The Most Common Mistake in Estate Plans
A comprehensive estate plan is designed to address issues regarding the disposition of your assets upon your death; however, it will also relate to important issues which may arise during your lifetime.
A Durable Power of Attorney is an essential part of any plan. The health care power of attorney enables you to appoint someone to make medical decisions on your behalf when you are no longer able to do so. In addition, this document should contain language which requests you to indicate your desires regarding end of life decisions. The durable power of attorney for health care decisions should not be confused with a durable power of attorney for financial matters, which authorizes someone to take control of your assets and can be made effective only upon your incapacity.
Common Mistakes
Many seniors arrange for their children to be placed on their bank accounts as joint owners as a planning device. Some of the concerns with this technique is that once the child is added to the account, he or she is free to withdraw funds for themselves. An even greater concern is that merely by adding the child to the ownership of the account, although they have contributed no funds, creditors of the children may be able to pursue the account for debts of the child! The durable power of attorney for financial matters is an excellent away to avoid this unfortunate outcome.
Control Your Distributions Through a Will or Trust
In order to address the distribution of property upon your death you should consider the preparation of a will or trust. Both documents contain your expression of how you desire your assets to be distributed upon your passing.
In one instance, a grandfather passed away and had no estate plan in existence at the time of his death. His surviving child saw no reason to probate the property and occupied the residence and left it titled in his father’s name. Upon the son’s death, the grandson did the same. Sounds like a simple solution; however, when the grandson went to sell the property he was disturbed to learn that he could not transfer the property since the title still reflected his grandfather as the owner of the property. Substantial attorneys’ fees were incurred to untangle this mess.
The primary difference between a will and trust is that a will must be submitted to the Court and “proven up” to be authentic. This process is known as “probate” and can easily last nine to twelve months after the admission of the will to ensure that creditors are paid before any distributions are made to the beneficiaries identified in your will.
A revocable living trust affords privacy in comparison to probate and, generally, the time of administration of the trust is shorter than probate which generally takes one year. Most attorneys usually charge a flat fee to prepare a trust. These fees will be less than the fees incurred to complete the probate of a will. A trust is a great way to control the timing and amount of funds distributed to your child. For example, in the event of your untimely death, ask yourself if an 18 year old has the maturity and financial sophistication to manage the funds? A trust enables the funds to be retained and administered by a trustee until your beneficiaries reach an age which you feel is appropriate to provide them a distribution to use in their absolute discretion.
In one instance, a grandfather passed away and had no estate plan in existence at the time of his death. His surviving child saw no reason to probate the property and occupied the residence and left it titled in his father’s name. Upon the son’s death, the grandson did the same. Sounds like a simple solution; however, when the grandson went to sell the property he was disturbed to learn that he could not transfer the property since the title still reflected his grandfather as the owner of the property. Substantial attorneys’ fees were incurred to untangle this mess.
The primary difference between a will and trust is that a will must be submitted to the Court and “proven up” to be authentic. This process is known as “probate” and can easily last nine to twelve months after the admission of the will to ensure that creditors are paid before any distributions are made to the beneficiaries identified in your will.
A revocable living trust affords privacy in comparison to probate and, generally, the time of administration of the trust is shorter than probate which generally takes one year. Most attorneys usually charge a flat fee to prepare a trust. These fees will be less than the fees incurred to complete the probate of a will. A trust is a great way to control the timing and amount of funds distributed to your child. For example, in the event of your untimely death, ask yourself if an 18 year old has the maturity and financial sophistication to manage the funds? A trust enables the funds to be retained and administered by a trustee until your beneficiaries reach an age which you feel is appropriate to provide them a distribution to use in their absolute discretion.
Periodic Review is the Key
Regardless of whether you execute a will or trust, your estate plan should be reviewed with your attorney every two to three years. I recently encountered a situation in which a decedent had nominated a friend to serve as her trustee. However, they had not maintained their relationship nor seen each other in six years. The decedent had never revised her documents. Moreover, as your estate or beneficiaries grow, you may want to revise the estate plan as well. Finally, laws change from time to time which may have significant impact on your estate plan. In 2019 the Nevada Legislature enacted changes to Durable Powers of Attorney for Health Care Decisions which warrant everyone to consider making a new estate plan.
Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.
