Estate Planning Basics

If you have never done any estate planning, you should become familiar with the basic concepts.

It is important for everyone to do some estate planning. Not doing any planning, means you do not get a say in who gets your possessions after you pass away.

The courts will decide using statutes written by your state government. Getting started in planning is not always easy, because people do not have the basic information needed. recently wrote about some of those basics in “Now is the time to consider the basics of estate planning.”

The biggest things people need to know are what is involved with wills and trusts and how they differ.

A will is a formal written document you can use to establish how your property should be distributed after you pass away. Your will is submitted to court after your death and the court appoints someone to make sure what you want done is actually carried out. A will has no effect until after you pass away.

A “living” trust is different. It does take affect before you pass away. Trust documents create a legal entity into which you transfer your assets. After you pass away, the assets are then managed or distributed, according to the directions given in the trust document.

A trust does not ordinarily need to be submitted to court. If you have a will, you do not necessarily need a trust. However, if you have a trust you still need a will.

There is a lot more to estate planning, including additional basic information that you should know.

The best way to learn that information is to schedule an appointment with an estate planning attorney and to get started planning.

Reference: (Nov. 2, 2017) “Now is the time to consider the basics of estate planning.”

Who Needs A Will? You Do!

Many people do not think that they need a will. They are all almost always wrong. Everyone with any property at all needs a will.

Some of the common perceptions about estate planning are just plain wrong.

In fact, many people do not think they need a will. Why? Because wills are something only rich people get.

They think that if they only have only a little bit of money or property, then everything they have will simply pass wherever their family decides.

However, that is not what happens.

For example, if a person has a car when he or she passes away, then someone has to decide who gets that car. A related person cannot just show up at the appropriate government office and have the title changed into his or her name.

It does not work that way.

A court must decide who will get that car.

For that reason, everyone who has any property at all needs a will, as CNBC explains in “Think you’re not rich enough to need a will? Think Again.”

In the absence of a will, a deceased person’s property will be distributed according to the state’s laws of intestate succession. Those laws determine which relations have priority to receive the estate and the court distributes everything accordingly.

Bottom line: the deceased has absolutely no say in who gets his or her property.

Instead of relying on a court to divide your property, get a will.

It does not have to be complicated.

An estate planning attorney can create a simple will for you, even if you do not have many assets.

Reference: CNBC (Oct. 24, 2017) “Think you’re not rich enough to need a will? Think Again.”

After-Born Children

When a person has children after creating a will, the status of that will varies from state to state.

Estate planning attorneys always remind clients that if there are significant changes in their lives they need to revisit their estate plans and make any necessary changes.

Having more children definitely counts as a significant change in a person’s life. Despite the advice of the attorneys, many people do not change their wills after they have more children.

That means courts have to decide what to do about the children and the will.

In Georgia the will gets revoked, as the Wills, Trusts & Estates Prof Blog discusses in “State Law on After-born Children Leads to Revocation of a Will.”

In a recent court case, a Georgia man created a will in 1989. He later had three children out-of-wedlock, but he never updated his will to include the children.

The Georgia court decided that the will was, therefore, invalid and revoked it.

The man’s estate would thus be distributed according to the state’s laws of intestacy, as if the will never existed at all.

Every state treats these after-born children (who are not mentioned in wills) differently.

Talk to an estate planning attorney about the laws in your state.

Better yet, ask the estate planning attorney to help you, if you have had more children since you created your will.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 17, 2017) “State Law on After-born Children Leads to Revocation of a Will.”

DIY Will Goes Bad

The case of a religious woman in Australia illustrates the dangers of do-it-yourself wills.

Australian woman Sandra Marie Hatton was a very religious woman. She wanted to give most of her assets to charities that carry on religious work.

Perhaps to save some money so that there would be more to go to charity, Hatton did not see an estate planning attorney to help draft her will.

Instead, she used a do-it-yourself will form.

Hatton filled it out and then proceeded to make many handwritten changes to it, as she changed her mind about which charities to benefit.

That could end up costing her estate a lot of money, as reports in “Unholy row as court decides on religious woman’s will.”

The will itself has been accepted into probate as valid.

Now, the court also has to decide which of the handwritten changes to accept as valid.

The charities who could benefit from the decisions are all eager to stake their claim and lawyers will have to be hired by Hatton’s estate to help in the case.

Do-it-yourself wills, whether purchased in a kit or online, offer people a way to save some money by cutting out estate planning attorneys.

Unfortunately, as is the case with Hatton’s will, things often go wrong with these DIY wills because the people who create them do not know what they are doing.

In the end, that DIY approach costs the estate a lot more money in the long run.

Reference: (Oct. 15, 2017) “Unholy row as court decides on religious woman’s will.”

Wills Must Go through Probate

A misconception is going around about estate planning, is that wills do not have to go through the probate process.

It is not always clear how mistaken estate planning beliefs get started. It usually happens on the Internet with people seeking out legal advice from often bad sources.

Sometimes, it starts with a television show or movie that has played loose with the law.

Regardless of how mistaken beliefs start, it is important to make sure that you do not believe any of them.

One that more people believe than might be expected, is that wills do not have to go through probate.

That is just wrong, as TC Palm discussed in “Common misconceptions about wills and trusts.”

This idea probably got its start, because in some states if an estate is small enough, then it does not have to go through probate. Usually, these are very small estates with very few assets.

Someone with good intentions probably had a relative or friend who passed away with few assets and as a consequence, the will did not have to go through probate.

However, most wills do have to go through probate. They need to be submitted to the court and approved.

The probate court then oversees the administration of the estate as conducted by the executor or personal representative.

If you want your estate to avoid probate, what you need is not a will.

Instead you need to use other estate planning instruments, such as trusts.

Trusts do not have to go through probate in almost all cases. If you would like to get one, schedule an appointment with an estate planning attorney.

Reference: TC Palm (Oct. 5, 2017) “Common misconceptions about wills and trusts.”

There Is Not Time to Do It Later

One of the most frustrating things about estate planning, is that people assume that there is always time to do it later. That leads to putting off important estate planning, until it is too late.

Most people do not think something bad is going to happen to them any time in the near future.

Healthy people have this belief that they will be able to continue with their lives without any problems.

They do not think they will have an accident. They do not think they will get seriously ill. They know these things could happen, but believing that they are imminent is paranoia.

The problem with this thinking is that it leads people to put off estate planning. People put off their initial estate planning, but they also put off making necessary changes to the estate plans they already have.

The latter can be as big of a problem, as the former the Sunshine Daily Coast reports in “Fix your will before it’s too late.”

What is the problem with putting off making necessary changes to an estate plan? Once you have a plan that is the one a court will follow, until you change it.

If you have stated in your will that someone should inherit your property and you change your mind for whatever reason, the change has no legal effect until you actually create a new will.

If something happens to you before you create that new will, then the person you do not want to inherit the property actually will.
It is never a good idea to procrastinate in any area of estate planning.

Instead of putting things off, see an estate planning attorney as soon as the needs arises.

Reference: Sunshine Coast Daily (Oct. 2, 2017) “Fix your will before it’s too late.”

Wills Need Probate

If you inherit something through a will, you cannot just take the will to the bank and demand they give you the contents of a bank account.

How wills actually work, is not understood by everyone.

Many people think that if something is written down in a will, then everything is settled. They think all that is required is for the beneficiary to show the will to whoever is holding the property the beneficiary is to inherit.

That is not the way it works at all.

Unfortunately, the misperception is common.

In fact, estate attorneys are used to hearing this from people named in wills, who think it all works that way and are upset when they discover that it does not.

The Times Herald recently discussed this in “Wills won’t work without probate.”

A will is only a bunch of words on paper that have no real legal authority, until the will is filed with a probate court.

The court must then agree to accept the will as representing the valid wishes of the deceased.

Once that is done, the probate court appoints a personal representative for the estate.

That personal representative is then charged with carrying out the directives in the will, under the supervision of the court.
This can result in a long and often expensive process.

It depends on the size of the estate, the ability of the personal representative and whether there are any challenges to the estate.

Of course, this can all usually be avoided by speaking to an estate planning attorney about getting a trust instead of a will.

Reference: The Times Herald (Sep. 22, 2017) “Wills won’t work without probate.”

Window Cleaner Could Go to Jail for Lying about Inheritance

A strange case out of the U.K. features a window cleaner, a fraudulent bankruptcy and the possibility of jail time.

For years, an elderly woman in Britain, Julie Spalding, had been looked after by the nephew to whom she promised to leave her estate.

She was not in good health and suffered from many falls.

The nephew said she became belligerent with him and eventually kicked him out of her life.

At that time, she grew close to the man who was employed to clean her windows. He began to look after Spalding and she changed her will to leave the window cleaner her entire estate.

When Spalding passed away, the nephew challenged the will in court and eventually won, as the Telegraph reports in “Window cleaner bequeathed £300,000 by customer faces jail for failing to hand money back to her family.”

The window cleaner was ordered to pay back all of the money he had received from Spalding’s estate.

He refused, however, and instead claimed he had already lost it all.

He even claimed that much of it had been in cash in his car, when the car was repossessed. To avoid given anything back, he obtained a bankruptcy judgment.

The window cleaner now appears to have been lying.

Through many small transactions, he transferred the money to his family members for safekeeping and opened many small bank accounts to stash some of the money.

He now faces possible jail time for his scheme.

The court case has been suspended, so that he can obtain legal counsel.

Reference: Telegraph (Aug. 30, 2017) “Window cleaner bequeathed £300,000 by customer faces jail for failing to hand money back to her family.”

Cutting a Child Out

It is not all that unusual for a child to not live up to the expectations of parents. Sometimes parents will be so disappointed when that happens, that they will attempt to cut the child out of their estate plans. They might want to reconsider.

Wealthy parents often have extremely high expectations for their children. They want their children to go to school, get a good job, raise a family and do all of the things that made the parents so successful.

However, sometimes a child just does not live up to those expectations.

Sometimes there is a black sheep who does everything the parents would not want him or her to do.

If the problems are severe enough, then the parents might even stop contact with the child and seek to cut him or her out of their estates.

The latter is often a bad idea, as the Globe and Mail discusses in “Think twice, wealthy family, before cutting the black sheep out of your will.”

One big thing to consider is that a child who receives nothing has no incentive to not cause problems.

A no-contest clause can prevent someone who does receive an inheritance from challenging an estate plan that they do not like, but it cannot prevent someone from doing so who is set to receive nothing or very little from an estate.

This can make cutting a child out of an estate plan a very expensive proposition. This is because the child has no reason to not launch legal fights.

A black sheep child can also be more easily controlled by using an estate plan to incentivize that child into desired behaviors.

An estate planning attorney can help you create a trust, for example, that only distributes money to the child when certain actions are taken by the child.

Reference: Globe and Mail (Sep. 19, 2017) “Think twice, wealthy family, before cutting the black sheep out of your will.”

Electronic Wills are around the Corner

Almost all business can now be conducted electronically. Wills are one of the last holdouts, but that is starting to change.

Traditionally, for a will to be accepted as valid in probate court, it had to follow very strict forms and procedures. It needed to be signed and there needed to be witnesses present who could testify that the will was signed. Normally, two witnesses were needed.

Eventually, some states relaxed the strict formalities and allowed other wills to be probated, if it could be proven that the contents of the will were the intentions of the testator. However, some states kept the very strict rules.

That makes it difficult for wills to be made digitally, like most everything else can be today.

The law is now beginning to adapt in ways that will make them possible, as the New Jersey Law Journal discusses in “Electronic Wills: No Longer in A Galaxy Far, Far Away.”

In 2013, an electronic will was accepted into probate in Ohio. In that case, the person had digitally signed the will using a stylus and witnesses were present to the signing.

While Florida recently rejected an electronic wills law, Nevada has passed a law that allows them.

In other states, courts are rewriting the rules to allow more non-conforming wills to be accepted, which will eventually pave the way for electronic wills in those states.

For now, you probably do still need to make sure that your will is written on paper and that all of the formal procedures are followed correctly.

That might not be true in a decade.

Reference: New Jersey Law Journal (Sep. 11, 2017) “Electronic Wills: No Longer in A Galaxy Far, Far Away.”