This morning I came across this article on estate planning advice by the Better Business Bureau. I certainly endorse the idea of urging people to do proper planning, but articles like this can sometimes do more harm than good. I give a grade of C (mediocre). Here’s the text of the majority of the article, with my comments in bold: An estate plan can be as simple as drafting a will or as complex as setting up a trust and a living will. BBB offers the following guidance on the basic components of an estate plan and advice on choosing what is necessary for different situations. Wills can be complex also, and can contain trusts that take effect at death (testamentary trusts). Also, the first sentence implies that a will and a living will are mutually exclusive, which of course is not the case. The only source of true estate planning guidance should be a well-qualified estate planning attorney. Will At the very least, anyone who has assets that they would like to pass on to specific individuals should create a will. A will can allocate assets as well as establish guardianship of children. Most wills have to go through probate after the individual’s death. In probate, a court oversees the payment of any debts and distributes inheritances—the process can last several months. This is basically accurate, but it’s not really the will that goes through probate, it’s the assets (depending on what type and how they were owned), And in many cases, probate can last for a couple years. This is one reason I generally counsel the use of living trusts to avoid probate. Living Trust While a trust might sound like something only wealthy people need, it’s actually a tool for anyone who would like to set conditions on how and when their assets are distributed. A trust can also help reduce the amount of taxes paid on the inheritance and does not have to go through probate—unlike a will. Examples for creating a trust include wanting to give a child their inheritance over time, rather than in a lump sum, and restrict how the money can be spent. This is misleading. A will can also contain provisions that set conditions on how and when assets are distributed (a testamentary trust). In addition, a living trust in and of itself does nothing to reduce inheritance (estate) taxes. Trusts or other provisions that can save estate taxes can also be contained in wills. Living Will A living will provides a way for an individual to communicate their desire for life-saving measures in case they are incapacitated. In addition to a living will, individuals can also assign medical power of attorney to someone they trust who can further ensure that their wishes are fulfilled. Actually, a living will normally states one’s desire to not have life-prolonging measures. There’s no mention of HIPAA restrictions on sharing health care information, however, and the need for a blanket HIPAA Authorization. For simple estates, many Web sites offer an inexpensive do-it-yourself approach to creating a will; for more involved estates, it’s best to enlist the help of a lawyer. BBB advises researching any estate planning companies or lawyers first at www.bbb.org before paying for assistance. Beware of the websites. Using a website to do your estate planning is like diagnosing and treating yourself after reading WebMD. In, the North Carolina State Bar has stated that Legalzoom is violation of the law. Click “Continue Reading” to view the text of a letter sent to Legalzoom in 2008. Also, to be accredited with the Better Business Bureau, a business must pay a fee. Therefore, lack of accreditation should not be viewed as a negative factor. Finally, don’t just use any lawyer – with a board certified estate planning specialist you know that he or she has extensive knowledge and experience in estate planning. After creating an estate plan, BBB recommends communicating the terms of the plan with the family members and loved ones it impacts. An estate plan needs to be revised every time the individual moves, changes marital status or is affected by major financial changes, such as investments or buying or selling a business. An estate plan will also need to be reviewed if anyone the estate plan affects undergoes major life changes such as marriage or death. Communication with family members is generally good, unless you think it will start a family feud. Regular review and updating of estate plans is also important because of changes in the law. Bottom line – it’s a good idea to try to educate about estate planning before meeting with a lawyer, but don’t rely on the Internet alone for your estate planning. There’s no substitute for the services of a knowledgeable and experienced attorney. The North Carolina State Bar’s 2008 letter to Legalzoom: “Legalzoom’s conduct…is illegal in North Carolina and must end immediately; Specifically, Legalzoom may not prepare or offer to prepare legal documents to North Carolina residents or for use in North Carolina, including but not limited to articles of incorporation or organization, deeds, wills, trusts, or court pleadings, including divorce complaints. Legalzoom may not offer to provide any legal services in North Carolina or represent that its services have been reviewed by an attorney or are legally sufficient for the customer’s legal needs. If you continue your activities, the State Bar may seek a court order to perpetually enjoin your unlawful conduct, as the Bar is authorized to do pursuant to North Carolina General Statute Section 84-37 and Chapter 1, Subchapter D, Section .0200 through .0207 of the Rules and Regulations of the North Carolina State Bar. Please also be aware that the unauthorized practice of law can be prosecuted as a criminal misdemeanor offense pursuant to North Carolina General Statute Sections 84-7 and 84-8 (copies enclosed).”
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I saw this post by a fellow estate planning attorney on linkedin and thought it would be good to share with my readers:
Ten Dangerous Estate-Planning Fantasies
By FREYA ALLEN SHOFFNER – an attorney in Boston who focuses on estate planning.
Estate Planning is great. It is an empowering tool that can be used in a multitude of ways. Planning your estate means designing the documents that will direct how your assets are handled now and in the future. Making an estate plan that works means avoiding the difficulties of conservatorship, guardianship, and a complicated probate process. A good plan can help you and your family save many thousands of dollars in taxes. It allows you to make your medical decisions in advance.
Unfortunately many people have fallen for the many myths and fantasies about estate planning. Often, their families and loved-ones are left with nothing but huge bills, complicated probate proceedings, and even nasty lawsuits.
Here are ten dangerous estate-planning fantasies. Which ones do you believe?
1) I’m Too Young For An Estate Plan. False. If you have passed your eighteenth birthday, you need an estate plan. Every pot of gold comes with a pot, and your estate plan is the pot that holds your gold. Your estate plan helps you manage your assets during your life, if you are disabled, at death, and after. Don’t leave Earth without it.
2) I’m Too Poor For An Estate Plan. Wrong. Estate planning is essential for everyone who is concerned about how their assets are managed now and how they will be distributed after their death. Don’t forget, once you take into account the value of your home, your retirement funds, and insurance policies, you might be wealthier than you thought.
3) A Simple Will Is All I Need. Not Necessarily. Many people have the mistaken belief that their Will controls where all their assets will go. However, many assets like insurance proceeds, retirement plans, IRAs, annuities, and even bank accounts may automatically become the property of someone else. Be sure to review all of your co-owned assets when you begin your estate plan.
4) Once I Write My Will, I’m Done. Absolutely Not. Birth, adoption, divorce, death, and many other factors can change the way you should set up your plan. Review your estate plan periodically, especially when there are major changes in your life.
5) I’ll Just Leave Everything to My Spouse So I Won’t Have To Pay Taxes. Not True. The federal government and many states do offer a tax credit for assets that pass to your spouse. However, if you leave everything to your spouse, you may be throwing away half of the credit.
6) I Can Make Unlimited Gifts to My Children To Avoid Estate Taxes. A Myth.While making gifts to your children can lower your estate tax total, you need to do it properly to make the most of the gift tax laws.
7) My Closest Relative Will Automatically Be My Children’s Guardian. No. Guardianship of minor children is an important aspect of estate planning that requires thought and careful consideration, nothing about it is automatic.
8) Life Insurance Doesn’t Count For Estate Taxes. Another myth. Life insurance proceeds are part of the policy owner’s taxable estate. And, if you forget to name a beneficiary they could be part of your probate estate as well.
9) If I Go Into A Nursing Home the State Will Take All of My Money. False.There are many ways to plan for payment of long term care expenses. Sit down with your attorney to discuss long-term care strategies.
10) An Online Form Is All I Need. Very Wrong. While online estate planning forms might give you an idea about what to do, every state has different requirements for the specifics of a Will. Remember, you estate plan is the container that will hold all of your wealth. Don’t risk your family’s future security on a fill-in form.
Don’t be fooled. With a little thought and the help of a good attorney, your estate plan will work to protect your hard-earned wealth for decades to come.
