STORYTIME:

Death is a part of life and working in financial services, we get an intimate view into death and money and estate planning…or lack thereof. I will never forget this young girl, we will call her Sara. Sara came into the bank at opening on a Monday, her eyes were red and she had the look of someone who had been crying. She told me her mother had died over the weekend and that they needed the money in her bank account to pay for her funeral. She had all of her mother’s personal items and her bank statements.

A quick check of her mother’s accounts and it was clear that Sara’s mother had made the number one error in estate planning. She had no direct beneficiaries on her accounts. This meant that Sara, once she obtained her mother’s death certificate, would have to go file with the probate court and be appointed Personal Representative of her mother’s estate. This caused a huge delay and potential tax implications for Sara. Had her mother had her as the direct beneficiary sometimes known as a POD or TOD Sara would have simply been able to bring in her mother’s death certificate and we would have cut her a check.

This story is intended to highlight that even if you don’t have a lot of money, it is still important to organize it and tell it where to go when you die. There are a few other ways of doing this as well…

WHAT IS ESTATE PLANNING AND WHY YOU NEED A PLAN

Estate planning is something that should be considered by everyone, regardless of age or financial status. It is important to have a plan in place to ensure that your assets are distributed according to your wishes after you pass away. However, estate planning can be a complex and overwhelming process. In this blog post, we will discuss the importance of being organized and having a plan, and the different vehicles that are commonly used in estate planning.

The Importance of Being Organized and Having a Plan

Without proper estate planning, your assets may not be distributed according to your wishes. This can lead to family disputes, legal battles, and unnecessary tax burdens. By being organized and having a plan in place, you can ensure that your assets are distributed to the people you choose, in the way that you choose.

Vehicles Used for Estate Planning

There are several different vehicles that can be used for estate planning. Here are three of the most common:

1. Wills

A will is a legal document that outlines your wishes for the distribution of your assets after you pass away. It is relatively inexpensive to create, and can be updated as needed. However, a will must go through probate court, which can be a lengthy and expensive process. Additionally, a will may not be the best option if you have complex assets or if you want to minimize estate taxes.

Most people have wills, and although we used to have a joke in banking that having a will was like ‘suing yourself and losing’ because of the tax implications and time spent, it is still the most popular estate planning vehicle.

Trusts are expensive I get it, although they are SO much better and way less expensive in the long run if you have assets. If you want to stick with your will make sure you have direct beneficiaries set up on ALL of your personal bank and investment accounts. This will make the process of accessing money much easier for your loved ones and everyone involved.

2. Trusts

A trust is a legal entity that holds your assets for the benefit of your beneficiaries. There are several different types of trusts, including revocable trusts, irrevocable trusts, and living trusts. Trusts can be more expensive to set up than wills, but they offer several advantages. For example, trusts can help you avoid probate court, minimize estate taxes, and protect your assets from creditors.

I recommend getting a trust if you have a house or really any large asset. It can really lesson the tax burden realized by your heirs and they aren’t very hard to set up with a good attorney. The cost of a basic trust is around $3000-$5000. If you have complex assets…good for you… but it may cost you more to set up.

3. Power of Attorney

A power of attorney is a legal document that gives someone else the authority to make decisions on your behalf. There are several different types of power of attorney, including durable power of attorney (which remains in effect even if you become incapacitated), healthcare power of attorney (which gives someone else the authority to make healthcare decisions for you), and financial power of attorney (which gives someone else the authority to make financial decisions for you). A power of attorney can be a useful tool to ensure that your wishes are carried out in the event that you are unable to make decisions for yourself.

Please note: Although a Power of Attorney is a powerful financial vehicle in estate planning, it does cease upon the death of the person. So you will have no luck taking your power of attorney to close out bank accounts or make any financial decisions after someone dies.

Costs, Pros and Cons

The costs, pros, and cons associated with each of these vehicles will depend on your individual situation. It is important to consult with an estate planning attorney to determine which option is best for you. However, here are some general considerations:

• Wills are relatively inexpensive, but may not be the best option for complex estates or those with significant tax liabilities.

• Trusts can be more expensive to set up, but offer several advantages, such as helping you avoid probate court and minimize estate taxes.

• Powers of attorney are relatively inexpensive and can be a useful tool to ensure that your wishes are carried out in the event that you are unable to make decisions for yourself.

Conclusion

Estate planning is an important process that should not be overlooked. By being organized and having a plan in place, you can ensure that your assets are distributed according to your wishes. There are several different vehicles that can be used for estate planning, each with its own costs, pros, and cons. It is important to consult with an estate planning attorney to determine which option is best for you.