Expanding on Estate Planning: Keeping it Simple:
Estate planning can be accomplished simply and cheaply by using a combination of beneficiary designations, payable on death designations and joint ownership. This actually works well between spouses, but this, simplest form of estate planning is fraught with problems. It can lead to very complex and costly issues on the back end (after you are gone).
Giving some additional thought and effort into your estate planning on the front end, while you are alive and healthy, will pay dividends. Most people intuitively know that they should have a Last Will and Testament (otherwise known simply as a Will). Doing a Will is more easily put off than done, but it shouldn’t be a daunting prospect.
A Will is still relatively simple. The cost is greater than the alternative, but the likelihood of achieving your desired goals is high. With a Will, you can control how your estate is handled and who will handle it. You control who gets your estate and how they get it.
Your Will controls the assets that do not have built-in beneficiary designations and assets that are not jointly owned. For a couple who owns most of their assets jointly, most of their other assets designate each other as beneficiaries (like life insurance, IRAs, 401(k)’s, etc.). Wills are only intended to direct the administration of their joint estate when they have both passed on.
A Will allows you to choose who will handle your estate. You can choose the person you trust most and who has the greatest ability to get the job done and do it right. That person we call the executor.
A Will allows you to choose a guardian for your children if your children are still minors. Instead of the state stepping in to send them into the foster care system or, possibly, to place them with family you don’t want, you can designate who will raise your children. You can also control who handles the money for your children, and you can provide your specific instructions for how your assets should be used and when your children can take control of them when they get older.
If you have children with special needs or with specific issues, like addiction, or a bad marriage or credit problems, you can protect the assets you leave them from the state, from creditors and spouses and even from your children themselves. You can do this through a Will. Otherwise, there is no protection for the assets you leave behind.
A Will is relatively simple on the front end. When you complete the document and sign it, you are done. Unless you choose to amend the Will in the future, you can forget about it until you pass on and it becomes operative. You may still choose to have some assets go directly to people with beneficiary designations (like life insurance), but there is no other estate planning to do with a Will.
Wills are not very expensive to do, relatively speaking. In that sense, they are inexpensive and simple on the front end. The administration of the estate on the back end, however, involves some expense and complexity with a Will.
The back end complexity is the probate process. Probate administration is handled through the local probate court. “Probate” requires the involvement of an attorney to represent the executor named in the Will and is overseen by a judge. The cost of probate includes the attorney’s fees, court costs and other administrative costs that are necessary to complete the probate process.
The probate process also adds the element of time and delay. The typical probate estate takes about nine (9) months in Illinois (sometimes more, sometimes less) to complete. The probate process also delays the distribution of the assets to the ultimate beneficiaries.
The biggest downside to using a Will as the primary vehicle of estate planning is the cost on the back end after you are gone. The implementation of a Will is costly and time-consuming because of the probate process. The cost and effort on the front end is modest, and having a Will ensures a high degree of control (which can give you confidence that your wishes will be achieved). But, cost and delay on the back end is something to consider.
There is an alternative that eliminates most of the cost and delay on the back end, but it is more expensive and complex on the front end. A Living Trust is the most comprehensive and powerful estate planning tool you can use, but it is also the most expensive and complex of the estate planning tools on the front end.
The complexity and cost of a living Trust is more than made up on the back end because it reduces the complexity and delay of the administration of the estate, making the administration when you are gone simpler, more efficient and less costly. That is the trade-off.
Next we explore the benefits of a living trust.
- Kevin G. Drendel
- Drendel & Jansons Law Group
- 111 Flinn Street
- Batavia, IL 60510
- (630) 406-5440
- (630) 406-6179 fax