Do I need an Estate Plan?
It was the spring of 2007 and Joe met with an estate planning lawyer for the first time.
Joe was your average middle class guy. He was married to Sally and they had a little one on the way. Joe also shared custody of his daughter from a previous relationship. He didn’t earn a lot, but he had a good job with excellent benefits and he recently purchased a home with Sally. Joe and Sally lived comfortably, but there was little in the way of retirement savings.
“I’m here to make a will.” Joe says.
Attorney: “Ok, why do you want to make a will?”
Joe: “Honestly, I’m not even sure, my friend told me that I should get one, so here I am.”
Attorney: “Well, let’s learn a little more about you and see how I can help.”
After learning about Joe’s finances and his family, the attorney educated Joe about estate planning. He then explained why his friend was right to encourage him to sit down with an attorney.
Even small estates need planning.
The attorney taught Joe that even though he didn’t have much in “savings,” that his daughter, unborn son, and wife would greatly benefit from his life insurance policy if it was properly protected and managed.
By appointing a guardian of his children, Joe would know who would take care of his children if something happened to Sally and himself. Although his daughter would likely reside with his ex-wife, he was able to protect her portion of the inheritance by appointing a custodian of his financial estate in case he passed away. Essentially, blocking the ex-wife from having control over the money his daughter stood to inherit.
Joe made sure to nominate Sally as his primary agent to on his financial and health matters. But, he also appointed his mom as an alternate in case Sally was unable or unwilling to act. Joe felt a lot better knowing who his agents were, rather than leaving it up to the courts.
Joe also learned to change his beneficiary designations and add transfer on death designations (TODs). Now, his life insurance, bank accounts, and titled assets might be able to avoid probate. Even though a trust would have handled these better, Joe felt better.
Some of us have special circumstances.
Did I forget to mention that Joe was in the military?
Because Joe was in the military, his attorney was limited to providing him with a simple will, healthcare directive and healthcare power of attorney, financial power of attorney, and nomination of guardian documents. In hindsight, a trust would have been a better solution for Joe. A trust would give Joe better control over who had access to the financial assets intended for his children. The will safeguarded his children’s inheritance until they were to 18 or 21. Whereas, a trust could have stretched that inheritance over many more years and avoided court involvement and supervision.
Joe’s will included provisions that would enable his executor (the person taking care of his estate through probate) the ability to protect a child’s inheritance from creditors. Also, since Joe didn’t know the future, the attorney included provisions to account for a special needs beneficiary (i.e. a disabled person) and for a beneficiary with a drug or alcohol addiction.
Joe had no idea why he needed an estate plan when he didn’t have an estate; until he learned that everyone has an estate, but not everyone plans and protects it.
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