BASIC BULLET POINTS FOR THOSE THINKING ABOUT DOING AN ESTATE PLAN
By Chuck Newland
- Doing an Estate Plan, whether it’s a Will or a Trust plan, is a personal choice based on your priorities. Don’t let yourself be talked into something that doesn’t meet your specific needs and don’t settle for less than what you want accomplished.
- Allow yourself to have an open mind to listen to the pluses and minuses of your particular situation before deciding on your plan. If you are legally competent you can always amend and change things.
- One of the most important decisions to make is who will be your fiduciaries if not your spouse or if you are single and you become disabled or die.
- A fiduciary is the most trusted position recognized in the law. It comes with very serious responsibility and potential liabilities.
- An executor, trustee and agents under powers of attorney are all fiduciaries.
- Whatever you decide you should not draw up the documents yourself regardless of the forms you pull off of the internet. They are a cause of a lot of litigation.
- You should also never have a non-attorney, spouse or relative draw up your estate documents for you. The person doing it for you is committing a felony for practicing law without a license and your documents can be declared null and void.
SHOULD I DO A WILL OR A TRUST?
- Again, this is a personal choice depending on your priorities but you should consider the features of each.
- Wills, without a living trust plan, are generally more reasonably priced, but not always. Don’t let the cost, now, drive your priorities for the future.
- A will does not avoid probate. A will is probated.
- What determines whether your estate goes to probate is the nature and value of the property in your own name, alone, at the time of your death or whether you have debts at your death.
- The purpose of a death probate is to settle your affairs before assets can be transferred to your heirs at law or beneficiaries under a Will.
- Assets owned with a joint tenant or have beneficiary designations, generally avoid probate.
- Holding assets jointly with a spouse or naming the spouse as a beneficiary will avoid probate of those assets upon the first spouse to die but not the second.
- Owning capital assets or giving capital assets such as stock or real estate to adult children is a terrible way to avoid probate upon your death. Not only do you lose control of the asset during your lifetime but you create capital gains tax for the family member that wouldn’t have to be paid upon your death.
- Probate has its benefits- it provides oversight and a shorter statute of limitations for those to make claims against the deceased.
- Setting up a living trust only avoids probate if you fund the trust with your assets before death.
- If you have minor children, you will need a Will to provide for guardianship of the person and estate of minor children.
- You will still need a Pour-Over Will with a living trust to direct assets not in the trust at your death to be transferred to the trust, as the trust is then the beneficiary of your estate, which could possibly have to go through probate for those assets and to appoint guardians for minor children.
- Because there is no oversight with settling a trust upon your death and the trust laws are very complicated, it is highly recommended that you appoint a professional, corporate fiduciary, as a successor trustee to take over upon your death, as opposed to a family member that has never settled a trust before and does not know trust law.
- With a revocable living trust, while you are alive and legally competent you are the Settlor or creator of the trust and can amend it or revoke it. You are also the trustee of the trust or manager of the assets in the trust. Most importantly, you are the sole beneficiary of the trust to use the assets as you wish.
- A professional trustee is only obligated to act once it accepts office and is only entitled to be paid when you are no longer trustee of your own trust.
- A professional trustee is licensed, bonded and insured and has trust officers and legal counsel that know trust law.
- A family member can charge a fee to act as a successor trustee but that person does not have a deep pocket if they make mistakes, or worse, abuse his/her access to your property.
- If you are insistent on appointing a family member or individual as your fiduciary after death, a Will with probate may be the best option for you due to the oversight.
- If you are insistent on naming an individual friend or family member as a fiduciary, you need to think about what may be going in that person’s life at the time. While it is an honor to be nominated, most people do not realize the amount of time and complexities involved that may cause undue burden on the individual at the time that person must assume the responsibilities.
- Co-fiduciaries are generally not a good idea. You should not make someone a co-fiduciary simply because you think their feelings might be hurt. It’s an unenviable position to place someone in if they are not up to the task and disagreements amongst co-fiduciaries can hold up the entire process for everyone and be costly.
IF MY SPOUSE AND I DECIDE ON A TRUST PLAN, SHOULD WE DO SEPARATE TRUSTS OR A JOINT TRUST?
- Again, whether to do separate trusts or a joint trust depends on your individual concerns.
- There are certain benefits of doing separate trusts that might not be beneficial for your situation.
- Generally, separate trusts are a good idea for certain estate tax avoidance, liability purposes, second marriages with children from prior marriages, protection of assets from a possible subsequent marriage, different beneficiaries for reasons other than children from other relationships and simply maintaining control over assets in your own trust.
- Generally, joint spousal trusts are a good idea when none of the concerns mentioned above are a factor or priority, however, it is amendable after the first spouse dies so there can be a loss of control, which is the same for any asset held in joint tenancy with right of survivorship.
OTHER DOCUMENTS OR LEGAL INSTRUMENTS YOU SHOULD CONSIDER AS PART OF YOUR ESTATE PLAN
- Regardless of whether you decide to do a living trust plan or will plan, you should have powers of attorney in the event you become disabled.
- Powers of attorney granted by you during your lifetime die when you die-that is the reason why you need to have a will or a trust if you care to direct how your property is distributed upon your death.
- If you have concerns about becoming disabled and unable to manage your own financial affairs or communicate effectively with your doctors regarding decisions concerning your care, you should consider having a POWER OF ATTORNEY FOR PROPERTY and a POWER OF ATTORNEY FOR HEALTHCARE, along with a Living Will if you do not want to be kept on life support.
- Powers of attorney for property avoid the need of costly and protracted probate proceedings to appoint a legal guardian over your assets or estate with intense court oversight the rest of your life or until you are no longer disabled, which may be never. Your agent under power of attorney performs the same tasks as a court appointed guardian would without court involvement.
- Because the powers given to an agent for property can be so comprehensive, with no oversight, they can a license to steal. Therefore, careful consideration should be given as to who you appoint. You can choose a professional, just as you can choose a professional trustee. They can be the same person or company.
- Powers of attorney for healthcare avoid the need for probate guardianship proceedings to appoint a guardian of your person in the event you are not capable of providing consent and make informed decisions regarding your personal care and medical treatment.
- A living will is your declaration of philosophy regarding life sustaining and death delaying procedures that would only prolong the dying process and add no quality of life. It provides specific direction and solace to the person/agent acting under power of attorney for healthcare placed in the position of making end of life decisions for you.
- There are other documents that may need to be prepared depending on your situation, including things like, Assignments of tangible personal property, deeds to real estate, stock certificate reregistration or retitling, etc.
If it matters to you what happens when you become disabled or die, regardless of what you decide to do, decide to do something so that State law, a judge and the arguments of others don’t decide things for you. “Rip the band aide off” and get it done. You will feel much better and have peace of mind knowing this is accomplished.
Please note that this document is only intended as a general guideline to give you things to think about and should not be used to replace individual consultation with an experienced attorney.
©Charles T. Newland & Associates, Rolling Meadows, Lincolnshire and Chicago, Illinois. Main number, 847-797-9300. chuck@cnewlandassociates.com.
