“Estate Planning is the passing on of assets from one generation to the next.” That’s the polite definition. Another definition is “Estate Planning is the processes taken and documents created to ensure your family, friends, and loved ones aren’t set adrift on a bleak and stormy ocean of argumentative indecision, financial ruin, and endless bureaucratic night terrors because you didn’t have the right documents in the right place at the right time.”
Not very nice, but pretty accurate. I was speaking with someone yesterday regarding “Appointment Letters” and her request that I write them up for her. Apparently, her great aunt had passed on a few years ago and the attorney was just now getting in contact with her mother. The problem was that her father, deceased for a year and a half now, was a one-quarter beneficiary of the aunt’s estate. His three siblings were also to receive a quarter interest each. Unfortunately, two of the three siblings also passed on after the aunt’s death, and now the attorney was requesting “Letters of Appointment” for all three estates.
What the caller didn’t understand was Letters of Appointment in the State of New York where the aunt died meant setting up a probate proceeding in order for her father’s estate to inherit from the aunt. No, they can’t just give the inheritance to her mother. No, just giving the attorney a copy of her father’s Will would not be good enough. No, there was no easy way to do this “under the table” to bypass the court system. Letters of Appointment means probate. There is no choice. And since her father was a resident of New York when he passed on, probate has to commence in New York. “But that’s crazy!” she said. “Why should I have to do all of that?”
The answer was simple. She had no choice. The aunt didn’t have an effective plan that would bypass probate, and if there had been a revocable living trust and it were settled correctly and quickly (as they are supposed to be settled), it is entirely possible that none of these court procedures would have been necessary. Instead, there are now four probate proceedings required.
Having the right plan in the right place at the right time can yield a world of difference in how an estate and peripheral matters are handled. The right plan provides choices, and the flexibility and elements are almost limitless. Here are some of the more interesting choices our clients have made over the years. (Please note that some of the facts have been altered slightly to protect the privacy of the clients involved):
- A client knew that her son was a wasteful spender, and any inheritance he received would be immediately spent. If the inheritance were retained in trust and he only received the income quarterly, it was more likely that the money would be put to good use. However, she could not bring herself to say that her son would never inherit all of the property. So instead we set the time for complete distribution when the son reached age 184.
- Regarding burial or cremation issues, one client’s main concern was that his body be cremated and the ashes incorporated into a “reef ball.” In researching this method of laying a body to rest I discovered that there is a company that will mix a person’s ashes with concrete concentric circles. Those spheres are then planted in the ocean so marine life, sponges, and other formations will come together to create a barrier reef where one is needed. That same month, another client decided to make his plan incorporate cremation and to have his ashes incorporated into a fireworks display to be set off at a memorial in his honor. Believe it or not, there are companies that do this. http://www.angels-flight.net/
- A couple loved their two sons and wanted them to have the best use of their estate after they were gone. Unfortunately, while they loved their two daughters-in-law, they didn’t trust their oldest son’s wife. Particularly, they didn’t trust her spending habits, and their son was too easy going. They knew if they let their oldest son have half of their wealth outright it would be gone in a few years and the only thing they would have to show for it would be a walk-in closet full of shoes and one of everything QVC offered the month after they died. So instead they used a Beneficiary Trust so nothing could come out of the trust without a co-trustee’s approval, who would be their youngest son… who despised his brother’s wife. The back up co-trustees? Their other daughter-in-law who also did not like her, and her back-up was a niece who felt the same way. Now their oldest son, and their grandchildren, would have anything the family needed. But the daughter-in-law’s walk-in closet would have more Macy’s and Target than Vera Wang and Manolo Blahnik. Sometimes making good choices means making sure others don’t make bad ones.
Estate planning offers a wide array of choices for those who wish to take the time to plan ahead. It can protect your loved ones from disasters, confusion, and bureaucratic messes. But not making a plan is also a choice. And that choice means you give up the right to have any choices at all and that you want the State to make the decisions for you.