by Cody Jones
- “I/we don’t have enough assets to have a trust.”
- “I won’t need an estate plan until I’m older.”
- “I/we have too much debt for an estate plan.”
- “I just want to know who will take care of my kids if I die.”
I often hear these responses when the twenty- and thirty-somethings I meet discover I’m an estate planning attorney. Although we’re told to plan for the worst and hope for the best, that advice rarely translates into preparing for our incapacity or death. Instead, our time is spent focusing on careers, finances, homes, families, and other adventures. As a thirty-something, I too am often guilty of forgetting my days are numbered, hoping I’ll have plenty of time to plan for the not-so-fun “adult” decisions of life. In doing so, we disadvantage our loved ones by leaving them to pick up the pieces without any foresight from us. Plus, we sacrifice the advantages of planning ahead.
- Death is guaranteed, and incapacity is likely for all of us - no matter our age. If you have experienced the loss or incapacity of someone you love, you know it is difficult. We seldom think clearly in times of great tragedy. Planning ahead for such events can prevent additional stress in already stressful times. Such plans may include nominating someone you trust to care for you if you are incapacitated and documenting end-of-life decisions you would make if you were able. Nominating an agent or proxy for your health care may also prevent the need for a costly court-supervised guardianship.
- Not planning ahead can create confusion. Upon your death or incapacity, your loved ones will have heightened emotions, and each will react to grief in a different and personal way. One of the most sensitive questions that may be asked is who will take care of your minor children or other dependents. This may be a difficult question for you to answer, but it is even more difficult for others to answer when you cannot. Discussing the nomination of a guardian for your minor children or other dependents with your spouse and loved ones while you have the ability to express your reasoning and consider their input can help avoid controversy over an already difficult decision. Nominating a guardian helps provide a smooth transition for your children or other dependents and their caregivers.
- Planning ahead can make planning later easier. Just as a football team is better prepared for the big game if the coach has a game plan, you can be more prepared for managing your estate as it increases in value if you create the framework from the beginning. Part of this framework may include a revocable trust that outlines how your assets may be used upon your incapacity and controls the distribution of your assets upon your death. You don’t need an abundance of assets to justify having a trust. If you have assets without beneficiary designations, such as a vehicle and a house, preparing a trust may be prudent. Even if you have debt associated with an asset, such as a mortgage, the equity you own is an asset of your estate. If you die and the legal ownership of the asset is trapped in your name, your loved ones will likely need to go through a court-supervised probate to access the value of the asset. A probate is avoidable if you properly utilize a revocable trust. Creating a trust to own your assets as you acquire them throughout your life can be less time-consuming and less expensive than implementing the same planning with a lifetime’s accumulation of assets later in life. With a trust already prepared, you can simply buy an asset in the name of your trust at the time of purchase and rest in the assurance the asset will be controlled by the trust upon your death or incapacity.
- A plan eases the impact of unexpected circumstances. A revocable trust also provides a plan for unanticipated situations that joint ownership with rights of survivorship cannot address. Joint ownership only works well if at least one of the owners survives and has capacity. If both you and your spouse die or become incapacitated simultaneously, a revocable trust contains provisions to address such circumstances. Similarly, after your death if a beneficiary of your trust unexpectedly suffers from substance abuse or develops a disability, the trust can provide protections to avoid misuse or exhaustion of the trust funds which outright ownership cannot avoid.
Unexpected circumstances do not have an age limit. Take time today to look at your family situation and personal assets. Who will care for your children if you pass away? Who will care for you if you are incapacitated? What will happen to your assets upon your death or incapacity? If you don’t have answers to these questions, or if you have adult children who cannot answer these questions for themselves, make an appointment so we can help you plan ahead and provide everyone certainty and peace of mind.