I recently conducted an informal survey amongst my family and friends with respect to estate planning.  I asked two main questions.  The first was, Do you have an estate plan?  The second was, Why?

My goal was to be able to compile a "top ten" or "top five" reasons why or why not.  Some of the answers didn't surprise me. Some of them did.  My surprise, I think, was primarily based on who the responses were coming from.  Not because anyone I surveyed falls into the category of the "uber-wealthy," nor because anyone falls into the category of "totally destitute."  We are, for the most part, middle-classers - Average Joes just trying to survive from day to day and year to year.

I was also surprised that, when it came to why someone does not have an estate plan, the answers actually fell neatly into five main categories.  Before I provide the answers, let me begin by qualifying what I mean by "estate plan."  I mean some legal vehicle or mechanism whereby provisions have been made to distribute assets or care for individuals in the event of your death.

That said, the top 5 reasons why an estate plan has NOT been done were:

1. Time - either too busy, or just haven't taken the time to understand what can or should be done.

2. Lack of Assets - either there are no assets, or the respondent did not feel like there were enough assets to justify doing anything about them;

3. Cost - either the cost seemed to outweigh the benefit, or just assumed the cost would be prohibitive within their current budget.

4. Lack of Understanding or Education - either didn't know what estate planning really entails, or there was some lack of understanding with respect to a particular law or set of laws;

5.  Outdated Estate Plan - have an estate plan or some estate planning mechanism that has not been reviewed for a long time.  *I placed this under the reasons why an estate plan is NOT done because an outdated estate plan, in some instances, could be just as bad as not having one at all.

In reality, there are probably as many reasons why people don't have an estate plan as there are people.  We're all different.  Our lives and circumstances are different.  Our reasons will be different.  But these are a few of the most reliable excuses that I found.

Today I will talk about Reason #1 - Time.  In subsequent posts I'll address the other four.  But for now let's explore our busy lives and routines.

I read another, very well written, blog today.  The title was "The 'Busy' Trap."  What a great article.  It talks, generally, about how we sacrifice our daily existence for being "busy."  How we use the term "busy" like a badge of honor.  And the response we get when we respond to the common inquiry, "how are you doing?" with "Busy!" "So busy."  "Crazy Busy." is usually something of a congratulatory compliment: "That's a good problem to have."  Like we're saying, "Congratulations on being so busy that you don't have time to talk to me."  Its weird when you think about it.

Truthfully, when was the last time we felt good about being blown off?  "So busy," as a response, personally, puts me into a mode where I feel like I shouldn't be taking any more of that person's time.  Or makes me feel rushed and unimportant.  Yet, in general, we congratulate and compliment people for it.  It's almost like saying, "thank you for making me feel stupid for taking your time."  But, I digress.

Anyway, the point is that the busyness of everyday life often gets in the way of accomplishing those things that are most important.  I have heard it said (although I do not recall an exact source) that very few people on their deathbed will remark, "I wish I had just been able to <insert the mundane daily/business task of your choice here>."  Many, however, will remark, "I wish I had spent more time with <insert the person's name, or group of people, of your choice here>."   The point is, when we truly reflect on what is important, people and relationships almost always are where we end up.  The time we did spend.  The time we didn't spend.  The care of those people who are most important to us.

In truth, estate planning takes very little time, but has the ability to bless or curse our heirs well into the future.  Depending on the complexity of your particular circumstances, that time will vary.  Time invested could range from one hour to 20 hours or more.  However, the time invested is not likely to leave you questioning how your spouse, children, or grandchildren will be cared for.

I once worked with a client whose spouse had passed away.  The dying spouse - who had a terminal disease - had literally spent his final few days preparing tax returns in an effort to leave all affairs in good order and to care for his wife.  It truly was touching.

The point being, time is really all we have.  Don't fall into the "Busy" Trap and forget what is most important - time, relationships, and caring for those we love.  Take the time.  Make the time.  Speak with an estate-planning attorney in your area to understand what vehicles make sense for your situation.  An adequate estate plan  - be it a simple will or a complex trust - is really our final way of saying, "I love you," to those we care about (the Leona Helmsleys of the world aside).



DISCLAIMER: This website is for Informational Purposes only.  The information provided is not comprehensive, does not constitute legal advice, and does not create an attorney-client relationship.  If you need legal advice, please contact an attorney in your local community or State.

When is the best time to create an estate plan?

From its inception in 1908, the Boy Scouts have lived by a two-word motto, “Be Prepared.”

The direction that you can go with this is both singular and diverse.  Being Prepared, in general terms, means that you are ready for life’s obstacles, circumstances, or events – whether expected or not.  Being Prepared for specific events can mean a million different things to as many different people.  In the area of estate planning, being prepared means that you are prepared for one of life’s only certainties – death.

Death may be certain, but the timing is not.

Perhaps one of the biggest obstacles estate planning attorneys face is convincing young, healthy, prime-of-life clients that estate planning is important.  The main reason for this dilemma is that young, healthy people to one extent or another have not come to fully comprehend their own mortality.  When I was still invincible I was playing in a men’s hockey league.  Our goalie was . . . less than experienced . . . and as a result an extra burden was felt by our defensive players (of which I was one).  On one fateful shift an opposing player was at the face-off dot about to score.  Enter the hero.  Skating toward the corner at full speed I dove in front of the shot (not recommended).  I slid shoulder first into the boards.  When I stood up, I thought my right arm was going to fall off.  But, being a real tough-guy (i.e. invincible), I still went out for another shift.  It wasn’t until I actually tried shooting the puck that I realized the extent of my injury.  Instead of a quick wrist shot that sent the puck into the upper corner of the net, I dribbled off a weak shot that barely reached the skate of the defender in front of me.  The searing pain sent me stumbling to the bench.  Although not dislocated, my shoulder was separated.  I was 26, and for the first time in nearly 20 years of playing hockey, I suffered an injury that took me out of the game.    I was mortal.  I could be hurt.

Later that year – in a manner substantially less cool (distracted by a cell phone) – I rolled my car in the middle of the interstate during rush hour traffic.  Fortunately I walked away from that one.

The point being, we are all mortal, and we are all involved in incidents and accidents that remind us of our mortality and that life is fragile.

If we are unprepared for that eventuality, it is possible – and likely – that your estate, be it worth $2.00 or $2 million, or $200 million will fall entirely under the control of the State in which you died or where your property is located.

When we are young we typically don’t have a sizeable financial estate.  However, what many of us do have (or will have, or hope to have) are children.  And our children’s fate could just as easily be left for the State to decide if we fail to make preparations and designate a guardian.   Do we really want “Judge Wapner” – who doesn’t know us or our family from anyone else – determining who the best person to take care of our children is?  Most of us would say no.

My son recently went on a Boy Scout campout.   He did not pack a tent.  In Arizona, it’s usually not critical to have a tent to ensure staying dry in the night.  Camping under the stars is actually quite common here.  However, he learned the hard way that having a tent and not needing one, is a whole lot better than needing a tent and not having one.  It rained all night.  Sandwiched between two tarps; trying to use them as a type of water-proof blanket, he and two other Scouts huddled together while it rained most of the night.  With no way to keep himself or his equipment dry, he had a miserable time. 

He went on another campout last weekend.  He was so excited because he was determined to be prepared.  He packed every item on the list given to him by his Scoutmaster – right down to the disinfectant wipes.  The outing involved a six-mile hike to their overnight campsite.  His pack was heavy and it took work to get up the mountain to the campsite.  But when the time came, he had everything he needed both for his safety . . . and comfort.  The work paid off.  The effort came to its intended fruition.

He was prepared!

Just like with my son, being prepared does take more work.  It will take more effort.  But the peace that comes from having taken the time and endured the expense will far outweigh the cost of failed or inadequate preparations.

To answer the question in the title:  the time to think about estate planning is now.  You don’t have to solve the world hunger problem with your estate plan.  But ensuring you have what you need is critical to ensuring that when you get to your final “campsite,” you are not left with a “tarp” when a “tent” was most needed.

(I will discuss what estate planning vehicles may be most appropriate at different stages of life in my next post).

DISCLAIMER:

This website should only be used for informational purposes. It does not constitute legal advice, and it does not create an attorney-client relationship with anyone. If you need legal advice, please consult an attorney in your community.

My thoughts on a full estate plan vs. a simple will are these:

First, there are all kinds of different trust vehicles that have different features that allow for estate tax shelters, etc.  The one I focus on here is a simple probate-avoidance trust.

Most of us think of a trust as being for the uber-wealthy who are trying to keep that wealth from ending up in the government's hands.  However, a trust is really a vehicle to keep what might otherwise be a probate estate asset out of probate court.  Probate is simply the process of having the court determine who gets control over the probate assets - i.e. a personal representative/executor.  The problem is, that before the court will allow the PR/Executor to do anything with any of the probate assets, the executor has to petition the court, be appointed by the court, then publish notice to creditors (and creditors have 4 months to respond).  The whole process - in a simple case - will take approximately 6 months.  All the while, the assets are essentially in a frozen state.  With a trust, those assets that may otherwise be considered "probate assets" are actually titled in the name of the trust - not the deceased person - and so their use and disposition are controlled by the terms of the trust.  And the trust doesn't have to go through any type of court proceeding, so the trust beneficiaries are not subject to having assets "frozen" or tied up in a probate court proceeding.  Additionally, if your probate assets - your home, your cars, personal property, bank accounts, etc. - total more than $50k, then your estate is subject to probate.

It may be that most of the assets that would pass from you to your spouse or other family are currently in the form of life insurance, 401k, IRA's, or other similar vehicles.  Typically these are non-probate assets.  However, if you have other property it would still be tied up in probate and create additional expense in terms of lawyers fees (I hate those guys:), court costs, etc.

With all of that said, just having a will is better than nothing at all.  But, a will - in the long run - can be more expensive than a trust because of the backend probate costs.  Also, as long as you are alive you can buy, consume, or dispose of trust assets in the same manner you would if there wasn't a trust.  The trust agreement just kicks in when either you or your spouse pass away.

So, I recommend a full estate plan - because even though there may not be a lot in the trust to begin with, it is established and as your wealth/portfolio grows all you need to do is title additional assets in the name of the trust.

Hopefully this answers some of the questions and clarifies the will vs. trust question.


DISCLAIMER:
This website should only be used for informational purposes. It does not constitute legal advice, and it does not create an attorney-client relationship with anyone. If you need legal advice, please consult an attorney in your community.