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Is Your Estate Plan Properly Updated?

Studies show that 2 out of 3 Americans don’t have a Will or a Trust.* It is said that 80% of plans that are in place need to be reviewed and updated.  Wills and Living Trusts are used to pass assets to beneficiaries after death. However, what happens before death is life and a couple of ancillary documents that are considered a part of a basic estate plan.

These ancillary documents commonly would be a Financial POA( power of attorney), Living Will, Medical POA, Advance Directive, Appointment of Conservator, and Guardian for minor children. Whether someone opts for a Will or a Trust, these ancillary documents are generally recommended by attorneys abroad as part of any basic estate plan.

The Living Will tells the doctor what medical treatment you may opt for or refuse if you are unable to speak for yourself. The Medical POA appoints an individual to make those medical decisions on your behalf if you are incapacitated or in a coma and not expected to recover. In 2017, Tennessee adopted the Advance Directive which is basically a Living Will and a Medical POA rolled into one document.

The Advance Directive can be obtained free online with a simple google search for your State of residency. However, the State generated free documents have checkboxes in a general sense that cover the following issues: whether or not you want to be resuscitated or intubated, whether or not to artificially administer food or liquids, and things of that nature.  The questions and checkboxes are too cut and dry for my liking and I find them hard to answer without adding qualifiers. Additionally, there are people that would under no circumstances want certain drugs administered to them such as Remdesivir or they may not want a blood transfusion unless it came from a private blood supply.  Unfortunately, the free online government form provides little room to add any qualifying language to the form, and in such a case, either a modified form or addendum may be considered to relay more specific medical wishes.

A Financial POA appoints someone to handle your financial affairs if you are incapacitated. Most people choose a Springing POA which requires two doctor signatures attesting to your incapacity before it becomes effective. If and when you recover, the POA is suspended until such a time that you become incapacitated again. If someone is incapacitated for an extended length of time, and they don’t have a Financial POA in place, a process known as Living Probate may need to take place to have a court-appointed conservator or guardian to handle the finances.  This is something that is often overlooked with a married couple because they automatically assume that the healthy spouse will be able to handle everything.  If the healthy spouse is a joint owner with financial accounts that don’t require two signatures, then the healthy spouse can take care of business as usual. However, IRAs, 401k’s, and other financial accounts that don’t have joint ownership with the healthy spouse may present a problem when it comes to making a withdrawal, or paying bills, or making tax elections. A Financial POA will typically allow the appointed agent to sign tax returns as well. IRA and 401k accounts will always only have one owner. Often times brokerage accounts, mutual funds, bank accounts, and CD’s IRAs will have just one owner and not list the spouse as a joint owner, rather, may list them as the beneficiary. In the case where there is just one owner listed on the financial account, and that person is incapacitated, when there is a need to withdraw funds, write checks, or change how the funds inside these accounts are allocated, it cannot be done by the spouse unless they have a Financial POA or were otherwise appointed by the court to do so. It is much easier to have a Financial POA in place than to have to go to court to become a conservator should the need arise.

The majority of people that I have spoken to over the years did not understand that Wills are settled in the probate court with the average time taking 12-14 months to settle and costs ranging from 5% – 15% of the gross estate in court costs and attorney fees is customary.

The costs and procedural court rules will vary from county to county and state to state. For example, in Knox County, TN, where I reside, the cost to open probate court is only $250. However, attorney fees in the area range from $300 an hour to $500 an hour for a good probate attorney and we all hope to never hire a bad attorney. It is not unheard of to pay a minimum of $5,000 to $10,000 in attorney fees to probate a modest estate and if the Will is contested or there are complications, the hourly rate can add up to a more significant amount. In some counties, the attorneys are allowed to charge a flat percentage of the estate.  The probate process is a matter of public record which many find undesirable.  If someone dies without a Will, that is called dying intestate. Each State has a plan for those that died without a Will. Some call it:  The Government Plan.  If your estate needs to be probated and you died intestate, the government plan outlines how your assets will be distributed and this can be readily found online in most states.

On the other hand, a Living Trust is settled outside of court and is preferred by many that have assets valued at over $50,000, own real estate, have minor or special needs children or healthy adult children, or prefer to have their affairs settled privately rather than the public probate process.  There are over 25 different family scenarios that we may point out when talking with people about their estate plan which may have a determining factor as to whether someone would prefer a Living Trust over a Will. The cost of a basic estate plan including a Living Trust typically ranges from $2,500 to $4,000 depending on the complexity of the situation and who you hire to create your documents.

Part of any estate plan review should be a beneficiary review. There are a variety of life changes that would precipitate the need to change beneficiaries that may be overlooked.  I have heard of cases where the widow was shocked to learn that the ex-wife of her deceased husband was still the beneficiary on his life insurance, pension, or financial accounts.  Sometimes the named beneficiaries have pre-deceased the account holder without anyone else being named as the beneficiary. In such cases where there is no named beneficiary on a financial account, the asset has to go through probate and will be distributed in accordance with the decedent’s Will in the case where they died intestate, assets are distributed according to the States distribution plan, previously referred to as the “government plan.”

In the times we are in, it is a good idea to review your documents to make sure they are updated. Oftentimes, the estate plans are written and then put away and not looked at again for years.  Life happens and there are relationship changes, health changes, and asset changes.  The person that was appointed as executor, successor trustee, or agent for one of the POAs, may either no longer be living, or no longer a suitable choice for a variety of reasons.  The person we thought was the best choice even a few years ago, may no longer be the right person for a number of reasons.

I have personally been involved in estate planning since 1999 and have relationships with attorneys that can handle any estate plan from the most basic to the most complex. We also have access as a licensee to Family Estate Documents which is an online attorney-drafted estate plan that we make available to our clients on a case-by-case basis.

For a more detailed explanation of Wills vs Trusts, and the various ancillary documents, download our Free Estate Planning Guide.

Is it time to get your estate plan OnTrack? Contact us and schedule a free consultation.


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