Are You Spending More Time Planning Your Vacation Than Your Estate Plan?

This weekend Lake County News published an interesting story noting how many community members spend more time planning their summer vacation than their inheritance and long-term issues. Think about it: how many different contingencies are accounted for when heading away from home for a one to two week trip? Pet sitters are hired, mail is paused, email auto-responders are set-up, plants are moved inside and friends are asked to water them, doors are locked, and a spare key is left in case of emergency. We take these steps just in case, so that we can enjoy our time away with the peace of mind that everything back home can be dealt with in most situations.

In many ways estate planning involves similar forethought--understanding possible issues down the road and taking steps to account for those contingencies. Yet, vacation planning is done instinctively, while estate plans are often delayed or ignore due to either procrastination or apprehension of one's mortality.  It is easy to procrastinate on these sorts of issues without immediate compulsion. Summer vacation planning has to be done by a known date. Estate planning is not that easy, because no one knows for sure how much time they have or if they may need long-term care. The indefinite future makes it easier to procrastinate. Yet, planning is vastly more effective when conducted before emergency necessitates it. You will also get the peace of mind that comes with knowing inheritance and plans are in place.

Many also put off the planning because they assume that the planning is complex and time-consuming. Planning will be done when they finally "have time" for it. There will likely never be a time when you want to do your estate plan; instead one simply has to make time to do things that matter. But beyond that, the planning itself does not necessarily have to be as complex or time-consuming as one imagines. After all, the whole point of having professional help with these issues is to hand of the work to those who deal with these matters day in and day out. In most cases, a legal professional will explain how a trust or will can be created and how to put other documents into place, including a Power of Attorney and Health Care Proxy. Even if nothing more complex is required, having these few pieces in place can make all the difference in case something happens unexpectedly.

Planning for Couples with an Age Gap

Each estate plan is slightly different, but there are some challenges in estate planning that present themselves to different couples.  One common challenge is planning for married couples who have a significant age difference.

Perhaps the most obvious issue involves overall financial planning.  With age differences, one spouse is likely to outlive the other, perhaps by a considerable length of time.  The younger spouse may therefore feel more comfortable taking certain risks than the older spouse who is more likely to suffer from short-term financial dips.  It is important to balance the interests of both partners.  Couples of different ages require unique planning so that time horizons are meshed.  Retirement planning can be tricky if one spouse plans on working longer.  Similarly, long-term health care planning will be implicated by the age differential.  One spouse may need care earlier, though it is usually not prudent to automatically assume that the younger spouse will be able to provide the needed care.

A recent Morning Star article touched on many of these topics and mentioned a few other issues to consider for couples in this situation.  One point made in the story is that these couples often need to prioritize long-term care and life insurance.  Planning for disability is particularly crucial to couples, because family finances must account for both partners.  If one spouse is injured or faces a medical complication and is disabled, then family finances may be decimated if expensive, long-term care is needed.  In the worst-case scenario, assets are exhausted to care for one spouse while the second spouse remains healthy.  In order for the sick spouse to receive Medicaid support, assets for the entire couple must be below a certain level.  The healthier spouse can be left with little to no assets.  In these situations it is critical to get professional advice, as certain strategies can be employed in order to save as many assets for the second spouse as possible while still allowing the ill spouse to qualify for Medicaid.  This is particularly true for spouses with large age differences, because the younger spouse often needs assets to last for many years to come.

Should Each Spouse Have Their Own Estate Planning Lawyer?

Estate planning requires the attention of an entire family:  husbands, wives, children, grandchildren, and others all have a stake in ensuring that planning is done properly and timely.  This raises the question whether each individual with a stake in the planning needs their own lawyer.  Does each spouse in a blended family have adverse interests such that a single lawyer cannot represent them both in their planning?  An article in Forbes recently discussed this very question.

Of course, in certain family situations it is usually vital that couples have separate counsel. For example, while certain types of uncontested divorces exist, in most cases couples going through a separation must have their own legal advocate, because the entire process is contentious. Most times, though, the same issues do not apply in elder law estate planning.  While divorce involves a "tug-of-war" over property splitting and other issues, estate planning is a collaborative process where families talk together with the counsel of experienced legal professionals to discuss their long-term financial wishes and potential care needs.  There is typically much less inherent conflict.  This does not necessarily mean that that both spouses will automatically agree on every single detail of a plan, but the resolution of those disagreements are generally not so contentious that they necessitate each party have their own individual legal counsel.

The article mentions an added benefit of going through the process together, noting that "it builds greater trust and more open communication between the two of you, and possibly with all of the children in your lives. There are certain situations where separate representation may have benefits, though.  It is usually a combination of factors which might result in significant dispute, including situations where only one spouse has a child, where one spouse is much wealthier than the other, if the relationship is still very new, if there is a prenuptial agreement, if there is a large age difference between spouses, or if one spouse has certain privacy issues that they might not want exposed during the process.  It's a topic worth considering when starting a family estate plan.

Who Gets the Vacation Home?

Recently, the Wall Street Journal published an article entitled "Who Gets the Vacation Home?"   The article explores some of the issues involved with family cabins or vacation homes, including payment of expenses and the issues of access and use.  Often, once the owner of the property passes, the children have a difficult time of "splitting-up" or sharing the property.

The article suggests three possible solutions to sharing a property (and its inherent expenses): setting up a limited liability company trust, a dynasty trust, or a "qualified personal residence trust" (QPRT).  In these arrangements, family members can all contribute funds to expenses like taxes, insurance, utilities, etc.  In most situations, by gifting the property to a trust, there is the added benefit of not having to pay estate taxes.  

No matter what method is chosen, always make sure to include an "exit strategy" so that future generations can sell the property if they choose to do so.  The article gives a fine overview of a topic that often causes families confusion and strife. 

Holidays Are Prime Time to Discuss Estate Planning

Estate planning is about setting ones affairs in order for the benefit of friends and family.  In that way, the holiday season is a natural time to discuss these matters, because it is now when many families are getting together as a group. Particularly for families that do not live close together, this time of the year may be the only one when everyone is all in one place.

This doesn't mean that you need to spend time delving into the specific details of a plan over holiday dinners, but simply mentioning the topic lightly can be important to start the conversation.  If parents or adult childen do not seem willing to get into the details during the holiday, simply explain that you'd like to discuss the subject at a later time. However, if they are receptive, it is helpful to ask them some basic questions. For example, some parents may already have wills drafted.  If so, it is important for other family members to know where it is located and how to access it.  If a will is used, children should ask who has been named executor.  The same is true when more advanced tools like trusts are used, since in those successor trustees have to be named.  Seemingly simple choices come loaded with problems--for example, choosing one child over another for these duties may create hard feelings.  Discussing them ahead of time is often a good approach.

Beyond subtle prompting to get certain estate planning affairs clear, the holidays may also be a good time to share exactly how certain sentimental objects will be distributed.  Of course, each family is different and this may cause discord. However, it is never a good idea for family members to learn who is set to receive certain objects only after a loved one has passed, particularly items with emotional attachments.  Because everyone is together, the holidays may be the ideal time for grandparents or parents to clearly explain what steps they've taken and to answer any questions that family members may have.  The input that they receive from family members may also prove helpful in case something has been left out of planning

All of us at The Greening Law Firm, P.C. wish you very happy holidays.  We are proud to serve the Austin area with estate planning, estate administration, probate, and elder law, and we are excited to begin a new year with our clients, friends, and colleagues.

Creating a Successful Will Requires Professional Help

A will often creates more problems than it solves. With a will, probate is involved, the information is made public, and legal challenges to the will's provisions are common. Estate planning is meant to simplify the transfer of assets, and typically the creation of a trust is a superior method of saving taxes and streamlining the process to distribute assets quickly and seamlessly.

In estate planning, there may be limited situations where a will might still be appropriate, though, depending on the age of the individual and their assets. No matter if a will or a trust is created, it is vital to have professional help in the creation. While do-it-yourself projects can produce a large return on investment for home improvements and car maintenance, it is not the same with financial planning. When professional help is not sought and a will is self-written, it is only at the moment when the document is needed to work that its flaws come to light. At that point, there is no going back.

As Forbes recently explained in "The Case Against Do-It-Yourself Wills," when done without experienced aid, wills are often filled with errors. For example, common mistakes include failure to sign the will, not updating it, or adding amendments improperly -- all of which can nullify the document. Without the guidance of professionals, imprecise wording is often used. It is much harder than many suspect to craft legal documents with language that is void of any ambiguity. Without the author present, vague language will be easy to misinterpret. Estate planning lawyers are well versed in crafting legally precise terms in standard language that doesn't equivocate.

Besides making sure one's specific intentions are explained without ambiguity in the will, a legal professional can also ensure that important issues are incorporated into the document. When drafting a will on their own, many community members fail to consider important issues. What happens if an heir dies first? What happens when an asset distributed in a will is no longer owned when the will is executed? Who is responsible for paying the expenses on certain assets, like a house? A professional experienced in these matters can bring up these and many concerns that may need to be considered when going through the drafting process. This is particularly important in more complex situations, such as with blended families. The attorneys and staff at The Greening Law Firm, P.C. are always ready to discuss what planning is best for you and your family.  We stand ready to serve you.