Avoiding legal problems is better than solving legal problems. An ounce of prevention is worth a pound of cure. If you fail to plan, you plan to fail.
What does all this mean in terms of estate planning?
Taking steps now to avoid problems later can provide tremendous benefits for your family in terms of problems avoided.
A good updated trust-based estate plan will:
1. Avoid lack of privacy in the probate process,
2. Avoid unnecessary extra court cost in the probate process,
3. Avoid unnecessary extra legal fees in the probate process,
4. Avoid guardianship and conservatorship,
5. Avoid unnecessary federal estate taxes,
6. Avoid loss of income tax deferral on retirement account,
7. Avoid loss to creditors and loss to in-laws if a child of yours gets divorced,
8. Preserve the ability for your loved ones to do benefits planning for you, and
9. Preserve your assets for your family.
Let’s imagine Jack and Jill Newcomer move to the Lowcountry from Ohio to retire. Jack and Jill have two children, Amy and Jeff.
Amy is married to Kyle and they have one child, Nathan. Jeff is single and receiving government benefits because he is mentally disabled.
With appropriate legal papers, Jack and Jill can ensure that Nos. 1 through 9 will be accomplished in their case.
By using a revocable trust to own their probate assets, Jack and Jill will avoid the lack of privacy and unnecessary extra expense and cost of probate when a will alone is used.
By leaving assets to their children “in trust,” they can protect their assets from lawsuits and divorce.
Amy’s share, left to her in a trust she controls for her own benefit, can be protected from loss if she becomes divorced or gets sued.
If Amy passes, Jack and Jill can direct the share to go down to Nathan and not to Kyle.
Jack and Jill will need to determine who the trustee of Nathan’s share will be if Nathan inherits when he is a minor (probably Kyle).
Most people want their assets to stay in their family bloodline.
Jeff’s share can be left to Amy, as trustee, to manage for Jeff’s benefit to supplement benefits he may get from the government.
If you do not have this kind of protection, it can be quite costly. Guardianship alone can cost thousands.
Usually, for a husband and wife, we prepare a pour-over will, a revocable living trust, a general power of attorney, a health care power of attorney and a HIPAA release.
These papers, along with some advice and counsel, ensure that their affairs will be managed as they wish and for their benefit in a fashion that maximizes what the law can do for them.
Just as in the field of medicine, preventing problems in the legal world is quite valuable.
When it comes to your family and your property, a good plan will prevent many problems and provide you and your family peace of mind.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate planning and elder law attorney. www.mwinnesq.com