 Most people leave things to chance. It has been reported that something like seventy percent of Americans die without even a simple Will in place. When there is no plan, things may work out, or it may be a disaster. If you care what happens to your estate, put your affairs in order. Do not assume that things will work out the way you would like. Do not leave things to the state, the courts, the lawyers and the taxman. Take control now.
Estate planning can do more than you think. Proper estate planning should cover your whole lifespan. You may plan for yourself and your loved ones, without giving up control of your affairs while you are alive and well. You may provide clear instructions in the event of your disability, to ensure that all needs are met and your wishes are carried out. Upon your death, your plan also should allow for efficient and effective settlement, passing “what you have, to whom you want, when you want, the way you want”.
Estate plans are generally Will-based or Trust-based plans.
Wills
A Will does not avoid probate. Indeed, it is only effective as to property that does pass through probate. Probate is a court supervised settlement of your estate. If you die with property titled solely in your name, then it must pass through probate, which may delay settlement, increase costs, make your private matters public, and subject your property to the claims of creditors. When the court proceedings are done, the remaining property will pass under the terms of your Will, if any, or under the terms of state law if you have no Will. A Will may accomplish limited objectives, such as deciding who will settle your estate, and who gets what. It does nothing for disability or lifetime management. And if it provides for management for beneficiaries after your death, under a Testamentary Trust, administration of that trust may be supervised by the court for the duration of the trust, often many years.
Joint Ownership
Many people seek to avoid probate by owning property jointly with someone else, so that upon their death, title will pass directly to the surviving joint owner. Joint tenancy may be a useful part of a well-planned estate, but it also may cause problems. Joint tenancy property is not controlled by your Will or Trust or other personal instructions. It typically passes by law to the surviving joint tenant. Joint tenancy therefore often just postpones the hard estate planning questions for a surviving spouse to decide. Joint tenancy does not protect your legacy for your intended beneficiaries. It even may lead to unintended heirs. If your surviving spouse remarries, your children may be inadvertently disinherited. If you are single and add the name of one of your three children to your bank account, for your convenience, the account passes at your death solely to the named child, who may be unable to share despite their best intentions.
Beneficiary Designations
Working with standard Beneficiary Designation forms, for your life insurance, annuities, retirement or similar assets, usually amounts to “checking a box”. Rather than the assets being controlled by your wishes, as expressed in your Will or Trust, the assets will be controlled by the form or by operation of law. Getting your beneficiary designations right, so they work together with the rest of your estate plan, is important to the plan’s success.
Trusts
Trusts are great tools for achieving most estate planning goals. On one level, a Trust is a document. It is more instructive to think of a Trust as a set of instructions or an arrangement for managing your affairs while you’re alive and well, during your disability, and after your death. Trusts may avoid probate, may avoid or reduce death taxes, and may be customized to meet many of the estate planning goals described above.
Whether you have a Will or a Trust, “funding” is fundamental. Funding is a lawyer’s term for seeing that assets are properly titled, and beneficiary designations are properly made, so that your estate plan will operate as intended. If your assets veer off course to probate, or to a joint tenant, or to a designated beneficiary, your estate plan may not work.
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