If you are not one for making New Year resolutions, there is one huge promise you might consider making to yourself for 2021: Don’t make your death difficult for your heirs.
When the state of Michigan’s dilemma regarding singer Aretha Franklin dying without a Will, and her estate assets likely being split among her four children, it was also reported that many people still believe that because they do not have “significant net worth,” they do not need to worry about these “legal issues.” Wrong.
Therein lie three predicaments: (1) assets going to kids who are both responsible and wasteful, (2) vague definition of “significant net worth,” and (3) the “legal issues.”
Estate Planning is Not Always About Money
Sitting down with your financial advisor to review your current assets, goals, financial needs and wants will allow him or her to see where you are today, and then determine how you will get to where you want to go tomorrow.
Sitting down with your estate planning attorney, regardless of the size of your estate, also helps you analyze your present situation, and then determine who will get what, when and how much. What makes it legal is having the proper documentation to allow your wishes to become a reality when your time comes. What makes it a legal “issue” is when you do not.
Part of the planner’s job is to make sure you understand the plan. A part of your job is to also understand the plan. Granted, not many individuals have Ms. Franklin’s wealth, and an $80 million estate does qualify as being “significant,” but the general term is ambiguous.
Interestingly, an ultra-high-net-worth individual with at least $30 million in investable assets is considered significant. The top 1% of income earners – people earning at least $421,926 – are often categorized as rich, according to the Economy Policy Institute.
How Do You Choose a Guardian?
Unfortunately, some married couples often make this decision without proper forethought. Who will shape your children’s lives for years to come is a critical determination not made hastily simply to “get it done.” You do not want to get this wrong.
But keep in mind that the criteria for considering and eventually choosing a guardian may not become reality if the court system is not in favor of the individual you’ve chosen. Guardians must formally apply and be accepted. They must fit the criteria of responsibility.
To determine in your own minds the most qualified friend or family member to raise your children should you no longer be able to, first consider who you (both) think has somewhat similar parenting styles to yours and is in a position to raise them.
Remember, too, the guardian will handle inheritance money for them, which is why you shouldn’t leave assets directly to minors. Most times, this is a trustworthy couple with children near the same ages as yours. However, you mustn’t rule out younger, healthier, “time-tested” eager parents with grown children if the situation warrants it. Regardless, here are questions for you and your spouse to discuss.
· Do you both have a meaningful relationship with the couple?
· Do they know your plans and paths for your children’s futures?
· Do they appear genuinely kind, considerate and loving parents?
· Do they spoil, give in to, over-provide or over-protect their children?
· Do they approach discipline similarly, but not exactly the way you do?
· Do their children get along with each other fairly well?
· Do they have the means to raise your child or children in addition to their own?
· How confident are you both that the couple will say yes to raise your children?
What if You Don’t Have Children?
If you do not have a will – which takes effect when you die – and you do not have children, and, in extreme cases, you no longer have close family, and literally no one to leave your estate to, there is one more thing you don’t have: an executor or anyone you can trust to make decisions for you if you are incapacitated. Unfortunately, without your own estate plan, you might opt to do nothing at all. You don’t want or need to be in this position.
However, you could (and should) designate a durable power of attorney for finances, for health care, and create a living will. You could choose any recognized charity rather than dying “intestate,” which pushes the distribution of your assets and property onto the state courts. This is called “escheated,” and, ignoring the word “cheated,” it really means the state legally lays claim to the assets and uses them for the public good.
Make A Plan Before It’s Too Late
Create an estate plan. Choose a qualified guardian. If you currently have a trust, and don’t have a trustee, think about choosing a corporate trustee. Trusts don’t have to go to court. Wills do. A trustee knows trust law, fiduciary duties and experience with all kinds of assets.
If you do have a remaining family member, you could also consider them as a co-trustee. This gives him or her the authorization to remove or replace the trustee if need be.
Similarly, joint power of attorney is oftentimes given to a son or daughter so that one can check on the other. But yet another option is to give it to a family member and an attorney, bank or trust company. This is done not so much to check on the other, but in case one is unable or unwilling to make important decisions that may be required by under a power of attorney.
If you have questions or concerns about your estate plan and how to set it up properly, please contact us. We would be happy to help.