[image_frame style=”framed” align=”left” title=”Estate Planning”]/wp-content/uploads/2012/07/Elderly-walking-away-e1342018822849.jpg[/image_frame][dropcap4 variation=”red”]L[/dropcap4]ast week we received a call from one of our clients whose father had died recently. When she came into the office and provided the Will for our review, I was surprised to see that it was over 30 years old and had been prepared prior to her father’s second marriage. Needless to say, things had changed and the cost of probate and litigation between children from different relationships will substantially reduce the size of the estate ultimately distributed to the beneficiaries. All of that could have been avoided if her father had taken this simple test to determine if his estate plan was up to date:
- Have you prepared a Will or a Trust? We all have a choice, we can allow the Virginia General Assembly to determine how our possessions will pass and to whom they will pass, or we can establish our own plan with a Will or a Trust. The failure to have a plan will be one of the most costly and time consuming mistakes you ever make.
- Has your Will or Trust Plan been reviewed in the last two years? Estate planning is not an event, it is a process that lasts for the rest of your life. We all experience changes during our lifetime and major legal and tax law revisions increase the complexity of our lives. An out of date plan is dangerous, and in some cases can actually be worse than no plan at all. Keeping your plan current is vital to ensuring that your goals and objectives are met and in avoiding results that were not anticipated or planned.
- Are all of your heirs over the age of 21 and financially responsible? Under Virginia law, children inherit property upon attaining the age of 21, without any restriction. I would have bought a fast car and a few firearms with an inheritance at that age! Proper planning is absolutely crucial for preventing an heir from spending their inheritance, or losing it to creditors or an “evil spouse.”
- Will your assets be subject to the cost, delay and publicity of probate? Most of our clients want to avoid probate because of the cost, delay in making distribution to heirs, and the publicity of the process. Assets owned in a trust, owned jointly with right of survivorship, or those that are subject to a paid on death beneficiary designation will avoid probate. It is important to understand that jointly owned assets and assets that are paid on death, only avoid probate initially. They are subject to probate after the death of the last joint owner. Probate can be costly and will typically take twelve to twenty-four months to complete before distribution can be made to the beneficiaries.
- Have you made your children or others, joint owners on bank accounts or other assets? This is a common mistake with dangerous consequences. A creditor of a joint owner can take the entire asset to satisfy claims and a divorcing spouse can make a claim against a joint owner’s account. In addition, serious problems can occur if a joint owner dies in the wrong order.
- Does your Estate Plan provide asset protection, or protection from divorce or your spouse’s remarriage after your death? Most estate plans do not take into consideration the potential for a judgment creditor or a divorcing spouse or the remarriage of a spouse after your death. Many of the plans I review provide for outright distribution to children with no protection from any of these possible threats. Providing protections for the surviving spouse and for children or grandchildren should be a part of every plan.
- Is this your first marriage? Has your spouse been married previously? Second or subsequent marriages present complex and very unique challenges, particularly if both spouses have children from prior relationships. Undesired results including the accidental disinheritance of children is almost always assured without proper planning and the creation of an estate plan designed specifically for your situation.
- Do you have a plan for any business interests you own? Estate planning and the ownership of business interests or real estate, should all be considered together. You may have an effective Will or Trust but your business entity (corporation, limited liability company, partnership), may be structured in opposition to the plan, or without taking your plan into account. Any good estate plan should also include effective treatment of real estate and business interests.
If you answered “no” to questions 1-3, the first part of question 7 and question 8, and “yes” to the rest of the questions, you should make an appointment to speak to an attorney who specializes in Estate Planning and understands how to provide a solution for your unique situation.