by Tom McGirr
Joe and Margaret are 44 years old. They have two young children, own a nice home and have a growing estate that includes a 401k, IRA’s and life insurance. Although both are in good health, they have discussed the need to at least get a will drawn. They would like to make some small gifts to their favorite charities, while ensuring the children are provided for. Like so many, they have procrastinated, and it is still on the list of things to do “later.”
Unfortunately, there is not always a “later.” Joe and Margaret like to go out to dinner. What would happen if on the way home, a drunk driver ran the stop light and slammed into their car, killing both of them? Or taking another scenario, Joe is out for his daily jog and has a fatal heart attack. Or maybe Margaret develops a clot during minor surgery and suffers a stoke leaving her incapacitated. These, and many other possible scenarios, could mean it is now too late for Joe and Margaret to put together the optimum estate plan.
“Oh come on-that will never happen to me…” you say. That may well be the case, but you should be aware of the possible consequences.
Why a Simple Will is Simply Not Enough
Without a will, you really are leaving it up to the State to determine how your estate assets are to be distributed. The plan essentially first favors your spouse and children, but if deceased, can pass assets back up to your parents, and if they are not around, down to brothers, sisters, nieces, nephews, and to people you probably don’t even know, let alone want to pass your assets to. And if you had wanted some assets to pass to your favorite charities, as do Joe and Margaret, it will not happen.
A “simple will,” which normally gives everything to each other and then to the children outright is also often insufficient. While such a plan does defer taxes until the death of the surviving spouse, it may fail to utilize the decedent’s personal tax exemptions ($1 million for Oregon, $2 million for Washington, and $5.4 million for Federal). When you add up the value of your home, investments, retirement accounts and life insurance, you might be surprised to see just how much you have. The simple will approach could also necessitate costly probates on both deaths.
And what about the children? Joe and Margaret’s children are too young to receive assets outright; hence, the State will impose a costly court appointed conservatorship and guardianship to handle the funds and care for the children. At age 18, the child is magically deemed mature enough to handle his or her assets.
A conservatorship for your children can be avoided through proper planning. With either a will or a living trust, you can provide that should you die leaving minor children, a trust will be created at that time to manage the assets for the children until they reach a specified age you feel would be appropriate. They receive as much assistance as the trustee determines necessary for their health, education and welfare, working closely with the child’s legal guardian.
The Benefits of a Revocable Living Trust
For many, the Revocable Living Trust is the best estate-planning tool. In addition to doing everything a will can do, it can proactively address your possible incapacity. You control things until you become mentally incapacitated. In that event, your designated successor trustee steps in, manages your assets on your behalf, provides for your care, and at death, carries out your distribution plan without probate. Columbia Bank Trust and Investment Services often is a good choice to serve as successor trustee.
Planning and implementing an estate plan does take some time and money. Getting started can seem overwhelming especially if there are challenging family situations or complicated estate assets involved. However, the consequences of having an inadequate plan can be very expensive and having no plan can be disastrous.
Perhaps a good place to start is to request a complimentary estate planning consultation with a Columbia Bank Trust and Investment Services [link] specialist. While we do not draft legal agreements, we have had experience in dealing with a wide range of estate planning challenges. They can discuss your current situation and offer suggestions on ways to accomplish you goals with the least amount of estate taxes and heartache. Give us a call today!
Thomas McGirr, JD, CTFA is Certified Trust and Financial Advisor with Columbia Trust and Investment Services. He can be contacted at 503-399-2901 or via email:firstname.lastname@example.org
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