Just about everyone knows he or she should have an estate plan, but how much planning is enough? When is a basic estate plan sufficient, and when should a more complex plan be put into place?
Is a basic estate plan right for me?
Generally speaking, a basic estate plan may be the right choice for you if:
1) You are relatively young and in good health. If you are creating a will for the statistically unlikely event that you don’t beat the odds, you may not require a complicated estate plan if you meet the other criteria below.
2) Your current and expected estate (including life insurance) does not approach $1 million. While the current federal estate tax exemption is higher than that in 2012 (approximately $5 million), it may drop to $1 million in 2013 if Congress does not act. In addition, the state estate tax in Connecticut is $2 million and in New York is $1 million.
3) You do not require any specialized planning. If you wish to engage in complex planning or have a particular situation that needs greater care (such as a special needs child who may benefit from a special needs trust), you may want to consider additional steps beyond a basic estate plan.
4) You do not own a business or family entity. Family-owned businesses and entities can pose special succession issues, including valuations, liquidity and control, that require more advanced estate planning.
5) You and your spouse or partner (if any) do not have children from another marriage/parent. If there are sufficient assets involved, families with children from previous marriages or conceived prior to marriage often benefit from special arrangements to direct that their children, and not a current spouse’s family (upon his or her death), ultimately receive the inheritance a parent intended when drafting the will.
6) You do not intend to create a complicated list of specific bequests. If you intend to make specific bequests of certain assets, such as a car or a treasured painting, these can be done with a basic will. By contrast, if you have twenty cousins who should each receive one piece of jewelry, one artwork, 1/20th of your book collection and so on, you may want to bolster the language of your will to maximize harmony among your heirs and assure that your wishes are respected. Specific bequests can get complicated, need to be specifically documented and can cause will contests, disagreements or simple family bitterness if heirs are unclear about what they should have received or feel cheated by the “process”.
7) You have no reason to expect a will contest. If you intend to leave your estate in a manner that will anger or incite certain would-be heirs or have other “surprises” in your will, you will want to draft the will provisions extremely carefully to mitigate risks of litigation over your estate. For example, you may leave your estate to a non-marital partner rather than family members, which could generate friction after your death.
8) You are not concerned about generating immediate liquidity for your family. If cash could be tight in the event of your death, and you want to quicken the probate process, you may consider putting a revocable living trust into place in addition to a will. Any decision to create a revocable living trust or other trust should be based on a holistic approach to your estate plan.
9) You are not concerned about the public nature of the probate process. Trusts generally preserve your privacy, with some exceptions. Wills do not.
10) You do not expect any of the above factors to be relevant in the near future. Unless you plan to review your estate plan on an annual basis (and actually do it), you should create a plan that will not need to be revised based on facts that may come into being in the next three to five years. For example, you may be expecting an inheritance that would put your own estate closer to $1 million or be considering a remarriage with children involved. While it is always a good idea to keep in mind your situation and potential changes in law that might affect your estate plan, if you know that one of the above factors is likely to occur soon, you should plan ahead so that the time, emotional investment and money that you put into creating the plan pays off as you expect.
The information above is general in nature and may not be optimum for your individual situation. Please contact me or another qualified estate planning attorney to determine the best estate plan to fit your needs. The enclosed also appears on my website at www.MyStarterWill.com. MyStarterWill is a trademark of Anne Marie Segal.
Law Office of Anne Marie Segal provides estate planning advice and other legal counsel to businesses and individuals. None of the information posted on this site constitutes legal advice or forms an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.