Dr. Mor's Column - January
The Big Misconception of Estate Planning
By Eva Mor, PhD

Estate planning is highly misunderstood. It is perceived as something that only the wealthy need to focus on. But in actuality, everybody needs to plan for the future. Planning ahead is not only financially prudent, but it also helps you to develop a “blue print” to follow for future needs. Through such planning, you may be surprised to realize what you actual needs may be for your senior years, and this estate planning will make you aware if you are financially over or under your specific marker of needs. Most people find it difficult to deal with financial issues that relate to their death. It is easy to procrastinate or ignore it entirely. It is a misconception that if we share legal ownership of all our possessions with our heirs, that ownership will automatically be transferred to them. This may be an expensive misconception. Although most people think of the distribution of assets after their death; one should also look at the possibility of distribution before death. One should consider that as a way of preserving the assets. It is wise to take advice from an estate planner and/or a good accountant. It is important to understand that if one does not have a will, by law, the state has the right to step in and divide your property, with no consideration, or minimal consideration to the deceased’s family. The state can select the heirs your money goes to allow large sums to the tax collectors, and than charge your estate for this service. And those fees can be quite high. Yet even today, seven out of ten people have not had a will made up. The main reasons people do not have a will is their discomfort in dealing with the concept of their own death, or an indecisiveness as to how to divide their wealth. Most people in need of a will also worry about the cost of lawyers to prepare the will, yet the average cost of a will is between $300 and $500. A will should be reviewed every three to five years to make sure that it is updated to reflect your wishes and financial status. The lawyer should keep the original, while you should keep a copy.

Many people are relying more and more on the abundance of Internet sources that can provide them with a tool such as a will or a trust builder. For as little as $70 you can develop a will quite easily on a site called LegalZoom.com. Recently, the numbers of legal sites have increased, and they are extremely sophisticated. They include not only do-it-yourself wills, but help with estate planning, as well. Estate planning can at times be costly, it basically depends on how complicated the estate is. Living trusts can cost even higher. So if you are reluctant to pay an estate planner, you may consider the Internet option. You have to follow the do-it-yourself, online instructions very carefully when you write a will or a trust. The signing of a will requires two signatures of witnesses, but it does not require those signatures to be notarized. As opposed to the will, the estate planning, trusts, and living trust almost always require witnesses and notarizing the documents to make them legally valid. Some of the regulations may vary from state to state, so make sure you check the requirements in the state in which you file the documents. None of the self-filled documents need to be filed in court to make it legal, but it would be advisable to give a copy to your executors and your lawyer, if you have one, and let your family know where you are keeping the original.

As to the cost, Quicken Will Maker Plus has added living trusts to their site, as well as power of attorney, starting at a cost of $49.99 (www.nolo.com). Other sites that may concentrate on specific types of trusts such as Living Trusts on the Web, www.livingtrustontheweb.com, which charges about $149 for an individual, and $199 for a couple. Those prices were accurate at the time my book Making the Golden Years Golden went to print.
Many experts advise that do-it-yourself estate planning is most suitable for people whose estate is worth less than $2 million, according to an Oct. 14, 2007 article in The New York Times. Above $2 million, the federal tax kicks in.
Estate planning not only provides for distribution after death, but may also provide protection for your money before you die. If you do not plan and leave written instruction as to what you want to be done for you if you become incapacitated, the state can come in and make the decisions for you. At times people are hesitant and uncomfortable planning ahead; they may do it in increments, which may be easier.
It is very important that the legal documents in which you leave your dear one’s wishes are kept up to date. The will, for instance, will not negate other documents that may be in place, such as bank accounts that are set up in trust for someone and are not included in the will. Insurance policies that have a designated beneficiary will not be included in the will.
If a named beneficiary has died, and that beneficiary was not taken off the insurance policy, account, or trust, the court will intervene, and make the decisions, as to who gets what. This is the main reason why it is of utmost importance that you update your will or trusts regularly. The court may appoint an attorney to represent your interests; the attorney’s fee will be charged to your estate.
It may be a good idea to set up a secondary beneficiary, especially if the first one is elderly. It will be beneficial to set up the will as clear as possible, to avoid any misunderstanding or conflict. This has to be done if you want the will to be carried out to your specifications. Review the will annually to make sure that all beneficiaries are still the ones to whom you want to leave your money.
You also need to verify that the executors you picked to carry out your wishes are still willing and able to fill this role. If the situation changes and that person is unable or unwilling to fill this role, you need to choose someone else.
Note that the will becomes effective only after one’s death. So if one is unconscious or mentally unable to make decisions, it does not mean the will is going to be probated. So for such scenarios you should establish other instruments to take care of your needs and protect your estate.
When writing a will or planning trusts, do not assume that all your heirs, family members, friends, and others whom you may want to leave part or all of your estate will get along and agree upon everything related to the probate of your estate. If you go on the assumption that people are not perfect and conflict is likely to take place, you should do all that it is in your power to minimize tensions among the people that will benefit from your estate. The best way to do that is to be as clear and specific as you possibly can. Providing copies of your will to everyone involved, is also helpful, thus they will know what to expect.
Regardless if you are in your forties, a baby-boomer, or in your seventies and eighties, we all need for our own protection as well as for our loved ones, to put in place clear and specific guidelines as to how and to whom we like to leave our estate.