Most adults today have not set up their estate plans. Many fail to take action because they don’t understand why it is important. In this post, we will share five attention-getting reasons why you should put a plan in place if you are currently unprepared.
Prevent a Confusing, Tangled Situation
If you pass away without any estate planning documents at all, the condition of intestacy would exist. Your family members would have to scramble to try to figure out how to proceed and who would inherit your assets. Ultimately, the probate court would step in to supervise during the administration process.
The court would name a personal representative to act as the hands-on administrator. This is a necessary mechanism, but everyone in the family may not be on the same page with regard to the person that should assume the responsibility.
For an example of how things can go awry, look no further than the estate of the deceased NFL football star Steve McNair. He was murdered by his mistress a number of years ago. He was also married at the time.
Mr. McNair did not have an estate plan. In the probate proceeding, his wife was named as the personal representative, which makes sense on the surface.
However, McNair had a home built for his mother, Lucille, on a sizable ranch in Mississippi. It is logical to assume that he helped her out financially in other ways on an ongoing basis, so she was left in a vulnerable position.
Apparently, McNair’s affection for his mother did not extend to his wife. She demanded $3,000 in monthly rent, knowing that Lucille was not in a position to pay it. McNair’s mother was forced to vacate the property. When departing Lucille took some of the home’s contents with her.
McNair’s wife promptly sued Lucille, claiming that the property did not belong to her. Naturally, this added another layer of grief to Lucille’s misery.
This may appear to be a rather extreme example. It is not. The takeaway is that your own true wishes may not be carried out if you do not express them in a legally binding manner. Plus, we should emphasize the fact that this is not restricted to the actions of the personal representative.
If you die intestate, the court would order the distribution of the assets under the intestate succession laws of our state. It is very possible that people you wish to receive your estate would receive nothing, or less than you preferred. Others could be completely disinherited under these circumstances.
If you take the time to work to develop your estate plan with an estate planning attorney from our firm, you can take the matter into your own hands and prevent a less than ideal outcome.
Avoid Probate
The probate process that we touched upon above serves a purpose. It acts for you when you failed to act for yourself. It is not necessarily positive for the heirs of an estate. In addition to intestate matters, the court would supervise the distribution of your estate even if you create a simple will to facilitate asset transfers after you are gone.
Probate will take anywhere from six to eighteen months or more to run its course. Absent a rare court approval, no inheritances are distributed during this interim. Privacy is lost, because probate is a public proceeding, and probate expenses consume a noticeable portion of the estate.
If you use a revocable living trust as the centerpiece of your estate plan, you would act as the trustee while you are living, so you would maintain control of the assets. You are the designated beneficiary during your lifetime, meaning your cash flow remains the same. After your death, the successor trustee that you selected when establishing your trust would distribute assets to the beneficiaries, and do so outside of probate.
Protect Beneficiaries
In addition to probate avoidance, a living trust can be used to protect a loved beneficiary who is not good with money. You can include a spendthrift clause, and the principal would be protected from the beneficiary’s creditors and perhaps their own profligate ways.
In that case, when you are drawing up the trust, you could instruct the trustee to distribute a certain amount each month over a number of years to prolong the long-term viability of assets for the beneficiary. This is one example, but you get to create instructions regarding the distributions to protect the beneficiary.
You can also use a living trust to provide for a minor. A testamentary trust is another option if you have a minor child on your inheritance list. This is a trust that is embedded in a will, and it would not go into effect until your passing.
Another option if you want to set aside resources for a child would be to create a custodial account for that child. You should certainly explore your options so you can provide for all of your loved ones in an ideal manner.
Protect Assets
Proper estate planning is all about asset protection. So, if you are a business owner or a professional that is vulnerable to legal actions, asset protection should be a priority. We can help you implement a strategy to preserve your legacy if this is a source of concern.
Mitigate Estate Tax Exposure
The federal estate tax packs a heavy wallop with a 40 percent top rate. Today, there is an $11.7 million exclusion. This is the amount that you can transfer tax-free to anyone. The excess values over the exclusion amount would be subject to taxation.
We use the term “potentially” because there are steps you can take to facilitate transfers at a tax discount if your estate will be subject to taxation. Be aware, however, that many are supporting legislation to reduce the exclusion to $3.5 million. That will create a significant planning challenge for many.
Schedule a Consultation Right Now!
Today is the day for action if you have putting estate planning on the back burner. You can schedule an appointment with our Oklahoma City estate planning lawyer if you call us at 405-843-6100, and you can use our contact form to send us a message.
- What Happens to Assets When Creating a Trust? - February 27, 2017
- Are Living Wills Different from Regular Wills? - February 28, 2017
- Why Wills are Such a Common Estate Planning Tool? - March 1, 2017
