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This article is the third in a series of articles designed to educate and inform the reader on common estate planning pitfalls and mistakes we see in our practice, and solutions to avoid them. Often these mistakes result in undesired outcomes, create undue stress on loved ones and require costly measures to fix things that could have been avoided with minimal planning. Our third topic for discussion covers the importance of having the correct components of an estate plan and outlines, generally, how particular documents may assist your loved ones with carrying out your desires.
Estate Planning Mistake #3 – Not Having the Proper Components of a Comprehensive Estate Plan:
Recall from our first article in this series that having the proper elements in your estate plan will allow your loved ones to assist you if you become incapacitated, cannot express your desires and must otherwise rely on loved ones to make decisions regarding your care and finances. (Click here for a link to this article.)
The following is a brief description of various elements which make up a comprehensive estate plan and a condensed overview of why you and your loved ones may benefit from each of these components. Please note that this is a non-exhaustive break down and individual needs may dictate other tools to accomplish your desires/needs.
Simple Will (No Trust).
When you execute a will, you may name any individual who you wish to receive your property at your death. This may or may not be the same individual who would receive it under the intestacy laws if there is no will. The will also can specify who should be the estate’s executor and who should be any minor children’s guardian. The executor can be given the power to sell real property and other administrative powers, which will make the estate easier to close. The will must go through a court supervised probate process, and can be very costly to the ultimate heirs of the estate.
Living (“Intervivos” or “Revocable”) Trust.
In order to avoid unnecessary cost and probate expense, a you may decide to hold title to your assets as trustee of a living trust. This requires a trust agreement or declaration specifying a successor trustee who will manage your estate if you become disabled or incapacitated, and the property’s distribution after your death.
In addition to avoiding probate expense and delay, a properly structured living trust also can avoid many problems associated with establishing a conservatorship if you later become disabled or incapacitated. The perceived disadvantage is the additional “up-front” expense over a simple will’s cost. We cannot overemphasize enough that this “up-front” expense is almost always a fraction of the expense of a typical probate.
There also exists more complex trusts, both revocable and irrevocable, which may be used to protect heirs in blended families and/or to address some future tax issue.
Powers of Attorney.
General, special and durable powers of attorney for asset management are frequently used to provide asset management to assist if you otherwise become disabled or incapacitated. Under some circumstances, the need to accomplish certain asset related, or individual tasks or procedures, may not be accomplished by a successor trustee – a power of attorney is a great tool frequently used which provides an extra measure of protection.
A durable power of attorney for health care can likewise be used to authorize an agent to make health care decisions for you consistent with your wishes. Typically, this will include decisions to accept or deny medical treatment.
Not having proper and current elements of a comprehensive estate plan.
The mistake of not having proper current components of a comprehensive estate plan can be devastating to your family and loved ones. Not having a real plan in place is commonly very costly, takes much more time and resources than people anticipate, and ultimately your assets may not be distributed to the individuals, and in the manner, which you desire. Doing nothing is one of the worst mistakes you can make.
Solution:
Work with an estate planning attorney to review your concerns, desires, and ensure that you put a real plan in place. A comprehensive estate plan can: 1.) ensure that you are taken care of should you become disabled or incapacitated; 2.) ensure that your family and loved ones are properly taken care of after your death without unnecessary and exuberant expense incurred in a lengthy court supervised probate; and 3.) ensure that very specific and particular requests are carried out exactly as you desire.
Kirk & Simas assists individuals and families with their estate planning needs regularly and is here to help you get started on this process.
Our next article will discuss an all-too-common mistake of neglecting to place certain assets in a trust; we will discuss exactly what that means and the unintended consequences and results that accompany this mistake.
For more information, please visit us at www.KirkSimas.com, or call us at (805) 934-4600 to schedule an appointment.