Why you Should Make an Estate Plan Today
Tony Hsieh, former Zappos CEO passed away last week at 46 after sustaining injuries from a house fire. Hsieh retired last year from the shoe and clothing retail brand and even though he left behind over $840 million in assets, he never created an estate plan. With no estate plan or will, Hsieh’s family will have a difficult time figuring out what his wishes were concerning how his estate is to be divided up. Thus, it is likely that issues will occur when it comes time to actually divide Hsieh’s assets up, especially high-price items, family heirlooms, or other sentimental property, all of which could lead to conflict between family members.
Hsieh’s family requested the court appoint his father and brother as special administrators of his estate. However, with no training or comprehensive idea of what Hsieh would like to have done with his assets, the father and brother will be distributing assets based upon their instincts and own preferences.
Hsieh’s tragic case highlights the importance of making an estate plan immediately and updating the documents regularly. Further, many incorrectly assume that only wealthy individuals need to make an estate plan. However, an estate merely refers to the assets you own such as real estate, private property—such as cars, jewelry, other tangible assets—and financial accounts including savings and investment accounts. Creating a plan for your assets takes a burden off of your family’s shoulders and ensures that upon your death, your wishes are properly carried out.
Estate planning has always been important. However, with Covid-19 still posing a massive health risk, it is more important than ever before to make your estate plan today. Below is a discussion of important estate planning tools and how these documents play into your broader financial plan.
A Will and its Limitations
A last will and testament is a testamentary document that provides a set of instructions, to both your family and the probate court, on how you’d like your estate to be handled. Most last wills provide clear instructions on how the testator, (the person making a simple will), would like their property distributed after his or her death. Your last will gives you the power to decide how you would like valuable family heirlooms to be distributed amongst your beneficiaries. In addition, using a last will and testament allows you to provide for other entities. For example, you can provide for close friends, important charitable organizations, and for your church or other religious organization. Perhaps most importantly, having a valid last will and testament ensures that your estate is distributed exactly how you want.
If you pass away without a will, you are said to have died intestate. Dying intestate means that a state court will decide who gets your assets. Additionally, if you have children under the age of 18, the courts will decide who takes care of them.
While a will is a vital part of every estate plan, it is important to note that certain assets including life insurance plans, 401(k) plans, and individual retirement accounts cannot be included in a will. Thus, the people you list as beneficiaries on these accounts will receive the assets regardless of what your will says. Regular savings accounts can have similar stipulations regarding beneficiaries if you fill out a payable-on-death form. If no beneficiary is listed on one of these non-will assets, the asset automatically goes through probate—potentially costing your estate massive amounts of time and money. One final note is to check the title of your home to ensure it passes to the entities you want it to.
Putting Someone in Charge
An extremely important part of the will-making process is to choose an executor—also known as a personal representative—to your will. Depending on your financial situation when you pass away, executors can have a complex and difficult job. Liquidating financial accounts, ensuring your assets go to the proper beneficiaries, paying debts, and even selling your home could be a part of your executor’s job.
Thus, while it is important to appoint an executor that you know and trust, you should make sure this person has the knowledge required to properly handle this undertaking.
Where to get a Will
The best way to make a will that is legal under your state’s specific laws is to hire a local accredited estate planning attorney. While there are many online estate planning options, web-based alternatives may not reflect your state laws and may not offer you the individual support your situation requires.
If you decide to hire an attorney to execute your estate plan, you will need a witness and/or notary to sign the document before your plan is official.
Other Key Documents
In addition to creating a last will and testament, there are a few other important estate planning documents you may need to create. The most common additional document is an advance healthcare directive—also known as a living will. This specific form outlines your wishes if you experience incapacity due to illness or injury. Thus, if you ever end up on life support, instead of making your family member or friend decide whether or not to end your life-sustaining care, you can state what you would like done in that specific situation.
Another important document to create is a power of attorney form. This document allows you to create a list of people who can access your medical and financial records in the event you cannot access them yourself. Though the person you choose to deal with your healthcare could be the same entity that overlooks your financial well-being, these roles are typically assigned to different people.
Make a Master List
The estate planning process can be difficult as it requires you to face your own death. However, by not creating a master plan that lists where your important documents are, you are hurting your family. To avoid lost documents, create a list with all the information the executor will need to settle your estate. While most documents you need to include are self-explanatory, be sure to include passwords to your online accounts.
Consider a Trust
One of the most common documents to include in an estate plan is a trust document that allows someone to place their assets into the care of a third party who will distribute these assets to the person’s family, friends, and favorite charity. There are many benefits to utilizing a type of trust during estate planning. However, if someone does not have an estate plan that includes one or more types of trusts, family conflict, higher tax burdens, and probate costs can occur
Follow Up on Your Plan
As your life changes so should your estate plan. Major life-changing events that require you to review, change, or update your estate plan include:
- When a child or grandchild needs educational funding.
- Marriage, separation, or divorce.
- Death or change in circumstances of the guardian named in your will for minor children.
- Birth or adoption of a child or grandchild.
- Death of an heir.
- If you or your spouse receive a large inheritance or gift.
- Death or change in circumstances of your personal representative, executor, or trustee.
- Career changes — a new job, promotion, or if you start or close a business.
- Significant changes to your or your spouse’s financial condition.
- Changes in the number of dependents, such as adding the caring of an adult.
- A move to another state.
- When a child or grandchild becomes an adult.
- Significant changes to your or your spouse’s health.
- Borrowing a large amount of money or taking on liability for any reason.
- You start taking distributions from an IRA, 401(k), or another qualified plan.
Any of the events can have a significant impact on your family’s financial situation. Thus, reviewing your estate plan ensures that your assets pass on to the correct beneficiaries quickly and easily.
Trust and estate laws are complex. This is so no matter the type of trust you decide to establish. As such, it is extremely important to have legal representation that can help you correctly set up your trust. The Antonoplos & Associates trust and estate lawyers have over 20 years of experience helping clients in DC, Maryland, and Virginia create a variety of trusts. With this knowledge and experience, we can help with any legal issues that occur from setting up your trust.
Furthermore, Peter Antonoplos, founder and managing partner of Antonoplos & Associates has an LLM in Taxation from Georgetown University Law Center. With this knowledge, Peter can help you decide what is the best type of trust for you and your family and maximize the cost savings you receive from setting up a trust in DC, Maryland, and Virginia.
Contact Our DC Law Office for More Information
Finally, for more on why you should make an estate plan today, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding estate planning, check out our blog.