Estate Planning 101

By Alex George

Doing your estate planning is a little bit like going to the dentist. Most people agree that it’s a good idea, but nobody enjoys actually doing it. (You also don’t get a free toothbrush at the end of your appointment with a lawyer.)

It’s not much fun to contemplate your demise, but it is important. This series of articles in Columbia Home & Lifestyle has looked at a number of issues related to women’s financial health, and estate planning is a critical part of that jigsaw. After all, it makes little sense to save and invest wisely throughout your lifetime, and then to needlessly forfeit a significant proportion of your accumulated wealth on your death because of a failure to plan for something that-let’s face it-you always knew was going to happen in the end.

So what are the consequences of failing to address estate planning issues? Here are a few to think about:

1. The Intestacy Rules Apply. If you do no estate planning, your estate will be divided up according to the default rules drawn up by the government rather than in accordance with your wishes. You have worked hard to earn and save what you own, and you, not the state, should decide who will receive your assets on your death. It’s entirely possible that the intestacy rules will give rise to some unintended, and unwanted, results. For example, most married people want their estate to pass to their spouse. But if you have children, your spouse is only entitled to receive half your estate plus $20,000. The rest goes to your children. Ah. Yes, I thought that might get your attention.

2. Your Estate Will Pass Through Probate. The intestate probate process is complex, stressful, long-winded and expensive. (Lawyers love probate by the way. A percentage of the gross value of the estate is paid to the lawyer administering it on your behalf, and you have to have a lawyer.) The good news is that probate is easily avoidable-if you do some planning.

3. Minor Children. If you have minor children, the consequences of not taking at least basic estate planning steps can be severe. Firstly, and most importantly, the only way of validly appointing a guardian for your children in Missouri is by a properly executed will. If you fail to make a will, a judge will make that decision for you. Secondly, since minor children cannot legally own property themselves, a conservator must be appointed by the court to look after it until they reach the age of majority, and sometimes this can become time consuming, complex and expensive. Thirdly (if all of that wasn’t bad enough), your children will be entitled to their inheritance-remember, this will be nearly half of what you own-on their 18th birthday. There’s no telling how much of your hard-earned legacy will be left by the time their 19th birthday rolls around.

4. Unnecessary Costs. There are many different costs associated with the passing of property on death. Doing nothing is, unsurprisingly, the most inefficient way of going about things. With proper planning, some of these costs (such as probate fees) are completely avoidable. Others (such as federal estate tax) can be minimized. Without estate planning, though, you can be sure that your estate will bear the maximum costs possible.
Despite what some attorneys might tell you, there is no one-size-fits-all approach to estate planning. Everyone has different needs and requirements depending on individual circumstances, and there are many different solutions available. A simple will may avoid or limit some of the problems outlined above. In certain cases, particularly where there are young children involved, a revocable trust might be even better equipped to protect a client’s assets and family. Trusts offer great flexibility, and they allow clients to pass property on to loved ones without the expense and delay of the probate process. They also have many other advantages, such as the ability to defer payments to children beyond their eighteenth birthday, and, in some circumstances, to protect those beneficiaries against creditors.

Whether you need a simple will or a more complex trust, a good estate planning attorney should be able to help you decide what’s right for you. You’ll be glad you did it. Knowing that you’ve protected your assets and eased the burden on those you leave behind is even better than a free toothbrush.

Alex George is the principal of The George Law Firm.

Estate Planning: The Myths

1. I have a will, so my estate will avoid probate. This is a common misconception, and, in fact, the opposite is true. Any property passing under a will must go through the probate process. Probate can often be avoided; however, using non-probate transfers or a revocable trust.

2. My estate planning doesn’t affect me-I’ll be dead. Again, not true – if it’s done right. A sophisticated estate plan should include Durable Powers of Attorney to appoint people to look after your affairs should you become incapacitated. Also, you should execute an advanced health care directive, or living will, which specifies your wishes about life-prolonging treatment in the event that you become severely ill. In addition, a revocable trust should be structured so that your appointed successor trustees can step in and manage your property for your benefit without the need (and expense) to go to court. 

3. Only rich and old people need to worry about estate planning. Maybe this was once the case, but no more. Any estate worth more than $40,000 must be probated, and for the reasons set out above, this should be avoided if at all possible. (Even on an estate of $100,000, probate fees will be $3,300. And remember, that money goes to the lawyer.) And documents such as Durable Powers of Attorney are needed, irrespective of how much you own. 

4. I don’t have enough worth bothering about. Often not the case. When you take the time to add up everything that you own, it can often be more than you think, especially when you take life insurance payments into account. Besides, however much you leave, you surely don’t want to pay any of it to lawyers (see point 3 above.) 

How to choose an estate planning attorney

Selecting the right lawyer to do your estate planning is critical. You need to find someone you feel absolutely comfortable with-someone who (a) knows his or her stuff, (b) takes the time to listen to what you need, (c) answers your questions in language you can understand and (d) delivers documents according to your schedule, not his or hers. So make sure to take time to find the right person for you. Here are a few suggestions:

1. Talk to your friends. Personal recommendations and endorsements are probably the best way to find a good lawyer. They may also be a useful source of information about whom to avoid.

2. Shop around. Many attorneys offer an hour’s free consultation, and you should make the most of this opportunity to get as much free information and advice as you can. Ask every lawyer you speak with how much estate planning he or she does (see below). Take the time to compare prices and personalities to ensure that you find a lawyer whom you trust and feel comfortable with. 

3. Find a specialist. Just as you wouldn’t want your family doctor to perform brain surgery, it’s best to find a lawyer whose practice is solely or largely focused on estate planning. Estate planning is a complex and ever-changing area of law. An attorney with a general practice may not have the time to dedicate to keeping up with all relevant developments.