Leawood Revocable Trusts – Is it Right for You?
Below is a good short article from the Huffington Post on why you should take a long, hard look at estate planning. Some of the important things that they talk about are disability, which is generally underappreciated. Also, some of the key considerations like minor children and other issues that are ignored can be planned for.
Expert Offers Advice on Estate Planning: Why You Should Plan Ahead and What Can Happen If You Don’t
If you’ve postponed doing any advance planning, such as organizing your records, making health care decisions in advance, or doing estate planning, you’re not alone. In fact, about 70 percent of all American adults have done no estate planning, such as drafting a will, setting up a trust, or establishing powers of attorney.
Why is estate planning so important? What happens if you don’t prepare an estate plan? To arrive at answers to these questions, I sat down for an interview with Attorney Heather Reynolds, an Alameda, California-based estate planning attorney. Her practice solely focuses on Trust and Estate Planning, including the preparation of wills and living trusts, powers of attorney for financial management, and Advance Health Care Directives.
Martha Laham (ML): Many people feel that estate planning is just for the rich. Is there any truth to this?
Heather Reynolds (HR): It doesn’t matter how much money you have–avoid probate court. Who do you think is filling up the probate courts? It’s not the wealthy. The wealthy can afford to hire lawyers to keep them out of the probate court. It doesn’t matter how much money you have when it comes to health care decisions.
ML: So what happens if a person has a health crisis and is unable to make his or her health care decisions?
HR: If you don’t have an Advance Health Care Directive, then the probate court judge will supervise your care for the rest of your life while you are deemed incapacitated. It’s called a conservatorship. To learn more about the pitfalls of conservatorships, read The Con Game by T.S. Laham.
ML: In the same vein, what happens if someone can no longer handle his or her financial affairs, perhaps in the event of disability or incapacity?
HR: If you are still alive, but unable to handle your finances, and you don’t have a Durable Power of Attorney for Finances in place, then the same probate court will supervise your assets and/or debts for the rest of your life–regardless of how much or little remains.
HR: One of my clients’ wife died without a will. California decided that the house should go half to her husband and half to her 9-year-old son. The court supervises children’s inheritances until age 18. The judge said a house was too risky an investment for a child, so the father had to refinance to buy him out for hundreds of thousands of dollars. My client had just lost his wife, and now all of his money was going to pay a mortgage so that on his son’s eighteenth birthday, the son will get all of his inheritance as a lump sum–not a great parenting tactic from anyone’s perspective. In 15 years, I’ve never met a client who liked California’s plan for them.
HR: If you don’t have a living trust, probate is expensive. For those who own a home in California or have more than $150,000, probate awaits if they fail to create and fund a living trust. An average home in Alameda is worth $800,000, that means our average probate would cost at least $40,000.
ML: How long does the probate process take?
HR: It takes about a year if everything goes well, and ties everything up in the courthouse with lawyers and appraisers to pay for.
ML: So probate is a court proceeding. Are the proceedings kept private?
HR: Probate is public. Anyone and everyone can obtain a copy of your file in probate which includes your list of assets including account numbers and the value of each asset [such as] cars, home, jewelry. Your death certificate is also public record and contains your social security number, legal name, address and birth date. If you didn’t feel like a target for identity theft while you were alive, try probate. Guess who gets to clean up identity theft after you’re gone–your loved ones.
ML: Speaking of loved ones, most parents with young children probably wouldn’t think about doing estate planning. Why should they draft an estate plan?
HR: To protect their children. Most of my clients are motivated most by the idea that their children will need more than just some money when they die. Young children usually need parental guidance as well as access to assets before 18 to help pay for education and support expenses. The guardians cannot be expected to take on the financial burden of more children. Write your estate plan to address the children’s needs–and use a trust instead of relying on the probate court judge to make decisions for them.
In addition to getting your personal, legal, and financial affairs in order, Reynolds stated that estate planning offers an additional benefit. “My clients can enjoy the peace of mind that comes with knowing everything is in place to secure their legacies.”
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