Estate Planning Frequently Asked Questions
Below is a list of some of the common questions we get from people beginning to put together an estate plan, or looking to know more information about the process. The information below is simply meant as an introduction, and is not meant to replace the need for qualified legal counsel in establishing or managing your estate plan. Having a good estate planning attorney to help you through this process, as well as helping your family resolve your estate after your passing, is an invaluable resource that should not be disregarded.
Put in its most simple terms, estate planning involves putting your affairs in order so as to maximize the benefits that your assets can provide to you during your life and to those you desire to benefit from it after your death.
Estate planning is a process that has three objectives in mind:
A proper estate plan to provide for the needs of your family may include:
- An adequate Will or Trust
- A written agreement concerning the status of your assets
- A directive to your physician or a Durable Power of Attorney
- Final instructions of your preference
If you already have an estate plan, it should not be considered permanent. Conditions, as well as your desires, may change. Estate plans should be reviewed at least every two-three years but, additionally, any important change in your life demands immediate review. These changes might include:
- Birth, death, marriage, divorce or disability of you or a beneficiary
- Large increase or decrease in the net worth of you or a beneficiary
- Substantial change in the type of your assets
- Purchase or sale of a business
- Change of residence to another state
- Change in tax law
If you do not have a Will or a Trust and have not used other probate-avoiding techniques, upon your death your assets will pass according to the laws of the state which has jurisdiction over your assets. The "state plan" may not provide for those you desire to obtain your assets, and if it does, often presents several of the following problems:
- Higher estate taxes
- Additional inconvenience and expense (probate expenses can run from 2 1/2% to 5% and more of the value of the assets)
- Necessity of guardianship for assets inherited by minor children with rules probably not designed to accomplish your goals
The following methods are often used to avoid probate: joint tenancy title, community property title, bank account trusts, pay on death accounts, life insurance proceeds, retirement proceeds (IRA'S, TSA'S, 401K's, etc.), retirement plans, gifts made during life, revocable grant deeds. Each technique has its own ramifications for tax and other issues. As with everything else, there can be no "one right way" in all situations, and having an experienced estate planning attorney to help with the process is essential.
People often ask what they should bring with them to their initial estate planning consultation (we call this “the Discovery Meeting”) with one of our attorneys.
As we discuss in Our Planning Process, the Discovery Meeting is our opportunity to get to know each other and see how we would work together. It's important that we like and trust each other – that's the foundation of a strong professional relationship. Therefore, the focus of the meeting will be on you and on answering the questions you have about your estate planning options.
In order to make the most of our time together in the Discovery Meeting, we ask you to complete our Estate Planning Foundations Questionnaire and Initial Planning Decisions form. The information requested in these documents is essential for us to know in order to properly tailor your estate plan to your own unique situation, and by completing it in advance, we will be able to spend our time together focusing on your unique planning questions and needs instead of gathering the basic preliminary information.
Other than those 2 forms (which we'll send to you as a part of your New Client Kit when you schedule your Discovery Meeting), you don't need to bring anything else with you to the first meeting. However, we would be happy to look at anything else you feel is important. Some things that can be helpful (but, again, aren't required) include the following:
- Copies of previous estate planning documents (Wills or Trusts, powers of attorney, etc.);
- A list of questions you'd like to ask;
- Deeds to real estate;
- Account statements; and
- Business organizational documentation
We find that many people already have an estate plan, but it does not meet their current planning needs. They may have a Will that was prepared many, many years ago, or they may have a trust that prepared more recently, but those plans may not be sufficient for their current needs. Many times the plans are now insufficient because their assets or family situation have changed, or because when the plan was initially created, all of the planning options were not discussed and the right planning tools were not used.
In our Discovery Meeting, we review your current family and financial situation, uncover your current planning needs and goals, and help you determine whether your current plan will meet your needs.
As you might imagine, we get that question all the time. It is a difficult question to answer because fees are determined by the type of plan we put together, and that is determined by your goals, objectives and asset mix. The planning fees can range from almost $500 to over $5,000. The fees for Our Planning Packages are all set on a fixed-fee basis, depending on the type of planning that is needed. We charge our fees based on what your plan is designed to accomplish, and when you've decided what kind of plan you need, you'll know exactly what the fee will be.
The only thing that we can tell you for certain before we meet is that we do not charge a fee for your Discovery Meeting. In that initial consultation, we discuss your goals and objectives and take a look at your current financial situation, and based on that discussion, we will be able to recommend the best plan for you from our different planning options. You can then decide what kind of plan you want and be in control of the fees you pay.
When you call and schedule an appointment with us, we send out a packet of information, including a detailed description of our estate planning packages and the fees for each package. We also include information about the issues that need to be considered in making an estate plan. Our goal is to empower you so you can make informed decisions about your planning, so we give you everything you need in order to do that.
There is no “bright line rule” for determining whether a person needs a trust as a part of their planning. The answer for any particular person will depend on their own planning needs and planning goals.
While a person's age and assets are factors to be considered in determining what kind of planning a person needs, they are not the only factors, and they're not even the most important ones. Just as important are the circumstances of the beneficiaries, the family circumstances, and what you want to do with your assets.
As an example, we have a lot of clients who are in their thirties (and even some in their twenties) who don't have a lot of assets currently, but they do have life insurance and young children. The estate planning we designed and implemented for these clients included living trusts to make sure that any inheritance (including any life insurance) going to the children would be protected from a Guardianship of the Estate, would be used to provide for the children in a way consistent with how the parents would use them, and then would be given to the children when they are older, more mature, and have been better judgment (instead of at age 18).
Similarly, we have clients who have estates higher than $2 million, but a majority of our clients have less than that. Estate planning (and trust planning) is more than planning to reduce estate taxes, so it's not necessary to have several million dollars or more in order to need good, solid trust planning. While estate tax savings is certainly a major benefit of trust planning for those who need it, the benefits of trust planning go way beyond saving estate taxes. In fact, we've always said that estate tax savings is not the reason to do estate planning, but it can be the icing on the cake.
Here is a list of some of the non-estate tax issues that trust planning can be used to address:
Minor Children (see above)
Disabled Beneficiaries – If you have beneficiaries who cannot manage their own finances due to a disability, then a Living Trust should be used to allow someone else to manage those funds for them. The alternative is a Guardianship of the Estate, with its control limitations and expense.
Beneficiaries with Special Needs – If one or more of your beneficiaries has Special Needs, and is receiving needs-based assistance from the government (whether it is medical care, disability income payments, living expenses, or any other such benefits), then a Living Trust is needed to preserve their inheritance and still maintain their eligibility for those benefits.
Creditors – A Living Trust can be used to protect your beneficiaries' inheritance from creditors, predators, or even a potential divorce. While assets are in trust for your beneficiaries (instead of being distributed to them directly), they can be protected.
Immaturity, Spenders, or Addictions – Sometimes, unfortunately, we run into situations where a family member should not be given access to and control over assets. That could be because they are just younger or don't have the experience making good decisions with money. It could be because they are “spenders” and blow through whatever amounts they have. It could be because they have a drug, alcohol or gambling addiction. In any of these cases, a Living Trust Plan can be used to protect your loved one and help preserve the assets as well.
Blended Family – “Blended families,” with “his kids” and “her kids,” and sometimes even adding “our kids,” present special planning issues. Depending on the family dynamics, the relationships between the stepparents and stepchildren, and the planning goals, the planning can be simple or very complicated. Often, a Living Trust is the best tool to use in planning for these families.
This is just a short list of the issues that could arise when considering the type of estate plan to put together. When we sit with our clients and begin to design an estate plan, we look at all of these issues, and any others that are present, to help determine the best kind of plan for each person.