Before you go to some random website and try to DIY an estate plan, consider the fact that you may be tripping over dollars to pick up pennies. A will that’s not done properly isn’t worth the paper it’s printed on. And that’s just the people who actually make the effort to prepare a will.
Most people have a hard time facing their immortality so it’s human nature to procrastinate and avoid the process of preparing a will until a major life trigger springs them into action.
The problem is when you wait until something happens such as a marriage, the birth of a child, a divorce or a death in the family that leaves you scrambling to catch up. It’s much easier to make plans ahead of time than in crisis mode.
Kristi Hartmann, an estate planning attorney at Hartmann Law Office LLC told KMBZ in an exclusive interview many people don’t realize that without an estate plan, or even if they have one but the terms are not clearly documented and regularly updated, a sudden accident or death can cause big conflicts in the family.
According to Hartmann, most Americans are under the false impression that estate planning is only necessary for the wealthy. That’s a myth. The reality is that to minimize confusion, unnecessary costs, and stress for loved ones after a death, an estate plan is crucial for everyone, regardless of income or net worth.
Without proper preparation and documentation, assets including houses, retirement plans and savings accounts can get tied up in court for years, sometimes requiring expensive legal assistance to clean up the mess. It’s much more cost effective to hire an estate planning attorney to get everything worked out on paper before the inevitable happens.
“Ideally in most circumstances people aren’t going to need to probate the will. It’s becoming the goal of more and more of my clients to avoid the probate process completely,” said Hartmann. That’s because probate is often long and costly. So many people seek ways to avoid probate, such as setting up trusts or transferring bank accounts to children while they are still living.
But there are important nuances to consider. For example, never put a house in a child’s name while you are still alive. If the child goes bankrupt, creditors can seize the house. Unless it’s held in a trust.
A trust can be more expensive upfront because it requires a competent attorney but it provides benefits that a will doesn’t. When structured properly, trusts will help avoid guardianship or conservatorship if you become incapacitated.
A will only works after you've died while a trust works all the time, including periods of incapacity before death. Trusts also avoid probate in most cases which helps beneficiaries get to assets more quickly, saving time and court fees. Depending on how it’s structured, a trust may also reduce estate taxes owed and can protect an estate from an heir’s creditors.
That being said Hartmann warned KMBZ listeners that while many estate planning attorneys set up an ironclad trust with all the right legal language, they don’t oversee the most important step: funding the trust. “A trust is a worthless document unless it is properly funded with assets,” she said.
Hartmann assists in getting her client’s trusts funded by making sure all their assets get transferred into the trust. “I help my clients with funding because they’re not going to do it themselves,” she said.
Anyone with assets that doesn’t want the state to determine where their assets go needs to have the proper documents in place. And once you do have a will or living trust it’s critical to keep track of what you have. In the event of divorce, you need to change beneficiaries.