Planning for the end of your life or a serious illness is not enjoyable but unfortunately it is an essential part of life.
Have you ever considered who will make financial decisions for you if you are no longer competent to make them for yourself?
Creating an estate plan can help bring you peace of mind now and help to protect yourself and your loved ones from a difficult but avoidable situation in the future.
Regardless of your current age or financial status, a well-drafted estate plan ensures that your property, business interests, investments, insurance proceeds, personal property, and even your personal effects will pass to whom you want, when you want, and is carried out in the manner you've chosen.
Rest assured that your family won't have to endure the public process and costly matter of probate and that tax won’t eat away at what you've taken a lifetime to build.
Estate planning may include:
Revocable Living Trusts
Last Will and Testament / Probate
However, problems arise when these methods are not coordinated so choose an experienced, reputable estate planning attorney.
Let the Law Office of Rupert Corkill be your guide on the path toward preserving your family's future and feel confident about the choices you make.
The following question and answer series about common estate planning mistakes, how to get started, and how to discuss potentially awkward topics with family members stems from an interview Rachel Emma Silverman, the author of The Wall Street Journal Complete Estate Planning Guidebook, gave US News.
Who needs to think about estate planning? Does a single 20-something?
Everybody needs to think about estate planning. Unfortunately, we’re all going to die, and many of us might even grow incapacitated. You just never know. Estate planning isn’t just about assets. Even if you’re a single 20-something, you might not have a lot of assets or family support, but estate planning also involves medical directives, which means designating how you want to be cared for when you can’t care for yourself. Unfortunately, there are many tragic examples of even 20-somethings facing those kinds of situations, so it’s important that even young people make estate plans.
What are the biggest estate planning mistakes that people make?
The number one mistake is not doing anything at all. There are so many examples of people who die without a will, or get sick without a medical directive. That’s when family fueds happen and it leads to expensive litigation. Or people wait too long. People decide they need an estate plan when they’re already incapacitated, so it’s too little, too late.
Another big mistake is not planning your wishes clearly enough. There are two ways to do that. You can have real, live conversations with family members explaining your wishes. That really minimizes disputes going forward, but it can be a really awkward conversation to have. A lawyer can also help you make your estate plans clear.
How can you overcome the hurdle of talking about estate planning in the first place?
That’s a tough one. I have a few conversation starter ideas in the book. Nobody wants to appear greedy. “Hey, Mom and Dad, what are you leaving me?” And parents don’t want to freak out their grown up children by talking about this. I think a good thing to do is to play off events in the news. Studies show there are spikes in estate planning after a big news event involving estate planning.
Estate planning can be so complicated and expensive. Is there any way around that, especially for families on tight budgets?
Lawyers will say you should always get a lawyer, and a full package starts at about $1,000 to $1,500, and a lot more if you have a complex estate. There’s also a number of do-it-yourself options, like books and forms. Those are really controversial.
I’m a big believer that any estate plan is better than nothing at all, but the problem is, the laws change really frequently. Federal estate laws have changed four times in the past four years, and state laws are also changing. There are a lot of variables, and some reports have shown that these programs don’t necessarily reflect all those variables, so they are problematic. The safest thing to do is to go to a lawyer. If you really can’t afford one, do the basics with a DIY plan.
The high cost of estate planning seems so unfair, like another tax on families. Does everyone really need to pay $1,000 and up?
It’s a huge problem and it’s becoming an even bigger problem. It’s a systematic problem within the legal industry, and a lot of law firms are dropping their estate planning practices because they’re not that lucrative, so those that remain have to raise their rates even more. It’s a problem. The way around that is the proliferation of online programs. Unfortunately right now, because estate tax laws are in such flux, there is not a perfect solution. Hopefully it will get better.
What about life insurance — how much should people get?
I avoided that question in the book, because there are so many variables. It depends on your current income, the number of children you have, your spouse’s income. I didn’t want to give any blanket tips. I bought life insurance before the birth of our first son, and the broker just asked a lot of questions and ran some numbers, and we just kind of made up a number. It’s an art, rather than a science.
How often should people review and update their estate plans?
Often — at least every three years. And people’s wealth is constantly changing, and family situations constantly change. People have more children and children get married. There are a lot of variables, and estate plans should reflect that. ~ Kimberly Palmer.
(Adapted from an interview with Rachel Emma Silverman, author of The Wall Street Journal Complete Estate Planning Guidebook, as published in US News).
If you don’t plan ahead, the state will plan for you
If you don't create an estate plan your assets will be forced to go through your state’s legal process or "intestacy laws" to determine who will inherit your property.
In the case of a person who has died without a valid Last Will and Testament, the intestate laws of the state where the person lived and owned real estate at the time of their death will determine who will inherit their property.
Each state may differ slightly but all tend to adhere to the following arrangement. First your spouse and your children will inherit your property. If you don’t have a spouse or any children, then your parents will inherit your assets. If your parents have predeceased you, siblings are next in line. Finally, your property will be distributed to your nieces and nephews.
We'll help you stay safe and give you peace of mind.
You have worked hard to earn your assets. You have accumulated wealth that you want to protect from creditors and litigants, and eventually pass on to your heirs, losing as little as possible to taxes. The Law Office of Rupert Corkill recommends proven, tested strategies designed to achieve your asset protection and wealth preservation goals.
We offer a broad range of law services
Our lawyers will also represent you in civil litigation cases such as divorce, child and spouse maintenance.
How to Avoid Probate with a Revocable Living Trust
While a Last Will and Testament is an important part of any estate plan, there's one main drawback to having all of your property pass under the terms of your will: the property must go through probate before your loved ones will be able to have access to it.
Probate can take months to even years to complete, which means that your family will have limited, and often no access, to your assets during that time.
A Revocable Living Trust eliminates the legal requirement of probate.
A Revocable Living Trust is a written legal document that describes how your property will be managed both while you're alive, including your mental disability plan, as well as after you pass away, in the same manner as a Last Will and Testament.
How Does a Revocable Living Trust Avoid Probate?
A Revocable Living Trust avoids probate because your assets will be funded into the trust during your lifetime, and therefore won't need to be probated after your death.
To fund your bank accounts and real estate assets into the Revocable Living Trust, your name will be taken off the asset and replaced with the name of your trust.
For other assets, such as life insurance and retirement accounts, the trust will be named as a beneficiary of the asset. Once the trust is fully funded, your trust will own your assets, and property that's owned by a Revocable Living Trust doesn't need to be probated. Instead, the trust property can pass immediately and directly to your loved ones.
Regardless of your current life stage, a Revocable Living Trust can offer you peace of mind for your Estate Planning.
Wills vs. Trusts (Estate Planning for Singles)
When possible, a single person should consider a Revocable Living Trust over a will. However, to consider using a Revocable Living Trust as a single person you will need to meet a minimum net worth.
As mentioned earlier, a Revocable Living Trust offers two main benefits:
Revocable Living Trust keeps you and your assets out of a court-supervised conservatorship
Revocable Living Trust will allow your beneficiaries to avoid the delays and costs of probate
If your assets are higher than the threshold for California law then a formal probate will be necessary.
Wills vs. Trusts - Estate Tax Planning for Married Couples
Married couples can avoid an expensive, drawn out probate after a spouse's death through a Revocable Living Trust.
If your estate exceeds California's estate tax exemption you can fund Revocable Living Trust by first setting up AB or ABC Trusts and then dividing your assets equally between the trusts. Although this can be designated in a will, your assets would be divided into separate names and the assets would then go through the long process of probate after each spouse dies.
Many parents have a life insurance policy or retirement plan but this can present a challenge if the parents get divorced or the children are minors when the parents die.
In these cases the funds will be placed in a court-supervised conservatorship until the children turn 18 or 21. However, a Revocable Living Trust can be made the primary or contingent beneficiary of the life insurance or retirement account so that the successor Trustee will have the legal authority to accept the funds instead of a court-supervised guardian.
Wills vs. Trusts (Estate Planning for Couples in Second or Later Marriages)
Second and later marriages become complex as you and your spouse may wish to leave your assets to different beneficiaries, such as grand children from previous marriages. A Revocable Living Trust will allow your assets to go to the beneficiaries without a costly, drawn out probate.
Wills vs. Trusts (Planning for Mental Disability)
Diminished mental capacity isn’t something we want to think about, especially as young, healthy adults but everyone should be protected in the case such a scenario. If your assets are titled in your name only, then consider a Revocable Living Trust when planning for a potential mental disability.
A well-drafted Revocable Living Trust should contain provisions for determining your mental capabilities outside of a court proceeding as well as how to take care of you and your assets if you become mentally incapacitated. This will keep you and your assets out of a court-supervised conservatorship saving you and your family a lengthy and costly battle.
Wills vs. Trusts (Keeping Your Estate Plan Private)
A Last Will and Testament becomes a public court record that anyone can read once filed with the probate court. However, a Revocable Living Trust is a private document so unless your beneficiaries choose to go to court over the agreement, only trustees and beneficiaries will be able to read it after your incapacity or death.
Wills vs. Trusts (Estate Planning for Real Estate Located Outside of Your State)
Owning real estate in more than one state or outside of your home state often means two separate probates: one in the state where you live and one in the state where your property is located.
You can avoid the two probates with a Revocable Living Trust. You simply have to establish and deed the out-of-state property into your trust and update your beneficiaries.