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Mark Cornwall: Do You Need Estate Planning?
Asking whether you need estate planning is a much bigger question than asking whether your estate will be taxed after you die because it’s small enough to be exempt from the estate tax law.
Although the value of your estate is one of the first questions you must answer before proceeding, it’s more important to decide who will receive the assets you have and when. You need to know who should manage those assets if you can’t, both during your lifetime and after your death.
Who should be responsible for taking care of your minor children, or disabled loved ones, if you become unable to do so? Picking a trustee is a very difficult job if it’s not your spouse. And you may very well not choose the same trustee to be the guardian of your children. Those are two separate jobs demanding two separate skills. Trust becomes a huge issue.
Who should become responsible for making decisions regarding your health care if you are unable? Are your Medicaid and Medi-Cal in place?
You must ask yourself what you want done with your remains when you die. Where do you want to be buried or have your ashes scattered? Do you have a funeral trust in place to pay for it?
These are the types of questions that make up the meat and bones of your estate plan. So the answer as to who needs an estate plan is — everybody.
There are alternative routes you can take before going straight to an attorney. There are companies called wealth management advisers. These companies usually include a team (the “team” is made up of a “network” of experts who are independent contractors located in their own offices) and may include an investment adviser, a CPA, an insurance broker, a transfer tax specialist and an attorney who all will scrutinize your estate plan to ensure it achieves your goals. It’s what has been called a “consultative wealth management process.” Many banks also offer this service.
It’s their job to make certain your needs are properly communicated, examined and then put into a structure that would realistically meet your goals with an estate plan. It is a great concept to think you have all these experts working for you, but as with all businesses, it will work only as good as the people who run it. If they have the virtues of George Washington, who could not lie about chopping down the cherry tree, then you are in good hands.
But nobody knows you and your family better than you do. Think of some people’s dilemma. Can you imagine trying to create an estate plan worth $10 million, when the marital tax exemption is only $1 million and the government takes 55 percent of the rest it, as it may be in the future?
The first distinction to understand is the difference between estate planning and financial planning.
Estate planning uses trusts and wills to build a legal fortress (on paper) that controls how you can distribute and protect your assets during your life, and to provide a secured legacy for your family after death.
Financial planning helps you attain your financial goals while you’re supporting your desired lifestyle and funding your retirement. A good financial plan builds your legacy.
It’s important to understand this difference, because financial planners and investment advisers are selling a product, while an estate planner is selling services. The service of an estate planner, or the duty of an attorney drafting that plan, is to help identify your goals, help determine your needs and help formulate a plan to meet those goals and needs. It’s not to profit from them, other than to be your legal adviser and scribe.
Estate planning has come to be synonymous with planning a revocable trust (living trust), which is supposed to keep you out of probate court and the maximums of a discerning judge. But it only takes one heir who is dissatisfied with the trust distribution to bring that cost saving convenience back into court. Particularly because beginning in 2010 the “no contest clause” has been whittled down to almost nothing to despair over.
The other plan is a will, which takes effect upon your death and goes through the scrutiny of court administration, eliminating all privacy. Books have been written about the differences between the two, and one of them is mine. But the ultimate choice is yours.
— No opinion herein is a “marketed opinion” and no information provided herein can be used to avoid tax penalties for which the taxpayer would otherwise be responsible. Mark S. Cornwall has lived in Santa Barbara for more than 30 years and practiced law here for 25 years. He is accepting new clients. His book, Estate Planning: The Heroes Way for Baby Boomers, can be purchased via his Web site, www.MarkCornwall.com; Amazon.com; or locally at Chaucer’s and Borders bookstores. To schedule an appointment, contact him at .(JavaScript must be enabled to view this email address) or 805.845.7558.
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» on 01.27.10 @ 04:06 PM
Our family has just been told my wife’s mother is going to die in about two weeks. She is competant mentally, but her body is failing from cancer. There is a revocable trust in place that makes the elder son living out of state the successor trustee, and the other two siblings are to split everything three ways at the direction of the son. But he is 1.000 miles away and the expense of cost and time needed on his part to do the things that need to be done are going to be immense. We are told we still have time to change it but none of the siblings want to talk about it. Trouble has already raised its ugly head,and basically it’s almost more trouble than it is worth, which is about 300,000 split three ways.
» on 01.30.10 @ 05:57 PM
Mark, I welcome your columns and appreciate your efforts to inform people about these important issues, HOWEVER, I’ve noticed several gaffes in your postins…. you yourself are confused about Medicaid….. which is EXACTLY THE SAME PROGRAM except in CA it is CALLED Medi-cal… please get your facts straight on these medical insurance programs ... so that your columns/postings continue to be valuable to all us boomers and others…TIA
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