How to Avoid a $10,000 Mistake!

Jill passed away with $20,000 in savings and $10,000 of debt.  She only had a Last Will and Testament.  Because a Will requires debts be paid, $10,000 of her savings had to be sent to creditors.  Another $3,000 had to be spent on lawyers to get through the probate process.  A total cost of $13,000 that didn’t pass to the next generation.

However, Jack had the same $20,000 in savings and $10,000 of debt.  But, Jack had setup his estate to avoid probate.  The creditors were out of luck.  They could not get any of their money.  Jack passed that $10,000 to his family.  It cost him $1,000 to get everything setup.  So, Jack spent $1,000 to save $10,000.  Jack saved $12,000 for the next generation.

Multiply that out to $20,000 or $30,000 of debt and the savings is huge!

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What is a trust?

A trust is a document that can accomplish many things. It keeps your family out of probate, maintains their privacy, can protect your assets, allows you to maintain control over the assets for many years.

Companies out there monitor probate proceedings and can and do make “offers” to the people involved.

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What is the worst choice of words ever?

The phrase “Estate Planning” is the worst choice of words ever…

Maybe a better term would be “Personal Protection Planning” or just “Planning Ahead.”

The word “estate” conjures up images of big houses and a lot of money.  Don’t let the word estate fool you.  It doesn’t mean a big house and a pile of money to burn.

Estate in law just means “the stuff you have.”  We all have an estate.  Even if it just your clothes, that is your estate.

But, you have much more important things to protect than just your stuff.  You have a set of fundamental rights that can get ripped away by a judge.  Naturally, you don’t want that, right.

You have the right to:

• Make your own financial decisions
• Make your own legal decisions
• Choose your healthcare options, including refusing treatment all together
• Have a family
• Give your stuff away to who you want, when you want, how you want
• Sell your stuff
• Buy stuff
• and much, much more…

But, if you don’t plan ahead to maintain and manage your rights, then a judge can rip your rights away and give somebody else (a “guardian”) the right to make those decisions for you.

What can happen if you don’t plan ahead?

1. You could leave your family in a financial bind.  If you something happens, and you haven’t planned ahead, your family could be strapped for cash until everything is settled.  Especially if you haven’t shared with them all of your insurance policies, bank accounts, and retirement plans.  When my father passed away, he hadn’t shared where anything was.  We had to go from place to place finding all of his stuff.  If you have just a Last Will and Testament, your family may have to wait a year or more for the courts to finish the process and release the money.
2. You could put yourself in a bind.  If you are unable to make financial, legal, or medical decisions (think car accident, stroke, or heart attack) you spouse can’t just step in and take over without a plan in place.  One lady found this out the hard way when her husband had a stroke.  She went to his financial planner to get money for his care and was informed that without a guardianship or power of attorney, she couldn’t get the money.  Not to mention that your family would have to go to court for a guardianship, causing them more stress in an already stressful time.
3. You could find yourself on life support for years against your true wishes.  “Google” Terri Schiavo.  She was on life support for 15 years because she hadn’t planned ahead.  Her husband and mother fought through the courts for 15 years.
4. Your money could go to young children.  What would you have done with a lump sum of cash at 20 years old?  What would your children do with a lump sum?

How do you protect yourself, your family, and your “estate?”

1. Find a reliable attorney that does this type of planning all the time.  They should provide excellent estate planning at a reasonable price.
2. Get a minimal plan in place to protect your right to make financial, legal, and healthcare decisions
   • Durable power of attorney
   • Healthcare power of attorney
   • HIPAA waiver/Health Records Release
   • Living Will/Advance Directive

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Why Do We Procrastinate Estate Planning?

No hard deadlines. You don’t have to have it done tomorrow, so you can put it off.

The (perceived) expense. Start with small things then as your life gets more complex, work up.

“I don’t own enough.” Costs for probate and guardianship will be multiples of the cost of planning ahead of time.

“I’m not old enough.” Really? Read the paper and find out how many people your age were killed in car accidents in the last few months.

I’m confused and don’t know where to start. Start at the beginning. Get your financial records together. Find a local estate planning attorney that can walk you through the rest of the decisions.

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How Will You Feel?

Just a short note…

Most people, when they get their plan done express 2 feelings

1. A feeling of relief that they can stop worrying about their family so much and that their assets are taken care of
2. A feeling of “Peace of Mind”

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Can I write on the documents if I want changes?

Michelle decided she wanted some changes to her trust. She penciled (not pen, pencil) in some changes she wanted. When she went to a new bank to open an account, the bank would not accept the original with hand written changes on it.

No. Do not write on the originals. Make a copy, write your changes in, and then visit your attorney to make the changes official.

Wills are particularly sensitive to being written on. It can be argued that it is evidence that a person wants to destroy the will.

Some banks will not accept a trust or power of attorney with hand written changes.

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The Cost of Estate Planning

Why does estate planning cost so much?

Let me answer a question with a question.

Does it?

Estate planning is an investment in you and your family. Estate planning is not about you, it is about them.  Planning is an investment in love designed to protect your spouse, children, and other loved ones.

Estate planning is a financial investment. Where else can you invest a dollar and get back $2, $3, or more? A plan on $300,000 estate (not uncommon) is $2,500. Probate and other expenses on that estate are about $18,000. You put in a $1 and your family pulled out $7.20. That is a 720% return on investment.

If you could empower yourself to protect your children, yourself, your family, and your property against the rigors and unforgiving nature of the courts and law for less than the cost of a convenience store cup of coffee a day, would you pay that much? What about financial predators? Creditors?

Joe bought $1.85 mediocre coffee every day at the convenience store. Instead he started taking a cup of good coffee from home and started putting that money in a jar. At the end of a year he had $481.00 stuck in the jar. (Imagine if that was a $3.00 Starbucks cup of coffee. That would be $780.00 in a year).

That’s right. For less than the cost of a lousy cup of coffee, you can protect your children, yourself, your family, and your property.

For that measly amount, you are getting a well thought out, custom, individualized plan, not a “box” plan from the office supply store or online. You can get legal advice, not just a form to fill out.

There is something to the saying “you get what you pay for.” Lisa did an online will but did not get part of it notarized. This could have caused a big problem later if it was not caught during other work being done by an estate planning attorney. The overall cost would have been much greater than having a custom plan done.

The overall cost includes not only the attorney’s time, but training, assistants, witnesses, drafting, proof reading, and overhead of the building.

This does not include transferring assets to any trust(s) created. Excess asset transfers will add to the base price. If you don’t transfer your assets, then any trust created is worthless.

Any Supplemental Needs Trusts will add to the price.

If the attorney has to go to your location, then travel time at the hourly rate will typically be added.

Breaking this down by a minimum every 5 year review, you are looking at $1.21 per day. That is less than the cost of a cup of cruddy convenience store coffee every day.

Finally, don’t expect bargain prices if you just need a single document. An attorney, like a CPA or doctor’s office, has an overhead to open the file, make notes, do the work, and close the file.

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