Estate Planning
for the
Savvy Client
What You Need to Know Before
You Meet With Your Lawyer
Mary L. Barrow, Esq.
Copyright © 2017 by Mary L. Barrow.
All rights reserved. No part of this publication may be reproduced, distributed or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.
Savvy Client Press
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Rochester, New York 14607
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Ordering Information:
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Estate Planning for the Savvy Client/ Mary L. Barrow. —1st ed.
ISBN print edition 978-0692853061
This book is a brief summary only and should not be used as a substitute for the advice of competent legal counsel from an attorney admitted or authorized to practice law in your jurisdiction. You should always consult your attorney before implementing or changing any estate planning strategy. You should never delay seeking legal advice, disregard legal advice, or commence or discontinue any legal action because of information in this book.
Contents
Estate Planning for the Savvy Client
About the Author
Introduction
Why I Wrote This Book
What This Book Is
What This Book Is Not
Basics You’ll Want to Know
What Is Estate Planning?
What Does “Property” Really Mean?
Other Terms You Should Know
What Does a Typical Estate Plan Include?
What Happens if You Don’t Have an Estate Plan?
What Is Probate?
What to Expect When You Meet With Your Attorney
The Number One Misconception About Wills
What a Will Does
Some Property Does Not Pass by Will
Property That Passes by Beneficiary Designation
Property That Passes by Law
Property That Passes by Will
Spousal and Contractual Rights and the Like
Let’s Illustrate These Concepts
Probate Property and Non-Probate Property
An Estate Plan Is Like a Puzzle
More About Wills You’ll Want to Know
What Happens to Your Property if You Don’t Have a Will?
What Your Will Should Include
Your Tangible Personal Property
Your Residuary Estate
What Does an Executor Do?
Who Should You Choose as Your Executor?
Naming a Guardian for Your Child
Providing Financially for a Child
Other Will Provisions
Where Should You Keep Your Will?
You Need a Will Even if You Think You Don’t
What Happens if You Become Incapacitated?
What Happens Without Prior Planning?
“Putting Someone’s Name” on Your Accounts
Using a Power of Attorney for Finances
What Your Agent Can and Can’t Do
When the Power Begins
When the Power Ends
If the Power Is Refused
Making Your Healthcare Wishes Known
Do You Need a Trust?
What Exactly Is a Trust?
Why You May Want a Trust
Two Types of Trusts
How a Trust Is Created
How a Trust Is Funded
What Does a Trustee Do?
Who Should You Name as Your Trustee?
Revocable Living Trusts
What Is a Revocable Living Trust?
Do You Need a Revocable Living Trust?
Why Avoid Probate?
Probate May Be Slow and Burdensome
Probate May Be Expensive
Probate May Require Court Involvement in Trusts
Probate May Be Delayed by Hard-to-Find Heirs
Probate May Encourage Will Contests
Probate May Compromise Your Privacy
Using a Revocable Living Trust to Avoid Probate
Do You Lose Control of Your Assets?
You Still Need a Pourover Will
Using a Revocable Living Trust in Case of Incapacity
Working With an Attorney
Why You Need an Attorney
How to Choose an Attorney
Choose an Attorney Licensed in Your Domicile
Choose an Estate Planning Attorney
Choose an Attorney With Experience in Your State
Evaluating Your Comfort Level
Evaluating Written Communications
About Legal Fees
Keeping Your Estate Plan Up to Date
If You Move to a Different State
When Should You Review Your Estate Plan?
How Should You Make Changes to Your Estate Plan?
Conclusion
Index
This book is dedicated to all of my clients and students over the years.
You are the joy of my practice.
“Everything should be made as simple as possible, but not simpler.”
―Albert Einstein
About the Author
Mary L. Barrow has been an attorney for more than 30 years. She has a BA from Brown University and a JD from the University of Pennsylvania law school. For many years she practiced estate planning, probate and trust law, in three different states, both as a partner in a large law firm and as the principal of a boutique trusts & estates firm. She has helped numerous clients to define their goals and objectives, and then implement those wishes as simply and efficiently as possible through their estate plans.
In 2009 Attorney Barrow was approached by the Osher Lifelong Learning Institute (OLLI) at the University of South Carolina Beaufort to create a course for its members on the topic of trusts. She was delighted to teach the resulting course for a number of years. Attorney Barrow enjoys speaking to groups of non-lawyers on estate planning topics.
Introduction
Welcome to Estate Planning For the Savvy Client. This book is your guide to getting the most out of your relationship with your estate planning lawyer.
A quick search of any online or brick-and-mortar bookstore will tell you that there are already many trusts & estates books in the world. They cover wills, trusts, probate, and a variety of other estate planning topics. There are do-it-yourself books and technical “let’s-learn-everything-from-a-book” books. There are guides and templates and checklists. There are in-depth analyses written by experts in the field. But when it comes to planning your own estate, no matter how many books you may read, unless you have a law degree and years of experience practicing trusts & estates law, you’ll benefit greatly from the guidance of a qualified trusts & estates attorney. In the pages that follow, I draw on my extensive experience to help you get as much as you can from your lawyer’s time.
Why I Wrote This Book
When I taught a course on trusts for the Osher Lifelong Learning Institute (OLLI), I found that many of my students were sophisticated, successful people who had already met with an attorney and obtained estate planning documents, such as wills, trusts, and powers of attorney. But they came to my course because they still had questions or concerns. I understand how this could happen: In the first place, trusts & estates is a highly technical, detail-orie
nted area of the law. There often simply is not enough time to address all the fine points. Second, people are sometimes reluctant to ask questions that they feel are either too basic (and therefore embarrassing) or too complex. In addition, there is a mindset and a vocabulary in the world of estate planning, probate and trust law that is second nature to the people who work in that system. Lawyers and other people working within the system may assume that people understand certain terms and procedures when that simply is not the case.
I wrote this book so that the money you spend on estate planning is money well spent. I’ll explain some basic concepts and dispel some common estate planning myths and misconceptions so that you can be better-informed and more self-confident before you consult a prospective lawyer or meet with your current lawyer. I’ll also help you close any communication gaps that may exist between you and your lawyer. Better communication between you and your lawyer will make it easier to achieve your estate planning goals and objectives efficiently.
Did You Know? It is unlikely that all your assets will pass as specified in your Last Will and Testament. Read Chapter 2.
Did You Know? “Putting your daughter’s name” on a bank account or putting your house “in your son’s name” could have serious adverse consequences. Read Chapter 4.
What This Book Is
This book is designed to make you more comfortable with the estate planning process. It will give you insight into what to expect and explain important terms and concepts. We’ll start with the basics and move on to more advanced concepts. Understanding these fundamentals will help you make the most of your time, energy and money when planning your estate, as well as give you more confidence.
Whether you are new to estate planning or making changes to your existing plan, you’ll benefit from reading this book before your next meeting with your attorney. The Savvy Client is you!
What This Book Is Not
This book is not legal advice and it isn’t a substitute for legal advice from a qualified estate planning attorney and/or tax advisor. It provides a general overview of selected trusts & estates concepts in the United States of America. Keep in mind that specific laws and practices differ in each of the fifty states. Moreover, the information in this book may not apply to your specific situation. You should always consult an experienced estate planning attorney and/or tax advisor for legal or tax advice on your local laws and unique circumstances.
After reading this book, you will have a greater understanding and be better prepared to work with your lawyer, but you won’t be qualified to plan your own estate or draft your own estate planning documents any more than you would be qualified to remove your own gall bladder after reading a book on surgery. And you won’t know more than your attorney (if you suspect you do, get a different attorney).
Finally, reading this book is not intended to and does not create an attorney-client relationship between us, and the book is not a solicitation for legal work.
CHAPTER 1
Basics You’ll
Want to Know
YOU’LL BE MUCH MORE comfortable with the estate planning process if you have a solid understanding of some of the basic concepts. I remember (although it was many years ago) being perplexed the first time I heard the term “estate planning.” What was that, exactly? What do we mean by an “estate plan”? Is it a single piece of paper with a plan on it, or is it something altogether different? And how do we do whatever it is? This chapter will shed light on these and other murky areas.
Throughout this book, you’ll see some terms in bold print. Those are terms that I will define in a general, traditional trusts & estates manner. Bear in mind that each state may have adopted different terms for the same concepts. For example, many states have replaced the traditional term “executor” with the term “personal representative.” This should not interfere with your understanding of the general concepts.
What Is Estate Planning?
Generally speaking, your estate is all of the property you own at your death, both in your sole name and as a co-owner with others. Ideally, your estate plan is a plan that you devise (with the assistance of your attorney) long before your death so that, when you die, your assets go to the people you choose, and in the manner you want.
What Does “Property” Really Mean?
Although many people think of real estate when they hear the term “property,” in the estate planning context, property means all of your assets, not just real estate. Property includes both real property, which is real estate, and personal property, which is everything else. Personal property includes tangible personal property and intangible personal property. Tangible personal property is personal property that you can touch, such as books, jewelry, clothing, furniture and so on. Intangible personal property is personal property that has no physical form, such as bank accounts, stocks, bonds, retirement accounts, insurance, annuities, business interests, and the like.
Property = Real Property + Personal Property
Real Property = Real Estate
Personal Property = Tangible Personal Property + Intangible Personal Property
Tangible Personal Property = Property That You Can Touch
Intangible Personal Property = Property That Has no Physical Form
Other Terms You Should Know
Leaving real property to someone under a Will is traditionally called a devise. For example, a Will might say, “I give and devise my real property located at 123 Main Street to Mary.” Leaving someone personal property under a Will is traditionally called a bequest. For example, a Will might say, “I give and bequeath my silver tea service to Eileen.” The person receiving the property is typically called the beneficiary.
In estate planning, the deceased person is often called the decedent (dǝ-cḗ-dǝnt), and in the case of a married couple, the spouse of a decedent is called the surviving spouse.
You may also hear the terms probate estate and taxable estate. Your probate estate is the portion of your assets subject to the probate process (which we will discuss shortly). Your taxable estate is the portion of your assets which may be subject to federal or state estate or inheritance taxes.
What Does a Typical Estate Plan Include?
A basic estate plan typically includes:
a Will, also known as a Last Will and Testament,
health care directive(s), such as an Advance Directive, Living Will, and/or Health Care Power of Attorney, and
a power of attorney relating to the management of your assets.
An estate plan might also include a revocable living trust, also known as an intervivos trust. This type of trust is sometimes called a “Will substitute” because it can take the place of a Will in determining how assets pass at death.
Estate Plan =
Last Will and Testament (“Will”)
Revocable Living Trust (optional)
Power of Attorney for finances
Health Care Directives
Estate planning can also include many other techniques for many different purposes. These other techniques are beyond the scope of this book, which will discuss the basic elements of an estate plan.
What Happens if You Don’t Have
an Estate Plan?
If you don’t have an estate plan, your property certainly will still be transferred to someone, but it may not be to the person or in the manner you would have wanted. If you don’t have a Will, state law decides who gets your property and who will be in charge of settling your estate. If you have young children and don’t have a Will that names guardians for them, a court will decide who will be their guardian without input from you.
For example, many married people want all of their assets to pass to their surviving spouse. However, without a Will, the law in some states instead provides that a portion of the assets will go directly to the children of the deceased person.
Typically, estate planning also includes arrangements for managing your assets if you become physically or mentally incapable of handl
ing matters on your own during your life. Without such planning, expensive and time-consuming legal proceedings, such as a guardianship, may be required.
Finally, your estate plan should include directions regarding your medical care, such as life support, in the event that you are unable to make your own decisions. If you don’t make your health care wishes known in advance, it may be much harder on family members during what is already a difficult time.
What Is Probate?
Probate is a legal proceeding in which a deceased person’s Will is submitted to a court (sometimes called a probate court) which has legal authority (jurisdiction) over the settlement of the deceased person’s estate. The court determines whether or not the Will is valid and appoints an executor (sometimes called a “personal representative”) to carry out the terms of the Will. There is usually ongoing court supervision of the progress of the estate administration.
For example, the executor must account for his or her actions. This typically means that the executor will have to submit paperwork to the court (an accounting) that shows:
all of the assets in the estate as of the beginning of the estate administration (the date of death),
any income earned by the assets during the period of the estate administration,
any debts, expenses, and taxes paid during the estate administration, and
the proposed amounts to be distributed to the beneficiaries.
In some jurisdictions the court itself will examine the accounting and approve or disapprove it. In other jurisdictions the court will only consider objections if someone else (for example, a beneficiary) brings them up.
A popular misconception is that probate must be avoided at all costs. But the reality is that it depends. Probate procedures vary enormously, not only from state to state, but even from court to court. You’ll want to find out how your local probate court rates on the following factors:
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