A Tale of Two Dead Clients

A Tale of Two Dead ClientsJohn died two days before Christmas. He didn’t leave his widow very much. Except a fight between her and his children. Several thousand dollars later, and after deep family division and nearly a year of conflict, the matter was finally resolved.

George died two days after John in the same year. He left his widow and his children a large estate and several successful businesses. George’s widow met with their attorney one time after George’s death. George’s business partners also met George’s attorney once. Within a few weeks of his death, without extra expense or time, George’s estate was closed and his assets were distributed per his desires.

From the outside John’s estate looked very simple. In contrast, George’s estate appeared so complicated that it would take years and tens of thousands of dollars to administer.

The difference was that George had planned ahead using the principles set forth below. John could not get himself to emotionally deal with them. He was reluctant to face his mortality. If John had a basic understanding of how to legally prepare for the inevitable he could have saved his family from an unnecessary burden.

Why do I need to legally prepare?

Every four minutes someone dies unexpectedly in the United States—not from age or sickness but unexpectedly. Lack of preparation needlessly adds cost, effort and distraction at a time when your family should be focused on mourning your loss.

What is a will?

A will is basically a letter of instruction to the court about what to do with your property after death. A will can do nothing until you are dead. Every will must go through probate. There is no exception.

What is probate?

Probate is the legal system’s solution for what happens to someone’s property after they die. The court determines whether there is a valid will and appoints someone (the “personal representative”) to manage the estate. Notice of the probate is given to the public and to creditors and the assets of the estate are determined. Creditors are paid and assets are disbursed to the heirs named in the will or according to the priority established by law. Finally, documents are filed with the court to close the probate.

What is wrong with probate?

Probate is public so your affairs will be public. Creditors or disgruntled family members can easily dispute, disrupt and delay the management and disbursement of the estate. Probate always involves the court and limits what your loved ones can do. Probate takes at least 4 months but sometimes years. Probate can be expensive, especially if it is contested. Probate always costs much more than preparing a trust centered estate plan.

Does joint tenancy avoid probate?

Joint tenancy is a type of joint ownership in which the entire asset is transferred to the one joint owner upon the death of the other joint owner. It is true that this transfer does not require probate but if both owners die at the same time or if the second joint owner dies without proper planning, then probate will still be required.

What problems are there with joint tenancy?

When you add a joint owner you lose control of your property. If the joint owner is sued, the judgment will be a lien on your property. Joint tenancy often results in greater taxes. If the joint owner becomes incapacitated or a judgment is entered against the co-owner, you may end up controlling the property with a stranger. Joint tenancy does not allow the transfer on death to be flexible to account for future changes in your circumstances. It is not simple or easy to make wise decisions about joint tenancy. By the time you and your lawyer work through the possibilities and probabilities of the future it would have been simpler, easier, and more effective to have created a trust centered estate plan.

What if I become incapacitated?

Guardianship and conservatorship are the legal system’s solutions for what to do with a person who cannot make decisions regarding themselves or their property. A guardian has to report to the court and family members about the decisions that are made, usually for the rest of the person’s life. Being appointed guardian and reporting take time and money.

What is a durable power of attorney?

A “power of attorney” is a document in which you appoint someone to act for you. If it is “durable” that person continues to act for you even if you lose the capacity to make your own decisions. Durable powers of attorney are powerful legal documents And can be very useful, especially when they are part of a trust

centered estate plan.

What is a trust?

A trust is an agreement to hold property for the benefit of another. The law treats a trust as a separate legal “person.” Like a will, a trust can contain provisions for distribution of your assets to your loved ones after you die but the assets are distributed without probate. While you are alive you maintain possession and control of your assets. A revocable living trust is simple, convenient and affordable.

How does a trust avoid probate?

Unlike a will, a trust can own property. And, the trust doesn’t die when you do. Instead, a successor trustee automatically replaces you and begins to manage the assets owned by the trust. The successor trustee can also distribute the assets to your loved ones. For a will to be as powerful as a trust, it must create a trust upon your death. To do so requires court involvement.

Who controls my assets in a trust?

You do. As the grantor and trustee of the trust you have absolute control over your assets. You can continue to use them, sell them or even borrow against them.

How do my assets get into my trust?

Real property is transferred to the trust by deed. Money in bank accounts will be transferred to the trust upon your death when the trust is named as “P.O.D.” (“paid on death”). Life insurance, 401K, and other accounts will be transferred to the trust when the trust is named as a beneficiary.

How much time does it take to legally prepare?

It takes much less time, effort and money than it will take to deal with death and disability if you do not prepare. You will meet with the lawyer to discuss your needs, desires and particular circumstances. The lawyer will prepare the documents. A few days later you will meet again to sign the documents.

If I die or become disabled, who will control my assets?

Usually, your spouse will control your assets. If you don’t have a spouse, a successor trustee, someone of your choosing, will control your assets.

Who should be a successor trustee?

A trustee should be honest and responsible. No other particular qualification is necessary. A trustee does not have to be an accountant or a lawyer. Often, the best choice is a child or sibling. You should name a successor trustee in case your first choice cannot serve. Your lawyer will help you make the proper choice but the choice is yours. Can my trust keep going after I die? After you die your trust can continue to be managed by the trustee you selected. The trustee will distribute assets according to your direction. For example, the trust can hold assets for a child’s education or for a child who is not ready to manage the assets himself or for a child with disabilities. You can direct the trustee to do just about anything you want with your assets.

Should a lawyer prepare my trust?

Preparing a proper Trust is not a self-help task. To comprehensively plan for whatever the future may bring takes experienced and competent legal counsel.

Do I need a will?

A trust centered estate plan includes a particular type of will called a “pour-over” will. In most cases the will won’t be used. If it is used, it puts all assets into your trust. Your trustee can then distribute the assets to your loved ones, as you directed.

What is a “living will”?

A living will directs physicians to stop life support that is unnaturally keeping you alive if your condition is terminal. It shifts the burden of decision from the health care provider to you so that your wishes can be followed without inappropriate delay.

What is a health care directive?

This gives someone else the ability to make health care decisions for you if you are unable to do so yourself. Again, preventing delay.

Wht is a Trust Centered Estate Plan?

It is a plan prepared by an experienced lawyer that includes a revocable living trust, pour-over wills, durable powers of attorney, living wills, health care directives and deeds. It should be comprehensive, administratively easy and affordable.

How do I choose a lawyer?

Ask the right questions:

  • How long have you been practicing?
  • How many trust centered estate plans have you prepared?
  • Have your plans been tested in the crucible of death?
  • (Have you had many clients pass who have had to rely on your plans.)
  • Do you charge more fees to make changes?
  • Do you charge fees for questions asked after the plan is signed?
  • Do you charge to help my family after I’ve passed?

 

Gregory P. Hawkins is a lawyer who has been practicing law for nearly three decades. He is a

popular speaker and writer. He may be contacted at greg@gregoryhawkins.com or 801.558.2527.