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. Joe 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 savings and retirement saving wasn’t even a consideration.
“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 describing Joe’s finances and his family, the attorney educated Joe about estate planning and why his friend was right to encourage him to sit down with an attorney.
The attorney taught Joe that even though he didn’t have much in the terms of “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 act on his financial and health matters if he was unable, but he also appointed his mom as a backup to Sally, in case Sally was unable or unwilling to act. Since he was young, he didn’t worry too much about this, but learned that if he didn’t appoint his agents, anyone could ask a court to award them this power.
Joe also learned that by changing his beneficiary designations and adding some transfer on death designations (TODs) to his life insurance, bank accounts, and titled assets he would be able to save his heirs time and money if he passed away by avoiding probate. Doing so also allowed him to appoint someone who would manage his assets if his minor children inherited them.
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. Realistically, because of the age of Joe’s children at the time, he would have been much better suited with a revocable living trust, wherein he could have exercised more control over the distribution of financial assets to Sally and his two children. While the will allowed him to safeguard his minor’s inheritance to 18 or 21, a trust would have allowed him to stretch their 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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(Disclaimer: Yes, Joe is a real person and the facts of this story are accurate. I am Joe.)