Most people don’t know the first thing about estate planning lawyers. 67 percent of Americans don’t even have a basic estate plan. That high figure is disturbing, but understandable. At the risk of sounding philosophical, one’s own mortality is an unpleasant subject to discuss. Furthermore, many people don’t care what happens after they die because, well, they’ll be dead.
There’s another reason as well. Most lawyers put out fires. People call lawyers if they get hurt at work or in a car accident. Estate lawyers are different. They offer preventative services. We see the benefits of preventative doctor visits. But we don’t see the benefits of preventative estate planning lawyers.
All that being said, most people don’t want to leave a mess behind when they die. Jimi Hendrix passed away suddenly in 1970. Over fifty years later, his estate is still tied up in court, mostly because the guitarist died intestate (without a will). Quite frankly, we resent people when they expect us to clean up after them. Your final legacy shouldn’t be one based on resentment. An estate planning lawyer doesn’t have a magic wand that erases pain. But a lawyer can answer your questions and make things better for everyone.
Why is Estate Planning Important?
Regardless of how much money you have, at the end of your life, someone must make some very important financial and emotional decisions. That person can be you or a state bureaucrat. If you want to keep control over your own family’s affairs, you need to do something about it now.
Financially, most people leave encumbered assets behind. For example, if Jimmy inherits his father’s house, that house might not have a mortgage on it, but Jimmy must continue to pay the taxes. A will ensures that Jimmy understands his obligations.
Furthermore, most people have more than one child. If Jimmy wants to keep the house and Sara wants to sell it, a will, or even better a trust, could address that possible conflict.
Other important decisions are emotional. That’s especially true if the decedent (person who died) had been married multiple times and left stepchildren behind. Intestacy laws are very specific as to what happens to stepchildren. Frequently, these laws aren’t consistent with the decedent’s wishes. But the laws always prevail in these situations.
Additionally, if you have minor children, would you want someone you select or someone the state selects to raise them?
When Should You Get an Estate Plan?
Most people get estate plans after their first “milestone” event (first marriage, first car, first child, etc.).
The aforementioned financial and emotional circumstances change frequently. Therefore, most people should revisit their estate plans at least once every three years. If a document is outdated, don’t amend it. Physically destroy it. Amended documents create additional confusion at a very confusing time.
We should pause and address an important question, which is the legal requirements of a will. These requirements vary slightly in different states. For the most part, they require a single format (all typed, all handwritten, etc.) and multiple witnesses.
Do-it-yourself downloaded internet forms often don’t adhere to these rules. Specifically, these documents often fail the witness test, which is very specific in most states. An unenforceable estate plan is worse than no estate plan at all.
What Estate Planning Documents Do I Need?
Many people start with a basic estate plan document package. Usually in one office visit, an attorney can prepare a will, living will, and power of attorney.
Wills clearly give the answers to the aforementioned financial and emotional questions. Also as mentioned, a will must be properly executed.
Execution rules for the other two documents are less stringent. A living will is also called a DNR (do not resuscitate) order and a directive to physicians. A power of attorney gives limited or broad powers to someone else, usually a family member, if the maker becomes incapacitated or is otherwise unable to make important decisions.
Typically, people should keep original testamentary documents in a permanent, secure location, like a safe deposit box. Copes should be clearly marked as “copies.” The law hasn’t yet caught up with digital technology. Computer files and other non-paper documents are usually unenforceable.
What is the Difference Between a Will and a Trust?
Usually, a will contains emotional and financial information. A trust usually contains financial information only. Several types of trusts are available, but not all trusts are legal in all states. More on that below.
A related question is “what is a revocable trust?” A revocable trust allows the settlor (person who sets up the trust) to add or subtract from the corpus (property in the trust) during the settlor’s lifetime. Irrevocable trusts are set in stone. An estate planning lawyer in your state can advise you as to the tax consequences of each kind of trust.
Incidentally, the other two parts of a trust are the trustee and beneficiary. Usually, the trustee and settlor are the same person.
Property in a trust legally belongs to the trust and not an individual. So, property in a trust is exempt from probate. Some common trusts include:
- Spendthrift: Beneficiaries have only limited access to the corpus until they reach a certain age or hit another milestone, like graduate from college. Many settlors insist on such behavior-related milestones.
- Charitable Remainder: A charity receives income-producing property and your other beneficiaries, such as your children, receive the income from that property for a certain amount of time. People often use donations for charitable tax deductions while they’re living.
- Special Needs: The Rain Man trust wasn’t as unfair or uncommon as Charlie Babbitt believed it was. People with disabled children who need lifelong care often leave substantial funds in special needs trusts.
- Gun: Firearms owners often place their firearms in trust. They pass privately after the owner’s demise. Furthermore, the settlor can designate an unlimited number of co-beneficiaries, like a hunting buddy who needs to borrow a shotgun.
That last bullet point touches on a key trust advantage. SInce the corpus passes outside of probate, an executor doesn’t include this property on an accounting report. Many people may not want to publicize the fact that they have guns or jewelry in the house.
These listed trusts are just the tip of the iceberg. Basically, if you share your needs with an estate planning lawyer, there’s probably a trust that fits those needs.
What is the Role of an Executor in Estate Planning?
An executor pays claims in accordance with the law and distributes assets in accordance with the will. An executor is usually a trusted individual or an investment company.
The claims-paying process could be complex if the decedent left a large estate or died in a car crash. Easy or not, creditors always get dibs on any estate assets, as long as they file a proof of claim before the deadline passes.
Executors have a fiduciary duty to distribute assets in accordance with the will. They cannot fill in the blanks or make assumptions about who should get what.
What Does an Estate Planning Lawyer Do?
To find a good estate planning lawyer, look for an attorney who has considerable experience in the same location. A lawyer must be able to help a client put together the proper estate planning package, including relevant trusts. Furthermore, upon your death, you don’t want your heirs to find the lawyer by putting his picture on milk cartons.
These same things apply if you’re wondering what to look for in an estate planning lawyer. Experience in this area and deep roots in the community are usually the key values.
As for how much an estate planning lawyer costs, a basic will/living will/power of attorney package should be no more than a couple of hundred dollars, unless you’re Sanford Babbitt and the will is very complex. Most lawyers charge hourly fees to draw up trusts and represent beneficiaries, executors, and other parties in probate court. The fee amount usually depends on the geographic location, the matter’s complexity, the lawyer’s experience, and the opportunity cost (i.e. a time-consuming case precludes other employment opportunities).