Estate Planning for Smart People

August 9, 2016

Estate Planning for Smart People does take off on the better known series. And, for sure, I’m not offering a full-fledged book here. Instead, I write to share some thoughts and provide some guidance for a particular group of people: smart people.

estate planning

Mark Rubin

Introductory Comments

If you’re here, you’re a smart person. Why? Because you’re devoting time and energy to the estate planning process. It’s a process, for sure, and it does take time and energy. And lots of thinking!

For many reasons the whole estate planning thing makes people uncomfortable. Here are some of those reasons:

  • It’s about not being among us.
  • Estate planning often involves hard decisions about important matters.
  • It can be mysterious and intimidating.
  • People think they will have to spend a fortune to get help.

On the death thing—I could have stopped right there, right?—no one can make it go away. But, and this matters, estate planning is about making sure our loved ones can grieve, smile, laugh, and remember us fondly … without stressing and spending money dealing with our passing.

From a comment at my blog, MarkRubinWrites, came these words, a while back:

A word of wisdom you can pass on to your clients:   Everybody needs a Will, and please keep Beneficiary information up to date and valid. These are simple responsibilities that save family members enormous amounts of time and anguish.

Hard decisions? Sure, but they’re decisions we get to make. Without competent estate planning, others will be making those choices. That may be fine, but it might not be.

Does estate planning have to be mysterious and intimidating? No. Just, No!

Money? Compared to the form Last Will and Testament aka Will you can buy on the Internet for $79, estate planning costs a fortune. No, not a fortune, but much more than $79. How much more? Read on, as I answer the questions I think you might have / ought to have, or skip to the end.

So what is estate planning?

For some, estate planning means hiring an attorney, paying for complicated documents which, too often, focus on tax issues, and calling it a day. From my vantage point, that approach turns what matters upside down.

For me, estate planning starts with deep thinking about what does and doesn’t matter. Who will take care of the kids? Will there be enough money? When will the money get distributed? To whom, and in what amounts? What about the business? Etc.

Documents count, for sure. However, for many people simple documents work very well. Achieving outcomes really depends on asset titling, being organized, and communicating with those people who will look after your estate when you’re gone.

What about the death tax?

Ah, the death tax aka the estate tax. Let’s cut to the chase: If you’re single the federal estate tax only applies to that portion of your estate which exceeds $11,180,000. And if you’re married? Each of you has the same exclusion amount, so the estate tax only applies if you, as a couple, have more than $22M of assets. (Complicated does not adequately characterize federal estate taxation. That said, less than one percent—way less—of all estates pay estate taxes at the federal level. If you won’t likely have a $10,000,000 estate when you die, relax!)

Not buying my words about estate taxes. Listen to David Brancaccio for Marketplace, with A Closer Look at Inheritance Taxes. It’s an excellent radio story about how poorly many Americans understand the whole estate tax matter.

You said federal estate tax?

I did. Fifteen states and the District of Columbia have an estate tax. Six states have an inheritance tax. (The difference? An estate tax gets paid by the estate. Those who receive money pay the inheritance tax.) Arizona residents pay no estate tax or inheritance tax. (Here’s a link to information about state estate and inheritance taxes.)

So, no estate taxes. Can I worry about probate?

Sure you can, but not for any especially good reason. Simple tools exist to transfer assets without ever filing a probate case in court. They include beneficiary deeds, which bring about the transfer of real estate with the recording of a death certificate. POD (payable on death) and TOD (transfer on death)—they’re the same thing—designations on bank and brokerage accounts effect a transfer to the named person or persons with the presentation of a death certificate. Auto titles can also be transferred easily.

Why don’t I need a trust?

I didn’t say you didn’t … but many people have one who probably don’t need one. Trusts are arrangements which allow assets to pass from generation to generation without probate proceedings. But, the tools I just mention will accomplish the same outcome for much less money. Avoiding probate rarely offers a good reason to establish a trust.

So when does a trust make sense?

That’s a really good question. Here are some situations.

  • You have a child with special needs who receives governmental assistance, and you want to pass some money along for extras, without causing a loss of benefits.
  • One of your children does not handle money well, or s/he owes everyone lots of money. Paying others or having the money spent in days? Not your plan.
  • Young children cannot handle the assets if you pass, even when they turn 18.
  • You have real estate in several states, and some of them don’t have laws which allow for beneficiary deeds or other simple tools for transferring ownership.

And when does a trust make no sense at all?

When someone offers you a free meal, along with a “sell job” about how the lawyers and the state will get all of your money if you don’t hire them to create your trust, right away.

Sorry, but I’m back on probate. With a probate, won’t everybody know my business?

Probate files are accessible. However, estate inventories need not be filed with the court, accountings get filed under seal, and many other documents qualify for “sealed” status. (Opening a “sealed” document requires something akin to an Act of Congress.) So, privacy should not be a big concern. Those who sell trusts hard push this point, but it’s really a non-issue.

One more thing. With a trust won’t I lessen the likelihood that everyone will set to fighting?

No, actually. The very best cases I’ve had in my 35 years as a lawyer—the most interesting, challenging, and lucrative ones—have been trust battles. Nothing about a trust makes it more or less likely to be challenged than a Will.

So what documents do I need?

If you hire me or someone like me to help you with your estate planning, you will end up with the following documents:

  • A Last Will and Testament aka a Will.
  • A Durable Power of Attorney, which will give someone—often your spouse or a trusted child—the power to act for you if you lack the capacity to act on your own.
  • A Healthcare Power of Attorney, which will give someone—often your spouse or a trusted child—the power to make healthcare decisions for you if you lack the capacity to make them on your own.
  • A HIPAA Release, which gives someone—again, the spouse or a trusted child—the ability to obtain medical records.
  • A Trust Indenture—the fancy name for a trust—if it’s appropriate. By the way, your Will might include a testamentary trust—fancy for a trust created when you die—to deal with the special needs or child having / spending issues.

What about an Executor?

In Arizona, for almost 50 years, we’ve been using a gender neutral term—Personal Representative—instead of Executor / Executrix. Your PR handles your estate when you die. He or she should be trustworthy and competent, and someone who gets along well with others. The job involves gathering and distributing assets. With proper titling of assets, there might be almost nothing to do, but with complicated assets—businesses are complicated especially when the owner dies—there might be some difficult work.

“Gets along well with others?”

Real money can get spent on lawyers after you’re gone. But for messed up estates and overcharging—it happens, unfortunately—fees grow out of fights. Sometimes it’s the Personal Representative—maybe it’s the bossy oldest brother, who everyone else resents—whose very presence in the official role gets things going. Not necessarily, but often enough.

I get trustworthy, but what about competent?

Competency really depends. If you own a business and spouse and children only know from the fact that you provide well for them, you might want to identify a professional—an attorney or a Licensed Fiduciary—to handle your estate. Your estate planner can and should advise you on these issues.

You mentioned children a while back. Mine are young?

Right, and they matter most of all. First, know this: If you don’t get your estate planning done and your documents signed, your children will not be going to an orphanage. The courts figure out who ought to be caring for children really well. But, everything works better when you have weighed in. Who will care for your kids matters. Will it be an aunt or uncle? Which one? If it’s your parents, are they well enough, and up for the job?

Concluding Remarks

Thanks so much for your great, great questions. I hope my answers helped you to better understand estate planning.

“Wait, what? You expected me to explain the difference between a revocable and an irrevocable trust? Define CRUTs and CRATs? You want details about the stepped-up basis rules?”

No, I did not provide you with a textbook on estate planning issues. The issues matter, for sure, but they matter less than many people think they do. A more holistic process makes more sense, I think, and too often the more complicated nuances get in the way of good planning. If your situation requires nuances, we’ll tend to them, but only after we have focused on the stuff that really matters.

Oh. Fees? I will work on an hourly or fixed fee basis. My hourly rate is $400 per hour. Fixed fees depend on your circumstances. Generally, however, I can provide an estate plan—sans trust—for $1200, or $1500 for a married couple. A relatively simple trust costs $2500.

So, if you’re ready to move forward, and if I’ve made the case for the smart person’s approach, contact me. I’m Mark Rubin at Rubin & Bernstein PLLC. I can be reached at 520.523.3038, or by email at (Note: Please review the fine print at Fine Print.)




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