Good estate planning contemplates potential future life changes. If the right planning is in place, a Will or Trust will remain viable for a long time. Sometimes life throws curve-balls (sudden death of a loved one, divorce, dramatic financial changes) that necessitate some changes to an existing estate plan. Also, laws sometime change in a manner that make it desirable to revisit existing estate planning.
So how do I know if I need to review my documents? A review every few years is a good idea. If it has been 10 or so years, a review is a really good idea. Whether changes would be beneficial will ultimately depend mostly on personal preferences and goals, coupled with the effects of any changes in life or in the law. I offer a free review at any time for any existing client. I also offer a review for new clients at a very modest cost.
Do I really need a Will? What about a trust? What’s power of attorney and why would I want to grant that to someone? These basic questions about the need and value of estate planning are common. The preparation of a will, powers of attorney over health care decisions and financial decisions and a health care directive is absolutely essential for everyone, no matter their income or wealth status.
In short, these documents and this type of planning can be boiled down to taking care of those around you. In varying fashion, each of these documents helps make life easier, smoother and less expensive for your loved ones in the event of your death, diminished capacity or similar circumstances. Proper estate planning provides answers (and clear directions) to questions such as: Who will handle my legal and financial matters if I become incapacitated? Who will make medical decisions for me if I cannot? Within what parameters? What happens to my property when I die? Who gets my money, property and personal affects? Who administratively handles my property and how? The questions that are addressed by estate planning could go on for pages and pages. In the end, estate planning matters and when done properly, ought to be straightforward and affordable while squarely addressing your unique personal and family circumstances.
In the course of estate planning, it is not uncommon for a client to share their concern about potential liability and to wonder what can be done to help protect them from a lawsuit or some other type of financial liability. Does a trust shield your assets from liability in such circumstances?
A revocable living trust typically does not offer added liability protection. For a married couple, some types of joint trusts may provide a layer of protection in some instances. As a general principle, a revocable trust is simply not a tool for broader liability protection. What can be done?
There are variety of approaches and tools that can be utilized to protect a client from liability. Some types of irrevocable trusts can be used to reduce or shield liability. Separate business entities such as an LLC or corporation are effective in some situations to provide liability protection. Additional measures can also be considered such as insurance and titling. Liability considerations are top priority concerns in some situations and the use of the right tools, and the right approach is vital.
In seeking to avoid probate, the use of beneficiary designations to “automatically” transfer accounts or other assets to an intended beneficiary can be a simple and useful approach. This is often an effective approach and is always a low-cost approach. These sorts of designations are most commonly used in connection with retirement accounts, other bank accounts, insurance policies and even interests in small companies. However, in many instances, simply utilizing beneficiary designations is not adequate to put into place desired planning and to assure the intended outcomes. Beneficiary designations often do not contemplate many unexpected scenarios, provide clarity with respect to heirs nor allow for any direction or limitations as to the use of assets. Frequently, a trust can be used to better address these many situations. However, even when a more comprehensive trust-oriented plan is in place, beneficiary designations can be used effectively to direct certain assets seamlessly into the trust. Ultimately, every individual and family situation is unique and requires careful consideration and use of all available estate planning tools.