What happens when people die — or are dying — is a subject of intense debate. For you it might be a matter of faith or science. What’s less debatable: If you prepare properly, the people you leave behind will have an easier transition. Several options are available. Which one you select depends upon several factors, including the size of your estate, your heirs and your state of health. With that in mind, here’s a quick guide to wills, trusts and estate planning:
Wondering About Wills?
A will designates what will be done with your assets after you’ve passed. This document has a number of advantages:
- A will is relatively simple to create. In certain states, a handwritten will — also known as a holographic will — is acceptable, although there are strict requirements. For instance, anyone using a holographic will must handwrite it; no computers, typewriters or other assistance are allowed.
- Legal fees are relatively low.
- You can provide for both the care and financial needs of minors and other dependents.
- A court oversees the handling of a will, so you know your intentions will be honored.
Nothing’s perfect, however, including wills. There are certain constraints:
- Wills take effect only upon death. If you want to make provisions for incapacity, you’ll need another document.
- Wills can take a long time to go through probate: months or years, depending upon complexity. The probate court needs notification of assets and liabilities. Heirs and creditors are contacted. Only then can the estate be settled.
- Probate is a public process, so don’t expect secrecy.
- You must go through legal channels in order to properly modify a will.
- If your estate spreads across different states, each locale might require a separate hearing.
A Look at Living Wills
A living will takes effect before you die. It spells out what should happen if you are not capable of making medical decisions for yourself. On the plus side:
- You ensure your wishes are followed if you are unconscious or otherwise out of commission.
- A living will gives you the opportunity to share your choices with loved ones before a crisis.
- A living will can prevent family court battles over your medical treatment because you have already identified protocol.
- Creating a living will can be free. Medical offices, hospitals and assisted livings centers often supply documents at no charge.
Factors to consider include:
- If no one else is aware of your living will, it can’t go into affect. Your family then makes medical decisions for you, even if they conflict with your wishes.
- As you age, your intentions might change. If this happens, modify your living will to reflect your new state of mind.
- Legal requirements for living wills vary by state.
Troubled About Trusts?
By using a living trust, your heirs avoid the hassle — and publicity — of probate court. You appoint a trustee to manage your affairs after you’re gone. Is this the right choice for you?
- Since there’s no probate, your wishes go into effect quickly. Some states have very long, complex processes for handling wills.
- Trusts are private. No outsiders know how you dispose of your estate.
- Having property in several states does not complicate the workings of a trust.
- In addition to directing assets after your death, you can also use a trust to establish an end-of-life directive and identify a guardian if you’re physically or mentally unable to make decisions.
The downside is primarily financial. If you go through a lawyer, a living trust is typically more expensive to create than a will.
Ponder the Power of Attorney
By legally designating a power of attorney, you give someone the ability to make decisions for you if you’re incapacitated. It has distinct benefits:
- The power of attorney isn’t usually a public document. However, if a real estate transaction is involved, the county clerk’s office records the activity. These archives are available to anyone.
- The only people who must see the authorization are those who are affected by its provisions, such as hospital or bank personnel. These individuals will likely expect to keep copies of the form.
Keep in mind, however:
- In most states, you have to legally record the document. Often a notary must authenticate your signature and the date.
- You’re not required to notify your family when you establish a power of attorney — but that can be a big mistake. If you don’t, you open the door to confusion, disagreements and distrust.
End-of-life scenarios are never pleasant to consider — but it’s important to knuckle down and make decisions. Doing so will provide peace-of-mind that the situation will be handled exactly as you wish. Then you can get back to the business of enjoying life.
Photo Credit: Ken Mayer
My mother is getting older, and she has been considering creating a will. I understood that it would simplify things after she passes, but I didn’t realize that they were simple to create and that even handwritten wills can be a great asset.
Good one.
Thanks.
Excellent topic. Excellent. I have been through this a couple times as executor. I would like to emphasize that being an executor is a young persons game unless you like endless phone tag and irritating correspondence and emails. I recently told my older brother that I would now simply be instructing a local accounting firm to take over his/my executor duties for an estate paid fee as opposed to doing it myself. The reason is my brother has investments all over the place for that wee bit more yield, all of which he will never touch while alive, anyway. There is a huge increase in work load if contact is needed across time zones and locations….think automated phone menus controlled by A1 (press 1, press three, press____ (oops, no one in the office too bad so sad) then faxes galore, pdfs etc etc etc. If someone is close to eighty working on their own will, do they really need a term deposit for an extra .5% through an office 3,000 miles away? Think about it, the money will never be used by him while alive….maybe it is time to bring it home to one place? So our accountant will be doing it for a fee instead of me. We will spend more on the fee than the yield of those distant investments. The fee will be paid by the estate and comes off the top.
Details vary everywhere, but it also makes a huge difference in owed taxes and the work load for survivors if bank accounts are signed over before death….obviously to someone who is trusted. This avoids probate and vastly eases the workload of the living.
Here is one example. I canceled a VISA account of and for my friend….I held POA as well as being his executor. He was in a Care Home. I live on the west coast, the VISA headquarters is in Toronto. I couldn’t even do the VISA cancellation at the local bank because it had to be done through head office with one particular local bank employee present. No biggee? Think phone menus and holds to make appointments. For two years I received a snail mail bill every month for a disputed $6 (yes six dollars)!!!!!. I finally stopped it (i think) by just writing deceased…. return to sender on the envelops. A tip…..if you are on a bank account you can simply transfer all funds into another account and just leave 1 dollar. This also saves phone tag, messages, etc etc. The bank will simply close it as a dead account at a later date. Keep a paper trail, obviously.
I have a will all set and ready to go. Daughter is executor. My goal is to make it simple for her….easy to work through. The will is in a filing cabinet and easy to find. We do have a bunch of property, but all is in the same location. One RE agent can look after the sales for her. We have also been getting rid of stuff we don’t use. I just gave away two motorcycles/projects . My carpentry and mechanic tools will be going to a local high school shop program and some local tradesmen I know….stuff like that. Make it easy for the survivors. Oh yeah, get a beneficiary listed on any automobile titles….ahead of time. Anything to avoid probate and tie ups. But do it fairly….even steven so there will be no disputes.
regards
Add on to the car title tip. Why is this a big deal? A car? Really? Well, the car has to be stored somewhere. It needs to be insured. It can only be sold as part of the estate. You have to wash the car and then show it to a buyer, sell it…or get hosed by a dealer for 50% value. If someone is on the title they can deal with it, immediately after death or if the owner loses driving priv. My buddies car? I wasn’t on the title. I found out he had a finance loan while working on his bank account statement. I got the car appraised and was going to sell it but would not even make enough to cover the balance owing on the loan. Having POA and also being on the bank account allowed me to simply freeze payment and then told the company to come and get it. Even this took a few months. I helped the tow truck driver load it. I saved the driver the keys which made his life much easier. It ended up being a positive experience instead of a hassle.
My friend told me he paid cash for the car. Nah, he didn’t. Now what kind of a dealership would sell a car on time to someone 82 years old? Bastards.
As I read more articles about estate planning, I’m thankful for how my dad and I set up his estate before he died. Dad’s only assets were bank accounts and the family home. He’d moved to South Dakota to live with us, and the family home was in Virginia. I didn’t want to deal with probate in two states, so I researched a “Transfer on Death Deed” (TODD) for the house. We had one drawn up, so his estate now only had bank accounts in it.
Dad had us kids give him lists of what we wanted from the family home, and had a will drawn up to include those lists. As retired military, he had his will done free of charge at a local military base. When he died the family home went to me per the TODD, I emptied it per the ‘kids lists’, held an estate sale for the rest, sold the house and divided the proceeds between myself and my siblings, per Dad’s wishes. I hired an attorney to open probate for distribution of the only remaining assets, Dad’s bank accounts. South Dakota has no estate or inheritance taxes, and because the ‘basis’ of the house was the value when I sold it, I paid no capital gains taxes on it. All in all, a MUCH easier and less expensive ordeal than if I’d had to file ancillary probate in Virginia if his house had remained in the estate! WHEW! 🙂