Archive for ‘wills’

After a decade of working in the financial services arena and knowing the human propensity to “put off ’til tomorrow” when it comes to money matters, this story is extraordinary to me.

Personal Finance blog Get Rich Slowly has an excellent guest post on planning ahead for your demise.  The father in this story went above and beyond, in my view, just to make things easier for his executor (his daughter, the author of the post).  This wasn’t just ordinary estate planning.  This was a process that took YEARS and the man was very intentional about it.  I particularly appreciated the section on “Settling Affairs”, as it highlights a potential deficiency in the “all children receive equal shares” theory.

I see a couple of possible lessons in this story.

1. Your executor has to be someone you trust implicitly.
2. Take a significant amount of time to think through your plan, and be willing to alter the plan along the way.
3. Realize that when an heir is also your executor, the emotions of the heir will make the job of the executor more difficult.  Plan accordingly.
4. When possible, have a real relationship with a banker, investment professional, insurance agent, attorney, and accountant.

What are some other conclusions that could be drawn from this example?

Interesting article from the WSJ on unequal inheritance shares.  There is discussion of fairness vs. equality, some reasons why unequal shares might be reasonable, and how to minimize the potential for legal challenges to the will.

Personal finance blog Squirrelers notes that the decision to bequeath equal shares isn’t necessarily a simple one and probably deserves more than just a cursory though.

My boss Dan Garrett has been working with people to plan estates in the most tax-efficient manner for over 30 years.  He says he has three questions he always asks clients at his first meeting with them.

1. What do you own?
2. How do you own it?
3. After you’re gone, what do you want to happen to it?

The answers to these questions aren’t necessarily as easy as you might think at first blush.

What do you own?

Most people generally know what they own.  The issue is gathering all that information in one place, which becomes important if someone else (a non-involved spouse, power of attorney, executor, child, etc.) needs access to that information .  There are quite a few books and electronic documents that could be called “life organizers”.  Another alternative is the Provide and Protect website, which is sort of an online organizer that’s tied to a network of estate planning attorneys. More »

Article summary: What a will is, what things you must have to make your will legal, common parts to a will, and some other things to be aware of when making out your will.

Will (n.): a legal declaration of a person’s wishes regarding the disposal of his or her property after death, especially: a formally executed, written instrument by which a person makes disposition of his or her estate to take effect after death.

It sounds a little ominous, when written like that.  Maybe it’s easier to read it like this:

Will (n.): the desire, inclination, or choice of a person.

That’s a little easier to cope with.

In previous blog posts we’ve covered common excuses people give for not creating a will and looked at a few real-life examples where having a will is better than not having one.  Now let’s examine the will in a little more detail, and touch on the legal (probate) process all wills eventually go through.

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At least, that’s what SmartMoney (part of the Wall Street Journal network) calls them, though that may be overselling the point a bit.

Now that we are eight months removed from the Tax Relief Act of 2010, tax and estate planning professionals have had a good chance to digest some of the implications of the Act.  Among the things SmartMoney notes are potential changes to asset protection strategies, certain types of trusts, and the hazards posed by individual states that have their own estate tax regime (16 of them, plus the District of Colombia).  The most salient point for me is the one on “formula clauses” in wills.  Excerpt:

Let’s say you and your spouse have $4 million, divided equally. Your will, prepared in 2001, might very well call for “an amount up to the federal estate-tax exemption” to be transferred to a trust for the benefit of your children, with the balance passing to your spouse. The exemption in 2001 was $675,000, so if you died that year with a $2 million estate, the former amount went to the trust, and $1.3 million went to your spouse.

It’s a different story now that the estate-tax exemption has risen to $5 million. If you die tomorrow with a $2 million estate, the same wording would deliver all that money to the trust. Your spouse gets nothing.

Changes in estate law should always be an opportunity for you to re-look at your will and the rest of your intentional estate plan, just to ensure that what you want to happen when you pass away is actually what will happen.

Article summary: We consider some real-life scenarios in which an intentional estate plan would be beneficial.  State probate law is an inflexible, one-size-fits-all estate distribution option that is unlikely to meet with the approval of the deceased or the heirs in most of these cases.

Last week I talked about three common reasons people give for not wanting to create an estate plan.  Let’s take a look now at some good reasons to make an intentional estate plan.  It is important to realize there are common family dynamics that state probate laws do not consider.

If any of these situations describe your family and you have your own ideas on how your assets should be taken care of upon your death, you’re going to need to be proactive.  Otherwise, you’re at the mercy of the courts and the law.

Consider these various scenarios:

• You are childless and have always been so.
• You have children who are still minors.
• You have children who are deceased…who had kids of their own before they passed away…or who were childless before they passed away.
• You have step-children.
• You have adopted children.
• You have estranged children.
• You have a special needs child…or more than one.
• You have children of vastly different ages, stations in life, income-producing capacity, money-management skills, or levels of maturity.

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In another real life example of how it pays to be completely clear on who gets what when it comes to passing assets, we have this story from Illinois.  This might have been prevented if the father had been more explicit in his wishes, or at least recognized the potential for conflict ahead of time.  As it is, it’s another sad example of how (any amount of) money can potentially strain family relations upon the death of the parents.

As an aside, for many years The ACU Foundation used to give away a book called Who Gets Grandma’s Yellow Pie Plate?, which focuses on how to go about distributing unique, priceless family heirlooms when there is more than one heir.  We have a handful left in our office (I just checked – about 15 copies as of this writing); if you’d like one at no charge, just contact our office.  You can also find them through Amazon for about $7 at the link above.

In today’s regular post, I mentioned the possibility of creating a do-it-yourself will using software.  I came across this article that discusses Consumer Reports look at three different DIY will software packages.  CR created different wills from those software packages and had the completed documents reviewed by a law school professor who specializes in estates and trusts.

Upshot: DIY software might be okay for very basic wills, but not much else.  Money quote:

“We found one good use for all three of these products — education,” said Tobie Stanger, Senior Editor, Consumer Reports Money Adviser. “Going through the interviews forces you to think about issues like who should be the alternative executor, and who gets your estate if your spouse and kids don’t survive you. This information is easier to digest in interview form than reading is as straight estate law.”

Article summary: Between 60-70% of Americans do not have any formal estate plan.  We take a closer look at three common reasons given for not creating an estate plan.

Depending on the study you read, somewhere between 6 and 7 out of every 10 Americans do not have a will, let alone an estate plan.

At The ACU Foundation, we operate under the assumption that every adult needs an intentional estate plan.  Young or old, rich or poor, six children or none – we believe everyone needs an estate plan, and everyone can create an estate plan.  Yes, that means you.

But why do we think it’s so important?  And what kinds of things keep people from actually following through with creating an estate plan?

Let’s start with a simple definition: what is an intentional estate plan? More »