Why do I need a will or a trust? Let my kids deal with it. When I’m gone, I’m gone. I don’t want to talk about it. They’re going to inherit it all anyway, why should I waste my time? My kids are ungrateful, I’m going to spend it all. I’m young and healthy and have my whole life ahead of me, why should I bother?
Believe it or not, I have heard these and similar statements too many times to count in the 18 years I have been practicing law as a trusts and estates attorney in Florida.
What surprised me even more, at least in the beginning, was that many of the people without an estate plan or even an interest in creating a successful plan were older, educated, and successful. Naturally, the average college-aged adult has little interest in planning for the inevitable. I was 18 once and in college, and felt invincible!
Many friends and colleagues who are in their 20s and 30s have started families and are focused on work and raising their children. Drawing up a will, or talking to an attorney about their possible death or incapacity are the furthest thoughts from their minds.
Today, however, more than ever, I am getting calls from my friends from high school and college, as well as twenty, thirty, and forty-year olds who have never given any consideration to an estate plan. With the uncertainty of COVID-19, younger adults, especially those with children are anxious to meet with counsel to ensure that their children are cared for and their assets are properly managed to benefit their children, in the event of an untimely death or incapacity. COVID-19 has forced all of us to rethink life and our priorities, and face our own mortality and the uncertainty of life. People who never had any desire to contemplate these things are now meeting with attorneys, often for the first time in their lives, discussing things like guardianship and trusts for their children, as well as putting their own health care wishes into writing in the form of a Living Will and naming a Health Care Proxy, as well as a Power of Attorney, and making provisions for disposition of their assets in the form of estate planning vehicles ranging from simple wills to Living and Irrevocable Trusts.
The reality is, planning your legacy is an important right and responsibility each of us has. Regardless of the fact that we are in the midst of a global pandemic that seems to affect both young and old, those with pre-existing conditions as well as folks who are seemingly in model health, and regardless of your personal or family situation, and net worth, every adult needs to make their wishes regarding the disposition of their property, the management of their affairs, their healthcare wishes should they become incapacitated, and the care for their minor children known in writing, legally.
What’s Involved in Estate Planning?
There are so many important considerations when considering your estate beyond spelling out who gets what when you die. No two individuals, families, or estates are the same and a simple will does not begin to cover the bases, even in the simplest of circumstances. It is crucial to discuss and plan with a professional to identify and address the obvious as well as the blind spots that can save your loved ones from needless expense and heartache.
Fortunately, due to my upbringing and involvement in the development and management of our family’s complex estate and network of trusts, I realized the value and necessity of having a solid, well thought-out plan, even from the time I was 18. I didn’t want my family to be left to deal with needless expenses and headaches, to fight over my assets, or worse yet, to argue about things like medical procedures or continuing life support, should I, God forbid, be incapacitated, which is a tragic and heart-wrenching situation I have witnessed both in practice as well as in well publicized right-to-die cases like that of Terri Schiavo. I can’t begin to tell you how many times I’ve been called to deal with an estate situation gone awry, whether the circumstances involved someone living or deceased, and the effects of poor or no planning have led to needless headache and heartache.
My goal is to help clients avoid these situations whenever possible. The reality is these kinds of tragic situations occur with alarming frequency, and while we may not be able to avoid death, injury, or incapacity, we can strategically plan to spare our loved ones needless grief by making whatever may occur easier for them to handle, and to ensure the results would be consistent with our objectives and wishes.
“Death and Taxes”
They say the only two guarantees in life are “death and taxes.” Unfortunately, I can’t help postpone or prolong the inevitable, and taxes must be paid. That being said, one important aspect of a solid estate plan is to minimize the tax consequences of a particular estate, leaving as much as legally possible for the beneficiaries, as opposed to Uncle Sam.
Clearly, the ideal situation is to work with a legal professional when you are in good health and spirits so you can understand and plan appropriately, and also deal with the concomitant emotional aspects of contemplating one’s own possible future incapacity or death. Estate planning, whether in the strategic planning stages or in a problematic situation, requires a great deal of patience, empathy, and compassion. As the attorney, I often become a sort of therapist for my clients, having been there many times with dozens of clients and situations, as well as having to navigate complex estate situations in my own family. It helps you and your family to have an ally who has been in your shoes and who can lend an ear and be supportive, as well as assist in formulating a sound legal strategy.
More Than Just a Will
Estate planning involves much more than the execution of a Last Will and Testament. Through a comprehensive evaluation of clients’ financial and personal affairs, estate attorneys advise clients regarding their long-term plan and their desires to provide for their loved ones, while preserving the money and assets they have worked so hard to obtain.
One major objective is to help clients evaluate the potential estate tax impact on their resources, and devise strategies to help mitigate that impact to provide the most benefit to their beneficiaries. One unique way I prefer to assist my clients is to visit and work with them at their home or office. I have found that clients are more comfortable opening up and discussing serious and sensitive subject matter when they are in their own space. This often helps identify and address situations that clients are reluctant to address and that may not have otherwise come to light, such as a valuable art or antique collection, or a dependent adult child who lives with them.
In all circumstances, estate planning means getting to know and understand clients on a very intimate level. It is essential to look for a professional with whom you can build a certain level of trust.
Death and Disability
Many people aren’t generally enthusiastic to think about death or disability, and mistakenly assume that their spouse or adult children can automatically manage their financial, medical, or personal affairs should they become incapacitated.
In reality, for others to take over the management of these affairs, they must petition a court to declare you legally incompetent. This is typically lengthy, costly, and emotionally stressful. Even if the court appoints the person you would have chosen, the individual will likely have to come back to the court as required and provide detailed documentation of how he or she is spending and investing each and every penny. Every decision is subject to scrutiny.
Often children, spouses, and beneficiaries argue over these decisions, even when they are spelled out in writing. The best thing a client can do is to put their wishes in writing with their attorney to minimize the risk of future problems. The last thing people would want is for a court appointed (and paid) individual with no allegiance to them making important decisions, or for a family to spend months and endless sums of money fighting while your medical and financial fate are hanging in the balance. These are the kinds of risks we assume without a proper plan in place.
A well-done estate plan will allow your family or a trusted individual immediately take over for you should you become incapacitated. The proper legal documents will spell everything out in advance, and designate the person or persons that you trust so they will have legal authority to withdraw money from your accounts, pay bills, take distributions, sell stocks, and refinance or sell your home, and do whatever is necessary to support and sustain you during your incapacity, while also reducing the possibility of abuse and litigation. Many people mistakenly think that a simple will can effectively protect you in the event you become incapacitated, but this is not so. A will does not take effect until you die.
Medical and Health Care Documents, Living Wills, Powers of Attorney
In addition to disposition of assets, estate planning also involves the preparation of other documents such as Health Care Directives, including Health Care Proxies, Living Wills, and Powers of Attorney.
In the event of incapacity, it is imperative that you establish a plan for your medical care. The law allows you to appoint someone you trust, such as a family member or close friend to make decisions on your behalf about medical treatment if you lose the ability to decide for yourself. Clients can do this by using a Durable Power of Attorney naming a Healthcare Proxy, as well as a Living Will which informs others of your preferred medical treatments such as the use of extraordinary measures to sustain life should you become permanently unconscious or terminally ill.
It is important to understand your options as well as the ramifications of every decision you make. It is also important to discuss with any prospective health care proxy your wishes and be sure they are comfortable stepping in and making incredibly difficult life-or-death decisions on your behalf.
Discussing and executing health care documents that may state your wishes not to have your life prolonged artificially if you are in a persistent vegetative state or an end-stage condition is one of the most emotional and difficult decisions you may ever make, and it is likely just as difficult for whomever you may nominate to carry out your wishes should the need arise. These decisions and this process may require a good deal of “hand holding” and empathy on the part of the attorney.
Other considerations include the possible need for supplemental insurance, long term care insurance, and life insurance. Depending on circumstances, it may be necessary to also look into Medicaid planning, as well as securing Social Security or Veteran’s benefits.
If you leave your estate to your loved ones using a will, everything you own will have to go through the probate process, which involves petitioning a court, is expensive, time-consuming, and a matter of public record. The court is in control of the process until the estate has been settled and distributed. During this process, it is not unusual for the court to freeze assets for months or more while trying to determine proper distribution of the estate, making it difficult for your family to pay for living expenses.
Even in the simplest circumstances where there are no legal challenges from possible beneficiaries or creditors, probate can take a year or more. If you are married and have children, you will want to be sure your surviving family has immediate access to cash to pay for living expenses and to maintain the estate assets while your estate is being settled. With proper planning, your assets can pass on to your loved ones without the hassle of probate, in a manner that is quick, inexpensive, and private. An appropriate trust, form of joint ownership, or named designated beneficiary on an account or insurance policy can easily avoid the hassle of probate. Even in smaller estates, proper procedure can save needless hassle, expense, and heartache.
Proper filing and administration, timely notification, and proper payment or dismissal of creditors can help preserve precious assets your family will need in order to survive in your absence. Many clients are unaware that there are many debts they are not obligated to pay on behalf of a deceased loved one, even if they are the surviving spouse, beneficiary, or executor, and often waste precious time and resources fighting and dealing with creditors who are merciless in phoning and sending threatening bills and collection notices. Having a plan in place, and a qualified attorney on your side will save you a tremendous amount in the long run.
If you have minor children, it is critical that your estate plan address issues regarding the upbringing and support of your children. If your children are young, you may want to afford your surviving spouse the ability to devote more time to your children without the obligation of work obligations.
You may also want to consider special counsel and resources for your spouse, such as a trustee to assist them in managing the assets you would leave, especially if you believe they lack the experience or ability to handle financial or legal matters. Having a solid network of trusted financial and legal advisors on board in advance is critical. Clients also need to consider the possibility of both spouses dying simultaneously or within a short duration of one another. A contingency plan should include a list of persons you would like to manage your assets, and name a guardian you’d like to nominate to raise your children in your absence.
These are all conversations that should be had in advance, during the planning process, so the people you are choosing are willing to accept these incredible responsibilities. You should give careful thought to your choice of guardian, ensuring they share the same values you would want instilled in your children.
You should also consider the age and financial situation of a potential guardian before making your decision. You don’t want to pick anyone whose interests may be averse to your children’s, in that they may entrusted to utilize relatively large sums of money to help sustain your children if they are financially struggling.
Choosing a guardian is important, as is choosing a potential trustee to manage the money you would leave to support your children, spouse, or family. These decisions should be revisited and re-evaluated as needed. The person or trustee in charge of the finances need not be the same person as the guardian. In many situations, you may prefer designating different people to maintain a system of checks and balances. Failure to plan will leave the decision as to who will manage your finances and raise your children up to a court of law where your estate will be paying an appointed third party to raise your children and oversee financial assets.
An important aspect to consider is whether you’d like your beneficiaries to receive your assets directly, or to have the assets placed in trust and distributed subject to conditions and circumstances such as age, need, and even incentives based on behavior and education. Often, beneficiaries receive substantial assets before they are mature enough to handle them in a prudent manner. It is commonplace for trusts to be created and managed when potential beneficiaries are under the age of 40, when they have shown a propensity for being fiscally irresponsible, or whenever there is some underlying reason to want to “protect” the beneficiary from themselves (or someone else) in their lives who may not have their best interests at heart.
The last thing anyone would want is for their hard-earned assets to be squandered or taken by someone unscrupulous. Choosing a trusted and vetted, legally-bound trustee to manage a trust is critical, as it is sadly very common for beneficiaries of large estates to be taken advantage of. There also needs to be a clear order of succession in the event a trustee is unable or unwilling to serve, or is removed for cause, and depending on the complexity of the trust and estate involved, a panel of trustees may be warranted.
As I said earlier, the only two guarantees in life are death and taxes. The IRS will want to review your estate at death to ensure you don’t owe them one final tax: the federal estate tax (and in certain states, tax authorities will review to determine any state estate or inheritance tax liability). Whether there will be any estate tax liability depends on the size or value of your estate and how your estate plan is structured.
To complicate matters further, federal estate taxes, the amounts exempt from tax, and the percentage of tax levy are constantly in flux, and are a hot button political issue, so every estate plan should be reviewed continually, as external circumstances like tax laws change, as well as changing circumstances for clients and their families. This has never been more true than in 2020, where there are some of the most generous estate and gift tax exemptions in place. Depending upon how the political and social winds may shift in the coming months especially and in subsequent years, clients, especially with sizable estates need to be abreast of the changes in estate and gift tax laws, exempt amounts, and amount of taxes that may be levied on non-exempt amounts. Proper planning in advance can mitigate any adverse impacts and safeguard and protect your family from the ever-changing landscape of trust and estate tax law and liability.
I recommend reviewing estate plans with clients on an annual basis at a minimum, and tell clients they should consider this as important to their overall planning as getting a comprehensive annual physical. What may have been prudent last year may no longer be the best course of action. There are many strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to properly implement many of these strategies. From experience, I have witnessed families owing millions of dollars in estate taxes that could have been legally avoided with some simple planning strategies. Also, changes in personal circumstances or family dynamics within your family, or among others you may have selected as potential trustees or guardians may warrant changes. Often, things that clients overlook or consider to be inconsequential wind up being very important considerations that may make changes an imperative. This is why it is so important to meet at least annually with your attorney and thoroughly review your situation and estate plan to make sure it accurately reflects your current needs, situation, and external circumstances.
Charitable Planned Giving
Your estate plan can provide support for charitable organizations you deem worthy in a variety of ways, during your lifetime or after your death. Depending how your planned giving is set up, it may allow you to receive a stream of income for life, earn a higher investment yield, or reduce your capital gains or estate taxes as a result of setting up a charitable trust or foundation.
It is wonderful to help clients select and work with deserving organizations and for them to see the benefits from their philanthropy while they are alive, or to know that their money will leave a positive, lasting legacy after they are gone.
A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at death, estate taxes, and unnecessary delays, expenses, headache, or heartache. It is imperative to consult a qualified estate planning attorney to review your family and financial situation, your goals, and explain the options available to you.
In the event that you own property or have assets in more than one state or country, you will need to consult with an attorney licensed in each jurisdiction to ensure a proper plan that will include those assets, as laws and procedures differ.
There are innumerable aspects to proper estate planning, many of which go hand-in-hand with proper financial planning. Having a collaborative team that you are comfortable with will ensure that nothing is overlooked and every possible benefit is realized.
Today, more than ever, people own property and assets in more than one state or jurisdiction, and sometimes in other countries. Society has never been more mobile. It is important that you consult with an attorney in every state or jurisdiction where you own property or assets to make sure you and your family are protected. It is common for attorneys in different states or countries to work together on behalf of clients so that their estate plan is cohesive and takes into account differing laws and requirements of multiple jurisdictions.
Once your estate plan is in place, you will have peace of mind knowing that you have provided for yourself and your family, and that you have done so in a way that allows your estate to be settled with the best possible outcome.