Note: The following is a 2 part series about having the right legal documents you need to have in place before a situation arises. This is part 1; part 2 can be found here.
You might have heard about estate planning, and thought, “oh that doesn’t apply to me because I don’t have an estate”. Estate planning is much broader than simply passing down assets. In fact, it covers things such as guardianship (who is going to take care of your kids if you are gone), medical directives (who is going to make medical decisions on your behalf if you aren’t able to), and financial decisions (who is going to make key financial decisions or keep your household going if you are incapacitated).
Many of these concerns can be avoided or mitigated by creating estate planning documents with a legal expert. So what does this mean for you and your loved ones? It means that after a person is incapacitated or passes away, if there aren’t legally abiding instructions guiding those decisions, the court may end up deciding for you.
Avoiding the Court System
Estate planning documents can either help you avoid the court system or direct the court where you want assets to go, as well as who you would like to have care for your children. If these documents are not in place (meaning no will or beneficiaries on accounts), then the assets go into a probate process and the court system will follow the default laws in your state to determine who receives your assets. A key point of having many of these documents is to avoid probate, which is the legal process that is followed and dictated by the state you live in, to determine where the assets (even if they are very few) will go. Probate is a costly process (usually requires hiring at least one attorney, paying court fees, etc.), is public (meaning information is open and available to everyone), and can take an exorbitant amount of time (sometimes even more than a decade for larger cases).
Other estate planning documents can also help you avoid difficult medical situations as well. In the early 1990s, there was a young woman by the name of Terri Schiavo who collapsed in her home; she never fully recovered. There was a long legal battle that ensued between her husband and parents. Eventually, a court judge ruled in the husband’s favor, but not until after a lengthy and difficult debate that reverberated around the world. (For more information on Terri Schiavo and her case, go here.) If Terri were to have had an advanced medical directive, more than likely, there would not have been such a horrific legal battle. This case just underscores the importance of preparing your advanced medical directive and other important estate planning documents, even if you don’t think something like that could ever happen to you.
Beneficiaries and Titling
In this post (Part 1), we’ll discuss everything you need to do to prepare before seeing an attorney. Let’s start with beneficiaries: Do you have a bank account(s), retirement account, or life insurance? A good place to begin is to make a list of the type of accounts, account numbers, institutions and addresses, and identify the paperwork you already have associated with each account. Next, you’ll want to check who you have listed as beneficiaries on each account. If you have beneficiaries listed, when you pass, the account funds will go to the person you direct on each of these accounts. It is important to keep the beneficiaries up to date as your life circumstances change. I remember one case when a soldier passed away. His wife, parents, girlfriend, and ex-wife all came to claim the life insurance policy payout. They were all surprised to see each other, but really shocked when the life insurance went to the ex-wife because the soldier had never updated the beneficiary to his life insurance policy. It is vital that you check these, and I’d recommend even checking them annually since circumstances can change drastically in only a year’s time. To do this, simply log-in or go to your bank or the company that manages your retirement account or life insurance. There should be a process they follow to add, update, or change beneficiaries. Just ask a service representative how.
Next, you’ll want to think through other common decisions that will need to be made. What “stuff” do you have, meaning when you pass, are there specific things that you want to go to specific people/persons? If so, write it down. You’ll also want to consider how you would like end of life decisions handled for yourself. Who will you trust with your own health and life as well as who will your kids go to for guardianship if you pass? You’ll probably want to come up with a short list of names of individuals and loved ones that you trust most with your life, finances, and children. You may want to call and have a conversation with them to find out if they are comfortable in these roles. I’d also recommend having more than one person in mind; you’ll always want to have a back up (or a few backups) in case something happens. Give yourself a couple of weeks to think through this and discuss with your spouse, partner, friends, and loved ones, but please don’t let these difficult decisions allow for indecision.
As you’re considering these things, I’d recommend actually calling the lawyer and setting up an initial appointment even if all of your thoughts aren’t finalized yet. That way, you can’t dwell too long without a decision being made.
How Can I Afford an Attorney?
Many attorneys provide estate planning packages for fixed fee costs, so you can budget and know exactly what you’ll need to spend. Some employers today offer prepaid legal services which allow for a small deduction from your paycheck to cover any legal services you may need throughout the year, and often estate planning documents are included in that service. Check with your Human Resources representative to see if your company offers this employee benefit. Military members are able to receive these services for free from their Judge Advocate General (JAG) office, and veterans can find out more about these services at their local VA office.
Another cost saving strategy some individuals choose is to make their own will using an online or other customizable service. These may work in many cases but may be more likely to be overturned in others (particularly more complicated cases). Some online resources will also allow you to pay a small additional fee to have your final documents reviewed by an actual attorney, which is a good option for some. Also, legal aid services, self-help centers (often at courthouses), and law school clinics are good places to go for legal help for low-income families. Another option is to download and create really basic forms so you have at least some basic protection in place, then save up to have a more comprehensive estate plan put together by an attorney. Make sure that you check to see if your state allows for self-made wills and what requirements there are. Keep in mind that if you move to a different state, you will most likely need new documents drawn up since the laws differ from state to state. I strongly recommend talking with a competent attorney in your state to find out how to complete this very important process.
How Can I Find an Attorney?
When looking for an attorney, you’ll want to research that they have experience in estate planning and ask them specifically about their experience dealing with anything unique you may need to address (i.e., blended families, complex retirement benefits, multiple properties, family businesses, etc.). Most state bar associations have attorney referral programs. At the very least, they will have a way to search and see if an attorney has ever been subject to professional discipline for malpractice or ethics violations. Other professional service providers might be able to provide you a list of people they work with regularly and trust. Low-income families can reach out to the local legal aid office or law schools and see if they offer pro bono estate planning resources or clinics.
A good attorney will listen to your concerns, explain how the law impacts your situation, and identify risks and issues you may not be aware of before recommending what type of estate planning instruments will best meet your needs. In the next post (Part 2), we’ll discuss all the legalese and documents needed from your lawyer. Don’t delay! Get started today!