10 Costly Misconceptions about Wills, Trusts, & Powers of Attorney

Misconception #1: A Power of Attorney can be used after death. No. Upon a person's passing, Powers of Attorney lose any and all authority possessed during a person's life. Whether a Power of Attorney for Health Care or a Power of Attorney for Finances, both documents, expires upon death. Neither document allows for anything to be done after death. Such decisions remain strictly in the hands of the Personal Representative under a Will or a Trustee under a Trust.

 Misconception #2: A Will avoids probate.  No.  A Will is the primary tool of the probate system. Your Will is like a letter to the Court telling the Court how you want your property distributed.  The Court gets to interpret your Will. After your death your representative must prove to the Court that all your property is collected and appraised, and all your bills and taxes are paid, before your property can be distributed to your heirs.

Misconception #3: Your Will and your assets remain private.  No.  Because probate is a public legal proceeding, everything that occurs with your estate will become public record.  This means that anyone – including nosy neighbors and salespeople – can go to Court to find out the balance in your accounts, the value of your stocks and other assets, and who you left your property to.

Misconception #4: Estranged family members do not need to be notified of a probate if the Will excludes them from an inheritance.  No.  All heirs must be notified of the probate even if they are excluded from the Will.   It is safer to handle an estate with potentially disgruntled heirs through a Living Trust.

Misconception #5: A Testamentary Trust avoids probate.  No.  A Testamentary Trust is a Trust created at your death by direction of your Will for a specific purpose. Your Will and estate still must go through the probate process.

Misconception #6: Minimizing Estate Taxes should be a primary concern. Probably No. Currently, the exemption level is over $5,450,000 per person. This means prior to having to pay any estate taxes, you need to have assets over that exemption level. While there may be other taxes worth worrying about, namely income taxes on pre-tax retirement accounts, estate taxes often are not of paramount importance.

Misconception #7: Revocable Living Trusts are only for large estates.  No.  Revocable Living Trusts are for anyone who wants to avoid costly conservatorship and probate proceedings.  Those with small estates, and especially their heirs, can benefit from a Revocable Living Trust.

Misconception #8: A Revocable Living Trust must have a separate tax return.  No.  If you are a trustee or co-trustee of your Revocable Living Trust, it does not need a tax return of its own.  Your personal tax return is sufficient for the IRS.

Misconception #9: There are no costs associated with administering a Trust at the death of the original settlor of the Trust.  Not always true.  Depending on what assistance and professional help a Trustee relies on, administering a Trust, distributing the assets, and terminating the Trust can result in fees and costs.  Many trustees hire attorneys and accountants, but these costs are substantially less than the costs of probate.  Typically, these costs are paid by the Trust.

Misconception #10: You have to amend a Revocable Living Trust when you buy or sell your assets.  No.  Your Trust does not have to be changed when you buy or sell assets.  When you buy a new asset, such as real property, a car, or open a new bank account, you simply take title as trustee of your Trust.  If you sell an asset, you sell it as trustee of your Trust.

If you’d like to ensure that you maximize the resources available to your loved ones and keep your family out of Court and out of conflict, schedule a Family Life and Legacy Planning Session.™ We can review your existing plan and help you make adjustments that will help you achieve your goals.

This article is a service of The Estate Planning Group and Davidson Law Office, LLP, your Life & Legacy Planning Lawyers, who believe in developing trusting relationships with families for life. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

5 Common Misconceptions about Estate Planning

Whenever you work long enough in a selected profession, you often find that there are common questions that arise and many times common misconceptions as well. Estate planning is no different. Here are five of the common misconceptions about this area of law:

 

1. "If I have a will, I will avoid the probate process, right?" Wrong! A Last Will and Testament will not help you avoid the probate process. A Last Will and Testament only informs the Probate Court how you wish to have your assets distributed upon your death.

2. "I can handle a decedent's Estate because I am the Power of Attorney." False. A Power of Attorney is a document that applies only during a person's lifetime. As soon as that person passes away, your authority ceases to exist. If you continue taking actions after a person passes away, you could become legally liable for actions taken. 

3. "I heard a revocable trust protects my assets from the nursing home. Is that true?" Unfortunately, no. A revocable trust will not give you protection from the costs of nursing home care. A slightly different trust, called an irrevocable trust, can offer such protections, but it comes with a number of factors worth considering to see if such a tool is right for you. There are certainly other reasons to consider a revocable trust, but nursing home care protection is not one of them.

4. "Should I be worried about estate taxes?" While there may be taxes due at your passing, the estate tax (also called the death tax) is unlikely to be one of them. Under the 2017 Estate Tax rules, each individual can pass up to $5,490,000.00 at their death without having to pay any estate taxes. This high exemption level means that a very small percentage of the population will have to pay estate taxes.

5. "I do not need to have a trust because I am not wealthy." Wealth oftentimes has little to do with whether you would like a trust or not. More important, is evaluating whether the efficiencies of avoiding the probate process and avoiding potential conflict and time for your heirs, justifies the creation of a trust.

 

Unfortunately, these misconceptions have been repeated and shared so often that they are now viewed as true. To get started on your own estate plan, contact our office today!  We offer an initial complimentary Life & Legacy Planning Session, where your goals and objectives determine what plan is right for you.

How much does a will cost? How much does a trust cost?

By far, one, if not the, most common question asked, is "How much does this cost?" Rightly so, attorneys carry the dubious distinction of being attentive to the time (see this article for an example), oftentimes, going as far to bill in 6 minute increments (or in 1/10 of an hour allotments). So, how much can you expect to pay for a will, a trust, or powers of attorney documents for your family?

 

While each attorney varies how they bill for legal work, there are three general approaches:

Hourly Billing. Just as it sounds, you are billed for the amount of time an attorney works on your particular legal matter. At the end of the day, the legal bill will depend on how long and complex the legal matter is and the time the attorney spent on the legal issue(s).

 

Contingency Billing. Here, the billing amount is based on the total amount recovered from the other party. For example, if you agree to a 15% contingency fee arrangement, and the total recovery is $10,000, the attorney would be entitled to receive $1,500. This type of billing approach is often utilized in personal injury cases and how attorneys (oftentimes the ones you see in commercials) can claim that you will not owe them anything in legal fees unless you win your case.

 

Flat-fee Billing. Flat-fee billing is often used when the legal work is for a particular legal transaction and not necessarily for an unpredictable, personal injury-type situation. This type of approach can have the added benefit of being more transparent on the front end, as you will know the total cost for the particular matter, without incurring additional and unexpected costs.

 

At The Estate Planning Group, we do things a little differently – we prefer to develop trusting relationships with families for life, so we can ensure you and your family are protected no matter what happens, and we let you decide on the appropriate plan and costs.  All our estate planning services are billed on a flat fee basis, so you know the total costs before you make a decision.

The best way to determine exactly what planning will best suit you and your family’s needs and concerns is to meet with one of our attorneys for a Life & Legacy Planning Session, where we can help answer all of your questions, address your concerns, and meet your goals.

At your initial complimentary Life & Legacy Planning Sessions, we walk you through what would happen if something were to happen to you, how your family would handle things, and design a plan to make it easier for the people you love. By knowing what would happen, you can identify those things you want to address in your planning.

 

You, then get to choose the right planning tools from a point of understanding, not just have a lawyer whose motives may not be the same as yours tell you that you need this or that plan.  We can then assist in designing the plan that will take care of your family.  To get started, contact us today!