While it may be a bit time-consuming, being prepared when you walk into a meeting with your estate planning attorney will ensure a quicker turnaround time for your estate planning documents.  Here are some of the things that I think are helpful in meeting with your attorney: 

1. Think of a couple of people who you think would be capable of handling your estate (these people will be named as Personal Representative/Executor in your Will).  Make sure to talk with them to see if they would be willing to take on this role.
2. Think of a couple of people who you think would be capable of handling your financial affairs and/or health care decisions if you are unable to make the decisions yourself (these people will be named under your Power of Attorney). You will also want to talk with them to see fi they are willing to serve in this role if and when the time comes.
3. Jot down a list of the people/charities that you want to name as a beneficiary of your estate.
4. Make a list of all of your assets. Don’t forget to include all bank accounts, Certificates of Deposit, real estate, stocks, 401(k)s, Life Insurance Policies, etc.
5. Make a list of all of your liabilities such as your mortgage, car loans, debts owed to individuals, loans on a 401(k), etc.
6. Make a  list of the names and contact information for your accountant, financial advisor, etc. I generally prefer to have this information in my file because after their death, if their executor/personal representative is unfamiliar with the decedent’s assets, these individuals can provide the necessary information and can save the personal representative a lot of time.
7. You will also need to  list of the names, addresses and birthdates of your children.
8. If you have a minor child, you will want to think of a couple of people whom you trust to take care of your children in the event that you die before they are 18 years old.  Again, make sure to speak with these individuals beforehand to see if they would be willing to serve as guardian.  What you don’t want is to appoint someone to take care of your children who ultimately decides that they dont feel comfortable serving as guardian. 

Finally, make a list of any questions you may have for your attorney. Together, these things will greatly assist your estate planning lawyer and will help make your initial consultation extremely productive.

Happy Planning!

I just came across a very disturbing article in SmartMoney Magazine last May that I wanted to share with you. I was very hesitant to spread this poorly researched article, but it raises so many misconceptions that I believe it will serve as a great starting point for me to address several common misconceptions about Estate Planning.

Misconception #1: If Your Estate is Under $3.5 Million, You Won’t Owe Any Estate Tax, So You Don’t Need An Estate Planning.

The Truth: It infuriates me how the author of this ridiculous article quotes some “spokesman” from the IRS, and states:

The overwhelming majority of estates don’t trigger the federal estate tax,” says a spokesperson for the Internal Revenue Service. In fact, as of 2009 you must be worth at least $3.5 million when you die to pay tax at all. If you fall below that—and don’t have any complicated estate issues—you probably don’t need a lawyer to draw up a will for you. Instead, you can use software like Quicken’s WillMaker Plus (around $45 at Amazon. com) and dispense with the whole task in a single afternoon.

The reality of the situation is that we are in a very unsual time right now. As of the time I’m writing this article (2/22/2010), anyone who dies in 2010 will owe no estate tax. However, in 2011, the Estate Tax comes back with an exemption rate of $1 Million and the highest tax rate is over 50%! This will be quite an ugly reality check for the beneficiaries of the estate whose loved one takes SmartMoney’s advice on estate planning…

Additionally there are some issues presented with the “carryover basis” of items inherited right if someone dies in 2010. Typically, the beneficiary gets a “step up in basis” (so, if Grandpa bought land in 1930 for $5000, that is now worth $100,000- in 2009, the beneficiary would receive the “step up in basis” of $100,000. So if he sold the land for $100,000 he would owe no capital gains tax. If Grandpa died this year, unless the tax laws change, the beneficiary gets only a $5,000 basis….so if he sold the land for $100,000 he would have to pay tax on the $95,000 in capital gains. Suffice it to say, things are far more complicated than the media may have you believe, and an estate planning lawyer can assist you in ensuring that you take advantage of all available tax savings tools.

The author of the article also says, unless your estate is “complicated” you don’t need an estate planner. Let’s see what might “complicate” things:

• Minor children (under 18)
• Children from a previous marriage
• Do you want your children to receive their inheritance at the tender age of 18, or do you want to protect your children from creditors, predators, bad marriages, and themselves until they are more mature?
• Do you want to ensure that your children receive an education?
• Do any of your beneficiaries have Special Needs – or receive needs-based government assistance like Medicaid?
• Have you nominated one of your children to be the Trustee over their siblings? Have you considered how this might affect their relationship?
• Do you have a system in place to remove a Trustee who is not doing their job – without having to take them to court?
• Do you have an iron-clad system for carrying out your decisions on health care, or finance, if you are not able to speak for yourself?
• Do you live in a community property state? Have you moved from a non-community property state to a community property state like Idaho? Do you know how this move will affect the characterization of your assets as separate or community property?

These are just a few of the “complications” that an experience estate planner can assist you with, as opposed to a fill-in-the-blank estate planning program.
Misconception #2: Your Lawyer Wants to Be Your Executor:

The article says:

Who should execute your will once you’re gone? It’s a tricky question, especially for parents who don’t want to favor one child over another but who also aren’t crazy about the idea of entrusting the job to the son who just depleted his 401(k) for a new Miata.

In California, for example, where executor fees are based on an estate’s size, a $1 million estate would pay $23,000 to the executor. Many people give the job to family members, who often refuse payment. But an estate planner stepping in to do the job will understandably want to pocket the profit.

The Truth:I can’t speak for every estate planning attorney, but I personally have no desire to be the Executor of my client’s estate. I find that I’m much more valuable to my client’s family in advising and navigating their loved ones through the probate process. I believe that only in the rarest of circumstances should an attorney serve as executor (for example, there is literally no other person whom the client trusts and a corporate executor is impractical due to the fees charged).

Misconception #3: You Need a Living Trust

The Truth:This is pretty much the only thing on which I agree with the author of the article. While Living Trusts may be very favorable in states like California where probate is extremely expensive and time consuming- Idaho is not one of those states. In my experience, clients don’t end up properly funding the trust, and the estate ends up going to probate anyways. Plus, the cost of the Living Trust can be quite hefty. Especially when you consider that in many cases the estate ends up being probated anyways due to the failures of the grantor to properly fund the trust.

Misconception #4: “I make more money in insurance than on planning your estate.”

The Truth:I don’t sell insurance, and I personally don’t know of any estate planning attorneys that do- if they do sell insurance, ask them candidly about their relationship with the Company.

Misconception #5: Once You Have A Will, You’re Done!

The Truth:You need to review your will from time to time, especially in life changing circumstances:

• Birth of a Child
• Death of a Spouse, Beneficiary, Executor, etc.
• Substantial increase in assets
• Moving to another state
• Divorce
• Marriage

Additionally, a good estate planner will follow up with you as there are major changes to the tax code that may affect your estate plan. If you have not revised your will, and you have an estate that is approaching $1 Million, I would suggest that you immediately contact your estate planning attorney and schedule a consultation to discuss the current issues regarding the estate tax. I will discuss the current issues regarding the estate tax in a future article.

Misconception #6: All Estate Planners Are Created Equal

The Truth:  In reality, the best estate planning attorneys to use, in my opinion, are the ones who also frequently handle the probating of estates. The reason is that these attorneys have seen the “other side.” In other words, they know what circumstances arise after an individual’s death. As a result, they have the unique ability to help you avoid the mistakes that others have made.

A “general practicioner” may be able to draft a simple will, power of attorney or living will…but if you have unique circumstances (see Misconception #1) you may be better off going with a more experienced estate planner.

Happy Planning!