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Estate Planning Decisions and How They Affect Your Family and Friends

Jul 7, 2011

Posted by

Kris Miller

As a PREtirement and living trust expert and National Speaker, Kris Miller assists people in developing complete estate packages. Her practice focuses on helping seniors reduce their tax liabilities, Read more

 

Editor’s Note: This article is an excerpt from Kris Miller’s new book, Ready for PREtirement?  Everything You Need to Know Now So Your Money Is There When You Need It.  The book contains a lot of good advice for you, as a real estate broker or agent, but also for your clients and prospects.  So you may want to read the book yourself and recommend it to friends, clients and prospects as part of your “full service” as a professional real estate consultant.

What did Heath Ledger, Marilyn Monroe, Michael Jackson, John Wayne, Jacqueline Kennedy Onassis, Princess Diana, and Anna Nicole Smith have in common? They all had lousy Wills. Because of this, their deaths left not just emotional turmoil for their friends and families, but also financial uncertainty, legal battles, and expensive, long-term, court-ordered supervision of the estates which drained the assets away from the people whom they wanted to benefit.

These are famous people with lots of money, but no matter your net worth, it’s important to have a basic estate plan in place. Such a plan ensures that your family’s financial goals are met after you die. This is essential if you have young children or elderly parents whom you support.

Did you know that, without a living trust, your financial legacy can end up in probate with your estate’s assets being controlled, and eventually eaten up by lawyers and court fees?  On the other hand, with proper planning, you could have a document that ensures your estate passes to your heirs without delays or time- and money-consuming probate. You can name someone you trust to take care of your estate so you know everything you worked to accumulate will transfer at death according to your wishes.

You should take steps to ensure that someone you trust will be able to take care of your personal, health and financial decisions if you are unable to do so. In the absence of any formal estate planning, the court will decide who will take care of you and your financial affairs, and might appoint someone you would not have chosen.

If your financial life is simple and straightforward, you may feel comfortable creating your estate plan by yourself.  If you have multiple bank and investment accounts, real estate investments, or a nontraditional family situation, you may well want to consult with a lawyer.

Before you meet with an attorney to draft a will, consider the following:

Taking inventory of your assets is a good place to start.  Your assets include your bank and other investment accounts (such as money market or mutual funds), retirement savings, insurance policies, and real estate or business interests. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?

Trusts aren’t just for the wealthy.   Trusts are legal constructs that let you put specific conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some trusts also offer greater protection of your assets from creditors and lawsuits.

Discussing your estate plans with your heirs may prevent disputes or confusion.

Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you’re gone.  It shocks me every time I see people fight over the material things in their own families, but it happens all the time.  I had a client who not only sued the estate of the uncle who left him a portion of his estate, but also sued every other relative to get more from the estate. His family members were amazed. They never saw it coming until they were served papers.

A will is not enough. A will, written and signed properly, directs “who’s in charge” and “who gets what” from your assets at the date of death, but it’s of no use before you die.  If you become incompetent, it doesn’t control your assets or designate who can make health care decisions for you. After you die, a will doesn’t avoid probate of your estate.  In fact, a will can be a one-way ticket to the fees and delays of probate court.   

Make sure you fund your trust. We advocate for the use of trusts as a useful tool to manage your assets during your life and following your death, avoiding the time and expense of the probate court. Trusts, however, only manage those assets that you actually, officially transfer into trust. Once your trust is complete, be sure to transfer your assets into your trust.  

For assets with a legal title, such as real property and automobiles, you have to change the title into the name of the trust (although in some states you can keep the car registered in your name but use a “transfer on death” title so that the car is automatically registered to the person you name on the title). 

For nonretirement accounts, you can simply contact your bank or the portfolio manager of your accounts and request that they change the title on your accounts from your name to the name of your living trust (some banks have accounts that are “payable on death” to a specific beneficiary).  For assets with no legal title, such as household goods, you simply include them in the list of trust assets in a “schedule” at the back of the trust document.

Keep your papers in a safe place.  Make sure your Successor Trustee and Power of Attorney know where you are going to keep these documents and how to get to them.  You can put them in a safe deposit box, make sure the Successor Trustee and Power of Attorney have signed the signature card and have a key. A Power of Attorney for Health Care is only useful if the documents can be accessed when needed so it’s a good idea to give the Power of Attorney his or her own copy, but make sure the original signed papers are in a safe place.

Designate a health care power of attorney.  No one plans to be incapacitated, but if you are, who will make health care decisions for you? You must make sure to complete a healthcare power of attorney so can you be protected. In this document, you appoint a trusted individual (and an alternate) to make important medical decisions for you in the event you are unable to make them for yourself.  Make sure your wishes are respected by giving a copy of your health care power of attorney to your physician.

Always designate alternates. Extend the usefulness of your estate documents by appointing more than one agent to represent your interests. In this way, if your first choice isn’t available, you’ve already provided for one or more alternates, so a choice is not made for you.

Update your estate plan.  Keep current: Be sure to review your estate planning documents every three years or so to ensure they are still current. Changes in personal circumstances, economic fortunes, and tax laws may warrant revisions.

Ensure protection from creditors.  Safeguard your assets. If you have concerns about your creditors or your children’s creditors, consider transferring your assets to a trust to limit creditor access to your assets. Trusts can be drafted with special protective provisions, providing you have not already incurred the debt.

Check your beneficiary designation forms.  Wills are not the only documents which govern the disposition of your assets. Insurance policy proceeds and retirement accounts both pass in accordance with the terms of your beneficiary designation form when you die. Make sure the information on these forms is current and accurate to ensure these assets pass to the individual you intend.

Protect your homestead.  The best deal in asset protection today is the homestead. If you own a home as your primary residence, for a modest fee, you can place protection on your home from creditors for up to $500,000 of the equity in your home. Simply contact your attorney to complete and file the necessary documents.

Ensure your powers of attorney by signing the signature card at the bank.

These tools not only serve to preserve your assets but, if properly executed, eliminate the need for your heirs to take the expensive, time-consuming path through the courts. As an estate planner, I identify suitability and needs, and organize each set of documents according to the client’s needs.