Expanding on Do-It-Yourself Estate Planning: Keeping it Simple:
Do-it-yourself estate planning is simple and cheap. By using a combination of beneficiary designations, payable on death designations and joint ownership, you can pass most of your assets on directly to the people you want. This simple estate planning can work well between spouses and for very small estates when there is only one heir.
For most people, though, this simplest form of estate planning is fraught with problems. It can lead to very complex and costly issues on the back end (after you are gone).
If you want to provide for beneficiaries beyond your spouse and have more than one heir or person you want to leave your estate to, you need a Will. Most people intuitively know that they should have a Last Will and Testament (otherwise known simply as a Will) but getting started means entering uncharted territory. In this article, I will explain some benefits of a “simple” Will.
The cost of doing a Will is greater than doing nothing, but doing a Will allows you to determine how your estate is handled when you are gone. You control who gets your estate and how they get it.
For a couple who owns most of their assets jointly with each other as beneficiaries on many assets (like life insurance, IRAs, 401(k)’s, etc.), Wills allow you to control the administration that joint estate when they have both passed on. Wills allow you to provide for your children.
A Will allows you to choose who will handle your estate. You can choose the person you trust most and who has the greatest ability to get the job done and do it right. That person is called an “executor”.
A Will allows you to choose a guardian for your children. If your children are still minors, they can’t legally fend for themselves. Instead of the state stepping in to send them into the foster care system or, possibly, to place them with family you don’t want, you can designate who will raise your children in a Will.
You can also control who handles the money for your children. You can provide specific instructions for how your assets should be used for the benefit of your children and when your children can take control of them when they get older.
If you have children with special needs or with specific issues, like addiction, or a bad marriage or credit problems, you can protect the assets you leave them from the state, from creditors and spouses and even from your children themselves in a Will. Without a Will, there is no protection and not controls for the assets you leave behind.
A Will is relatively simple on the front end. When you complete the document and sign it, you are done. Unless you choose to amend the Will in the future, you don’t need to do anything else or monitor it. You may still choose to have some assets go directly to people with beneficiary designations (like life insurance), but there is no other estate planning to do with a Will.
Wills are simple and less expensive that other forms of estate planning on the front end. The administration of the estate subject to a Will, however, usually involves greater expense and complexity on the back end (after you are gone).
The back end complexity is the probate process. Probate administration is handled through the local probate court. “Probate” requires the involvement of an attorney to represent the executor named in the Will and is overseen by a judge. The cost of probate includes attorney’s fees, court costs and other expenses that are necessary to complete the probate process.
The probate process also adds the element of time and delay. The typical probate estate takes about nine (9) months in Illinois (sometimes more, sometimes less) to complete. The probate process also delays the distribution of the assets to the ultimate beneficiaries.
The biggest downside to using a Will as the primary vehicle of estate planning is the cost and complexity on the back end after you are gone. That cost and complexity on the backend is due to the probate process.
The cost and effort on the front end is modest. Having a Will ensures a high degree of control (which can give you confidence that your wishes will be achieved). But, cost and delay on the back end is something to consider.
There is an alternative that eliminates most of the cost and delay on the back end, but it is more expensive and complex on the front end. A Living Trust is the most comprehensive and powerful estate planning tool you can use, but it is also the more expensive and complex on the front end.
The complexity and cost of a living Trust is more than made up on the back end because it reduces the cost, complexity and delay of the administration of the estate, making your estate administration simpler, more efficient and less costly when you are gone. That is the trade-off.
Next we explore the benefits of a living trust.Kevin G. Drendel Drendel & Jansons Law Group 111 Flinn Street Batavia, IL 60510 (630) 406-5440 (630) 406-6179 fax [email protected] foxvalleyestateplanning.com