The sad truth is that estate attorneys indicate that approximately 70% of Americans die without a will. In my opinion, this is unacceptable! Why? Because Americans truly love their families and would prefer not to place any unnecessary or additional burden on them at a time of such great emotional hardship.
Here is why this is such a terrible memory to leave behind: Without a valid will, the unfortunate reality is that state law will determine how the property is distributed and also take control if a person becomes disabled or incompetent. This statute is called the law of intestacy.
The way I best describe the intestate rules to my clients is “a lawsuit with the state over the management of your estate.” Put another way, “It will be your beloved government, and not you or your family, who ultimately decides what happens to your assets, your children and your financial legacy.”
It is safe to say that no state has the exact same wishes that we do for the disposition of our money, kids and how we want to be remembered. Therefore, dying without a will is going to put the family through an extremely difficult, time-consuming and expensive ordeal . . . at a time when they should be focusing on celebrating a person’s life and the wonderful memories left behind.
Everyone (even if single) should have a will! This is one of the greatest gifts that each of us and all our clients can give our families and our loved ones.
So what about a trust? Why would someone choose a trust versus a will? Even though a properly-structured will that is coordinated with a financial and estate plan is a great thing to have, every will must go through probate. Probate is a court-supervised procedure by which the court ensures that the assets governed by the will are valued properly, the debts of the estate are paid off, and the remaining assets are properly distributed to the persons named in the will.
The probate process is typically a very negative experience. Here’s why:
• It is expensive. Legal and executor fees and other costs must be paid from the estate before anything can go to the heirs. The costs are usually estimated at 1-5% of the gross value of an estate (before debts are paid).
• It takes time, often 1-2 years or longer, depending on the state. During this time, assets are usually frozen and nothing can be distributed or sold without the approval of the probate court. If the family needs money to live, they may have to ask the court for a living allowance, which the court may or may not approve.
• The family has no privacy. Probate files are open to the public, so anyone (including a business competitor) can see what was owned and owed. This knowledge can also invite disgruntled heirs to contest the will.
• The family has no control. The probate process controls. It can be very frustrating for a family to have to pay for the court to tell them who gets what money and when. This frustration very often leads to family feuds and disputes.
Probate can be a very emotional and difficult process. Ask anyone who has been through the probate process.
We personally went through this process in our family as my father went through the long, arduous and expensive process when serving as executor for my grandfather’s estate.
That is why most of my clients choose a Revocable Living Trust. This trust, if drafted by a seasoned estate planning attorney, can be a comprehensive document that will avoid this probate process. Also, it can be extremely hard to contest, potentially reduce or eliminate estate taxes, preserve privacy, and expedite the distribution of the estate. In addition, a trust also allows parents of small children (like myself) to give specific instructions to the trustee or guardians as to when to make distributions to the children, what they can use the money for, and at what ages to begin letting the children have control over some (or all) of the monies.
The bottom line is this—both a will and a trust can be effective, and each person’s situation is unique. Therefore, seeking professional help when developing the estate plan will ensure making the right choice.
Simplification helps! When I give a seminar or meet with a client, here is my personal definition of the Perfect Estate Plan:
To control my property while I’m alive, take care of my loved ones and myself if I should become disabled, and give what I have to whom I want, the way I want, when I want; and, if I can, I want to save every last tax dollar, professional fee, court cost, delay and family feud possible.
Show your love with a will or trust. It should be obvious that this “perfect estate plan” does not happen by chance, but by proper proactive planning. Since I am not licensed as an estate planning attorney, I cannot help my clients construct a will or trust. However, I do have strategic partnerships with estate planning attorneys who I believe are the best in the area. I have spent many years going through extensive research and interviews, and I have identified attorneys who I have concluded are the most personable, talented, experienced and reasonably priced.
I think it is important to note that our job as financial planners is to work closely with our clients and qualified estate planning attorneys, both before and after, to make sure that these wills or trusts are not only properly established, but that they are coordinated and integrated with the rest of their financial plan. In many states, a limited number of attorneys are qualified as an Estate Planning Specialist or Certified in Elder Law. Often they have, in addition to their law degree, a Master in Taxation, LLM.
In summary, I would like to ask a favor of each reader: Review your personal legal documents and institute any necessary changes. Then initiate a review with each of your clients. Ask each if they have the Perfect Estate Plan and guide them through the process.