents the court from needing to intervene to allow your family to care for you on incapacity or to distribute your property on death.
What is it like to work with an estate attorney? You typically meet with an attorney twice to put your estate plan in place. During your first meeting you’ll be asked key questions such as: Do you want your children to inherit equally? At what age do you want your children to control their inheritance? Do you have any concerns about how certain beneficiaries might handle an inheritance or want to treat beneficiaries differently? Do you want an inheritance to stay protected from creditors or spouses? You’ll also be asked who should make financial and health care decisions on your behalf if you were unable to make them yourself, be asked who you would want to serve as guardians for your children and be asked who should administer your plan on your incapacity or death. Within a few weeks of meeting with your attorney he or she will send you drafts of your estate documents for your review. After all questions are answered and any changes are made, you’ll meet to sign the documents. Once you sign your documents, your plan is in place but the last and key step is to be sure you follow the instructions provided by your attorney to title your assets according to your plan.
Most attorneys charge a flat fee for the plan ranging from $3,500-$6,000. We know this isn’t an expense anyone wants to pay but it is far less than what your family would pay to go through the courts to take care of you or distribute your assets on your incapacity or death. Note that the $6,000 plan isn’t necessarily better than the $3,500 plan but the attorney that charges the higher fee might have more experience incorporating interests in businesses or other unusual assets into the plan or creating additional trusts to help the wealthy transfer wealth to their family at a reduced estate tax cost.
What documents make up your estate plan? You’ll need several documents to handle issues that arise on incapacity or death which means your estate plan will likely to consist of the following:
Living Trust. The living trust is a document that lays out your wishes regarding how your property should be managed by the trustees you have appointed to act on your death or incapacity. A primary benefit of the trust is that it passes property outside of the court system and therefore avoids the often expensive and time consuming process of having the court distribute your property known as probate. During your lifetime you transfer title to assets to your trust so that on the event of your incapacity or death your successor trustee can manage your assets according to your wishes as expressed in the trust. The trust is amendable by you as long as have capacity to make changes but becomes irrevocable upon your death.
Will. In states like California, Arizona and Nevada a will is not likely to be your primary document that distributes your assets because it’s far simpler and less expensive to use a trust and avoid probate. Nonetheless, you need a will because it’s the document that importantly nominates guardians for your children and an executor to pour over any assets that for whatever reason you didn’t title in the name of the trust to the trust for distribution. It also allows you to nominate a conservator to make health care decisions on your behalf just in case you don’t have a valid health care power of attorney in place.
Power of Attorney for Financial Matters. While the trustee of your living trust will be able to handle the majority of financial matters on your behalf, some actions might need to be taken that are not under the trustee’s control (e.g., signing tax returns or electing or managing retirement accounts) so this document allows you to appoint agent(s) to take specified actions.
Health Care Directive. This document, also known as a durable power of attorney for health care, allows you to appoint the individual(s) who on your incapacity have the power to make medical decisions on your behalf and allows you to specify the type of care you want to receive. You can specify the type of pain relief you want administered if you are terminally ill or permanently unconscious and state your preferences regarding organ donations and other final arrangements.
HIPAA Authorization. This document allows you to designate who has access to needed health information so that they can make informed decisions on your behalf (typically trustees, agents under powers of attorney for financial and health matters, executors and conservators).
Who should know about my estate plan? Unlike what we see in the movies, it’s in no one’s best interest to be surprised to learn that they’ve been named as guardian of your children or will be asked to make medical decisions on your behalf. It’s important to ask the individuals you would like to name as key players in your plan whether they’d be willing to take on the responsibility and if they are willing you should make sure they know where you keep the key documents that appoint them to act. For assistance with this, please see Spend a Little Time Now — It Will Save You Lots of Time Later.
We know you will feel great about getting your affairs in order. Please contact your Beacon Pointe advisor for any additional information you might need to get started on creating your estate plan.
Disclaimer: This has been provided for informational purposes only and should not be considered as investment advice or as a recommendation. Beacon Pointe does not endorse and is not responsible for the content, product, or services of other third party sites or references. Beacon Pointe does not offer legal or tax advice. Private legal counsel alone may be responsible and relied upon for these purposes. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, this notice is to inform you that any tax advice included in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of avoiding any federal tax penalty or promoting, marketing, or recommending to another party any transaction or matter.
 In states where probate, the court supervised process of distributing wealth, is not exceedingly time consuming and expensive you may only have a will and not a trust.