All too often, I hear people say "I'm not rich enough to do estate planning". It seems that people automatically equate these words with great wealth. This is a common misunderstanding because people will usually hear of "estates" and "estate planning" associated with names of celebrities and captains of industry who have great wealth.
The simple fact is that estate planning is something for everyone to consider. Estate planning is merely a term used to describe the planning in settling your personal and financial affairs should you become incapacitated or in distributing your assets at the time your death. And like the old saying goes about the certainty of death and taxes, estate planning should be a part of your overall financial plan in dealing with these certainties.
Is a simple Will enough?
Are there alternatives to a simple Will?
What happens to money or other assets I leave to minor children or grandchildren?
Who will make decisions for me if I am living, but incapacitated?
Food for Thought
Is a simple Will enough?
Up until this time, for most of us, our estate plan has been limited to the use of a simple will. Usually this will was drawn up when we were younger and first became parents. Likewise, most of us have not updated our wills since then. People have always thought that the will would take care of all their problems should they become ill, incapacitated and then distribute their assets at their death.
Most Americans seem to believe the will is all you need to take care of your affairs, while avoiding the courts especially when the time comes to settling your estate at the time of your passing. However, this is not the case. A will is a document that tells your family, as well as the court, who you name as beneficiaries of your estate. If you have a will at the time of your death, you are known to have died "Testate" (with a will). If you die without leaving a wil, you are known to have died "Intestate" (without a will).
The great misconception for most of us is that if you died having a will, your family will avoid the probate court and your assets can be immediately distributed to your loved ones. In reality, it does not work this way. All wills must be probated, meaning they must be administered through the local probate court.
Over the last few years, attorneys and financial advisors have been making their clients aware of the inefficiency of probate. Not only does probate cost several thousands of dollars, but it may minimally take one year to complete. Not only will your loved ones receive less of an inheritance, because of attorney's fees and court costs, but they will not receive their inheritance for some time after your death.
Are there alternatives to a simple Will?
There are indeed alternatives to a simple will as a means of estate planning. Among these alternatives are various trusts that can be drafted that will avoid probating your assets at your death. But haven't we all heard that trusts are just for the wealthy? Absolutely not! The use of a trust is a matter of convenience and probate avoidance, not just a matter of wealth and saving taxes.
The trust is a document that any person, no matter the size or value of their state, can use as an instrument to distribute their assets at their death, while avoiding the probate court. By using a trust, your family wil save on attorney's fees and your heirs will receive their inheritance in a more timely manner.
Further, you do not abandon any control over your trust or your assets because you, or you and your spouse, can be the trustees of your trust. There is no need to designate a bank or attorney to serve as trustee. Though anyone can receive the benefits of a trust, for those with wealthier estates, certain trusts can also be drafted to either reduce, or sometimes avoid the Federal Estate Tax, commonly known as the death tax.
What
happens to money or other assets
I leave to minor children or grandchildren?
When I discuss with parents and grandparents their estate planning options, one of the things that most surprises them is that any money or property they leave to their minor children or grandchildren, will not necessarily go directly to these minors. What most people are not aware is that under Florida Law, if a minor (one under the age of 18 years) receives an inheritance of greater than $15,000, the money or assets will have to be deposited in a restricted court account.
That's right! The children, nor their parents, will have automatic control or access to these funds. But how can this be; why is the court becoming involved if you have made clear in your will what you want the minors to receive? The court becomes involved because it wants to be sure that assets greater than $15,000 in value are held strictly for the benefit of the child and only the child. All too often parents and legal guardians have used the inheritance of children to take care of their own needs.
In order to eliminate this problem, the court will hold assets for the minor in restricted accounts. In turn, the court will appoint a guardian to monitor these assets. Howerver, even this guardian does not have unlimited access to these funds. The court must approve all withdrawals made from these accounts. As you might imagine, the guaridan will have to hire an attorney to assist them with their duties and responsibilites as guardian. And if this is not bad enough, once the child turns 18 years old, the court distributes all assets directly to the child. No more supervision by anyone!
With the proper estate planning, this can all be avoided and you can determine who will manage the assets until such time that you feel the child can manage the assets for themselves.
Who
will make decisions for me if I am living,
but incapacitated?
This is a concern that more and more of us are facing, not only regarding ourselves, but also for our family members as they become older. Generally, most people think that should their spouse become incapacitated, that they can make all decisions for them. Adult children think that if their elderly parents become incapacitated, that they have an automatic right to make decisions for their parents. Unfortunately, it does not work this way.
The law recognizes each adult person as an independent person, which no other person has an automatic right to make decisions for. Only parents or legal guardians of minor children have such rights over said minors.
Should a loved one be afflicted with an illness or become incapacitated, only a court can appoint a legal guardian, giving the guardian the authority to make decisions for the incapacitated person. I can tell you is that the only thing worse than a probate proceeding is a guardianship proceeding.
Like probate, your family will have to hire an attorney to represent them during this process. The guardianship will last until the incapacitated person regains capacity or dies. Until such time, you will be dealing with attorneys and the courts. This does not have to be this way. With use of documents such as Powers of Attorney, Health Care Directives and Living Wills, you can decide who will make these decisions for you and take it out of the hands of the court.
By doing so, not only will your family save money, but it will allow the ones you love and trust to help you immediately in a time of crisis, without the delay of a court proceeding.
Food for Thought
By no means am I attempting to completely explain all estate planning options in this page. My intention is to clarify some myths and have you think about whether you have planned for these matters.
My hope is that if you have not done your estate planning that you will do so. Be sure to seek the advice of an attorney whom is familiar with this specialized area of law. Many attorneys will provide a complimentary initial consultation to discuss your estate planning options.
Remember, you do have options. Not every estate plan applies to every person. Take advantage of this and devise a plan that not only allows for your loved ones to help you in a time of need, but also leaves a plan in place to handle your affairs should you become incapacitated and to efficiently administer your estate once you have passed away.
