I have a good friend who is an experienced financial planner in my small town who has a pretty good understanding of what we do. He provides comprehensive financial planning and counseling for families who either have significant income or significant investable assets (or both), and who have some financial complexities in their lives that they’d like his guidance with. As a full-service financial advisor, he often asks his clients about their current estate plans.
My friend knows that our practice focus is on sophisticated tax, estate, and asset protection planning for individuals and their families. Like him, most of our clients have a high level of income – either from businesses or from investments – and have some complex issues that need to be addressed in their legal plans.
I was a little taken aback when he recently mentioned that he had a client who needs a “simple” estate plan that probably doesn’t require our “level of service.” It occurred to me that maybe I’ve done a poor job explaining how we approach things.
His clients are in their seventies and had wills prepared for them nearly 20 years ago. They reached out to my friend looking for a referral to a new attorney because their last attorney had retired. Apparently their last attorney hadn’t kept up with them to adjust their plan as their needs evolved over time.
There are a few problems with that scenario, but there’s one in particular I want to focus on:
Wills are crappy plans.
I would never do a will for my own estate plan, and I wouldn’t do it for my parents or anyone else I cared about. One of the reasons wills are generally inexpensive is because they leave a lot of gaps in an individual’s estate plan. Here are just a few:
Wills only help dead people.
Wills do absolutely nothing for you while you’re alive. A will is a formal legal document that applies to any property you have in your individual name when you die, and then tells the court how you want your stuff divvied up when you’re dead. That’s it. Wills leave a lot of issues unaddressed.
First, what happens if you aren’t dead but you can’t make decisions for yourself for some reason? If you end up injured or sick to the point that you can’t manage your own affairs, your loved ones have to get the court to appoint a guardian or conservator for you. They will have to go to the courthouse and answer some questions in front of a judge, and then they must follow all the rules of the court in making decisions for you. It doesn’t matter if it’s your spouse, your adult kids, or your best friend – they have to do what the judge says and report back to the court on a regular basis. That’s stressful, time consuming, and expensive. (And it’s avoidable!)
Then, after you do pass away…
Wills require your family to go to court.
As mentioned above, a will is just a legally binding document that tells the probate court what to do with your stuff when you died. In order to take effect, someone (usually your spouse or another loved one) has to present your original will to the court and have the will “proven and admitted” for probate. That starts a months-long process of court hearings, public notices, and formal proceedings that often require lawyers to prepare a bunch of paperwork and go to the courthouse for you.
The more property you have or the more complex issues that arise, the longer and more expensive the probate process becomes. In extreme cases, proceedings can drag on for years – leading to high attorneys’ fees, tremendous stress on families, and terribly inefficient transitions for a family.
Wills don’t even handle all your property.
When it comes to transferring property after your death, how an asset is titled is of utmost importance. Property that passes by a beneficiary designation, by joint tenancy with right of survivorship, or by a pay- or transfer-on-death designation bypasses your will. This means that valuable real estate, bank accounts, life insurance, and brokerage accounts can inadvertently shortcut your will and go to whomever is named on the form. Even if that person is your ex-spouse!
The only property that gets transferred through the probate process is property held in your individual name when you die.
This creates many opportunities for your will-based estate plan to be inconsistent with your overall planning objectives. A well-designed estate plan considers how all of your assets are titled, actively addresses what you want to happen, and then puts a comprehensive plan in motion to see your priorities get carried out.
Wills aren’t the best you can do for your loved ones.
We believe that any estate plan that intentionally sends a family into court when someone is incapacitated or after someone dies is a fundamentally flawed plan.
We structure all plans to avoid court – and the resulting expenses and stress on the family – whenever possible.
This means that for our clients, a revocable living trust serves as the centerpiece of every estate plan. When structured and administered properly, a comprehensive trust-based estate plan avoids the need for conservatorship or guardianship in the event of incapacity, and avoids probate when you die. It takes more work than creating a will-based plan, but the benefits are significantly greater.
Trusts aren’t just for “rich” people.
I have trusts at the center of my own estate plan. I have created a series of strategies that work together now, and that will protect and provide for my wife and kids if and when something happens to me. The last thing I want to do is leave a mess for my family to have to clean up (with the court’s “help”) if I’m not around to do it.
All of the planning strategies we put into motion for our clients – as well as the strategies we’ve created for ourselves – are comprehensive and use revocable trusts as the cornerstone of the plan. For many of our clients the planning doesn’t go much farther than that. Plans don’t have to be terribly sophisticated to be highly effective.
We design estate plans based on what our clients want and need; no more and no less. Many of our clients need all the horsepower we can provide, and that’s where we get into some really advanced strategies. But lots of our clients have pretty modest needs.
We wouldn’t do will-based plans for ourselves, so we don’t do wills for other people. Our clients’ families deserve the same level of care we give our own families, and we believe that trusts are so far superior that it’s where every good estate plan has to start.