Celebrity estate stories are rife with lessons about mistakes to avoid when creating an estate plan, such as problems with the estates of Philip Seymour Hoffman and Ernie Banks of the Chicago Cubs, Bing Crosby, just to name a few. Howard Hughes, one of the richest people in the world had his estate split between 22 cousins, some he didn’t know after THIRTY-FOUR YEARS OF LITIGATION! Failure to put into place a good estate plan may lead to probate, taxes and family disputes.
More than 65% of Americans do not have an estate plan. Many do not create a will, trust or other estate planning documents because they think they are too young or not rich enough to warrant a plan.
An estate plan names people who will make medical, legal and financial decisions for you if you ever become incapacitated. Documents such as powers of attorney, health care proxies, living wills and trusts are part of disability planning. This is far better than letting our government, “Big Brother” make these decisions for you!
A good estate plan names your beneficiaries (people or institutions who you want to leave your money and assets to) when you die. Many people think a will is the most important estate planning document. A will only says who you want your money and assets to go to. It will not avoid probate proceedings, which can be costly, may last a long time and possibly be contested. Wills do not avoid probate and may force multiple probates if you own assets in other states. Also if you only have a will, anyone can simply look into the court file and learn all about your assets.
Some people think that owning assets jointly is a substitute for an estate plan. With joint ownership, the right of survivorship means that if one owner dies the other person owns the property 100 percent. The survivor may leave the asset to whomever they want, ignoring agreements or promises you may have made prior to one party dying. Also jointly held assets will not protect you from long term care costs.
The last thing you would want is for a loved one to lose everything after you die because of the escalating health care costs you ran up, prior to passing away. Certain types of trusts may also protect those assets from nursing home costs.