Often, people explain that they do not have enough assets to need an estate plan. However, regardless of the value of assets you have, reviewing your personal financial plan from a legal and estate plan perspective is highly recommended. In fact, even those who have substantial debt may be able to pass assets on to beneficiaries. Everyone can benefit from creating and reviewing an estate plan including the elderly, married couples, parents with minor children and singles.
One common pitfall is joint ownership with bank accounts. Often, a person names a family member as a joint owner on a bank account for convenience. This changes the legal rights of the original owner and risks all the funds of the account. Even if the worst-case scenario where the joint owner runs away with the money does not occur, there are other consequences. First, creditors of the joint owner can try to get to the funds. Second, at the death of a joint owner, generally, the funds in the account go to the other joint owner by operation of law. A common estate plan is for property to be split equally among children and this raises the question of whether the original owner wanted the funds to go to the joint owner. Although we generally caution against having non-spouse joint owners, this is a common practice. Sadly, we have seen this scenario result in uneven distributions, family disagreements and discord that may never be overcome.
One major decision for parents is naming a guardian if they were to die before their children become adults. While it can be very difficult to determine who to name as a potential guardian, this can allow parents to have a say in who will take care of the children in terms of custody and financial care should such an unfortunate event occur. In addition, we offer other documents for parents including a Power of Attorney for Care of Children and a Designation of Healthcare Surrogate for Minor Children that we have discussed in a previous blog post.
A great estate plan can help you proactively create your future and avoid potential pitfalls. Depending on what assets you own, your goal may be to keep things simple and avoid probate. Or, you may choose to create a more advanced trust that covers many contingencies. Estate plans can be almost as simple or as complex as you can imagine. By consulting with a qualified estate planning attorney now you may be able to minimize court costs, legal fees and taxes in the future and help create the estate plan that best suits your needs.