Estate Planning as a Career

Thinking about Estate Planning can be very much like looking into a deep pit peering over your toes and looking down into a yawning chasm that seems to get deeper and broader with every passing second. Add the depth and complexity of this topic to the present-day confusion that exists in America because of the ever-changing estate tax laws, and the topic becomes quite difficult indeed.

However, in the interests of keeping things simple, there are some very important estate planning steps that you can take to make life a little easier on your loved ones in the event of your passing as well as increase your control over your assets while you are alive.

One of the things people often say to me is that they wish to avoid probate as much as possible. So, to that end, there are some very simple steps you can take to avoid probate with most of your assets, if this is your desire.

Probate comes from the Latin term meaning to prove. Essentially, it is the legal process whereby the correct titles to a deceased persons property are proven. The document most commonly used to do this is a will. So, when a person dies, the will is entered into probate, beginning the legal process of proving the will, and distributing the assets it controls. Having a will does not avoid probate in fact, it necessitates it. If you do not have a will well, your state of residence will give you one it just might not be the will you would have chosen!

It is important to understand that a will, and the probate which follows are used only to dispose of assets that are not disposed of in some other way. So, avoiding probate in many cases simply means arranging your assets so the title to those assets are directed by another means. This does not necessarily mean that you must use trusts or more complex estate planning tools. Depending upon your situation, this may not be necessary.

For example, IRAs, employer retirement plans, annuities, some Government Savings Bonds, and life insurance contracts, allow you to designate beneficiaries for these assets. By designating primary and contingent beneficiaries, ownership is changed at your death by operation of contract, and do not require a probate proceeding. Unless there is NO beneficiary designated on these contracts, or your beneficiary designation is your estate or as stated in will, your will has absolutely no effect upon the disposition of these types of assets. It is important to remember to update your beneficiaries on these types of assets whenever your situation changes. We have heard horror stories of assets going to the wrong beneficiaries because someone forgot to change the beneficiary on their IRA or life insurance even though they had updated their will!

There are other types of assets that pass to heirs without the use of probate as well. Non-IRA investment accounts can be registered as TOD Transfer On Death directly to an heir. Non-IRA Bank accounts and CDs can be titled POD Payable On Death directly to an heir. For example, it is possible to have an account titled Bob and Suzy Smith, Joint With Rights of Survivorship (JTWROS) TOD Ted and Bob Smith Jr (equal shares). This means that if Bob dies, Suzy gets the account, since she was the joint account holder. However, if both Bob and Suzy die, then Ted and Bob Jr. split the account evenly all without going through probate!

Remember a will only controls assets that 1) do not have designated beneficiaries, or 2) fall into the probate estate. In many cases, estate planners will use a will or a pour-over will only to do the clean-up work that the rest of the estate plan didnt address.

It is also important to point out that, none of these strategies will save you any estate taxes. However, they can help avoid some of the frustrations and long delays of the probate process.

We recommend a comprehensive review of your estate plan every few years, as life and laws tend to change. Your financial planner should help you with this, and provide extensive estate planning calculations and options and then work closely with your estate planning attorney to develop your overall plan as he or she drafts the legal documents necessary.