5 Unconventional Estate Planning Tips (and Why They are Right)

May 22, 2011
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Image by Brian Warren via Flickr

I hesitated to write this post for fear that many would be distracted over this weekend.  However, now that it is after 6 P.M. on May 21, 2011, and we seem to have avoided and survived the rapture, I can help return your focus to arguably more mundane concerns.

Speaking of the “out of the ordinary”, here are five estate planning ideas that may sound a bit strange given what you may have read elsewhere.  However, this advice could be quite helpful to you and your family in the years ahead.

1)  Let some property go through probate.

Recall that probate is the court process that is used to establish the validity of your will after you pass away.  However, since probate can take up to 24 months, expose some of your family’s “dirty laundry” to a public process, and also be quite expensive, most estate planners will recommend ways to avoid it.

However, a major benefit of probate is that it gives creditors a limited time to assert their rights against any assets passing through your will.  For example, if you owed money at your death to a credit card company, it must make its claim against your estate in probate court within the time frame provided in the state statute.  If it fails to do so, it would most likely lose its rights to the debt.

On the other hand, assets in living trusts do not go through probate, so the creditor is not limited by the state probate statute.  Therefore, in most states (see an exception in the comments below), assets going through your will are protected by law against creditors more quickly than assets passing by trust.

To take advantage of the benefits of a living trust while still being protected by probate, you would keep enough assets outside of your trust to satisfy any of your debts.  After your personal representative contacts all creditors and your debts are paid, your estate is safe, and your remaining assets held in trust will be safe from any future creditor claims.

2)  Don’t video record the execution of your will.

There are those who desire to video record the signing of their wills to help prove their level of capacity at the time of the signing.  If any question comes up later on, the personal representative just pops in the DVD in front of the judge, and voila, there’s the proof.

However, there are main two reasons why this strategy won’t work.  First, video recordings of the signing of estate planning documents are not approved in any U.S. jurisdiction as proof of competency at the time.  This is due to the relative ease of altering such recordings.

Second, many courts would look closely at why you took the trouble to record, and may very well assume your lawyer did this because capacity was in question in the first place.

Is this thinking a bit backwards?  Perhaps.  But unless your lawyer video records every will and trust signing, you might consider going old school here instead.

3)  Don’t give portions of your estate to your children outright at staggering ages.

In many estate plans, parents place assets in trusts for the benefit of their children to avoid giving large sums of money to them when they are too young.  A fairly typical plan is for trust assets to be given to children in stages – perhaps 1/3 of the trust assets once they reach age 25, 1/2 of the assets once they reach 30, and then the remainder at age 35.

However, look again at the rationale for not giving assets to the children directly when they are too young.  The concern is that outsiders don’t benefit from your estate:  the kids could spend their inheritance too quickly, invest it unwisely, or lose it through divorce or to creditors.  Don’t such concerns apply throughout their entire lives?

If you keep your assets in trust while only dispersing its income for the entirety of your children’s lives (sometimes known as a “spendthrift trust”), they will be your main beneficiaries exclusively.  If the trust is drafted carefully, it will be protected from your kids’ predators, creditors and even from themselves.

4) If you and your spouse separate, call your estate planning lawyer immediately.

Yes, you should most certainly call a family lawyer.  Sure, this looks like a cheap attempt at driving business our way during a very sensitive and terrible time in your life.

However, think about what could happen if you didn’t do this.  If you already have an estate plan, your soon to be ex-spouse can still inherit a large part of your estate.  Your ex could easily end up with your children even if you don’t want this to happen.  If you became incapacitated, your ex could still serve as your power of attorney.

With all due respect to the participants, shouldn’t Maria Shriver consider such advice during her separation from Arnold Schwarzenegger?

5)  If you want to change your will, don’t ever use a codicil.

Just get a whole new will.  It is far too easy and too common for a codicil (a short amendment that accompanies your will) to get lost or misinterpreted in probate court.  Besides, we are beyond the age of manual typewriters and correction fluid – printing out a brand new will instead of a codicil might take your lawyer 5 or 10 extra minutes.

Comments?  Other advice?  Please discuss below.

 5 Unconventional Estate Planning Tips (and Why They are Right)
 5 Unconventional Estate Planning Tips (and Why They are Right)

Scott

Scott R. Zucker, Esq. is the owner of The Zucker Law Firm PLLC, located just outside the Capital Beltway in Annandale, within five miles of the City of Fairfax, the county seat of beautiful Fairfax County, Virginia. The firm focuses mainly on estate planning services for Virginia, Maryland and Pennsylvania clientele, and seeks to do so in an affordable and approachable way. People interested in learning more can contact Scott by phone or email.

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2 Responses to 5 Unconventional Estate Planning Tips (and Why They are Right)

  1. May 22, 2011 at 11:07 am

    Great thoughts, succinctly expressed.

    In Massachusetts, your 1st recommendation doesn’t really apply. The creditor protection is no worse for the living trust than for the probate estate.

    http://www.malegislature.gov/Laws/GeneralLaws/PartII/TitleII/Chapter190B/ArticleIII/Section3-803

    Of course, you are not giving legal advice to an individual reader. Your thoughts are intended to help people think about their own estates, with the hope that they will then take their thoughts to their own, local planning lawyer.

    Those who live near your office know what they should do!
    Jennifer Deland recently posted..Do You Need a Financial Planner

    • Scott
      May 22, 2011 at 8:27 pm

      Jennifer–

      Thank you so much for this response! I immediately made a correction in my post to reflect your point.

      If our shared goal is to help readers gain more knowledge and understanding about estate planning, then this kind of assistance you have given me is essential. I greatly appreciate the fact that you took the time to point this out to me!

      Keep up the great work at your website and blog!

      Take care,
      Scott

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