What is the difference between an estate planning attorney and a financial advisor that gives estate planning advice?
A law degree and a law license.
Why do I make this point? Because one of these people can give legal advice, and the other is breaking the law by giving legal advice.
Nearly every day I am shocked by the number of financial advisors, brokers, bank tellers, and other professionals giving estate planning legal advice to their customers. Some of the advice is accurate, but a substantial portion is just plain wrong and incorrect.
Lately, I have heard the following about living trusts:
- It Is Only Beneficial For Avoiding Taxes
- It Is Only Appropriate for Families If You Have Over $5 Million
- If You Have Beneficiaries on Your Accounts You Don’t Need a Living Trust or Estate Planning
- If You Have a Living Trust You Can’t Be Sued and You Can’t Lose Your House
- Living Trusts Are Not Appropriate In Any Circumstance
I have also heard the following about estate planning:
- You Can Write a Will Yourself and It Will Hold Up In Court
- If Your Executor is Deceased, The Court Will Just Appoint One and It Is Really Simple
- Your Will Doesn’t Have To Be Probated If All Your Accounts Have Beneficiary Designations
Each and every one of these statements are either misleading or completely untrue. There are multiple uses for living trusts from asset protection to Medicaid planning to tax planning to privacy planning to probate avoidance. Only you and your attorney will be able to determine the appropriate strategies and options for your family.
If you have beneficiaries on your accounts, you don’t need a living trust or estate planning? This is a notorious example that I hear frequently which is both misleading and completely inaccurate. First, the truth in the statement, if you name beneficiaries on your financial accounts, those assets pass to the named loved one upon presentation of a valid death certificate to the financial institution.
How will your loved ones access those accounts if they need the money for your funeral, for example, immediately after your death? Remember, it takes several weeks, and sometimes it can even take a month or longer to obtain a valid death certificate.
What if your named beneficiary has predeceased you and their heirs are minors? A conservatorship proceeding must take place for the assets to be managed until that underage beneficiary reaches the age of 18.
What if your named beneficiary is incompetent or incapacitated? Well, he or she can’t inherit via the beneficiary designation and a conservatorship proceeding must take place to take possession of those assets. Plus, the inheritance could invalidate that loved one for certain government benefits he or she may be receiving at the time for their disability.
What if your named beneficiary is in an unhealthy marriage, going to get divorced, is being sued, or has creditors pursing him or her? Well, those assets could be lost via the beneficiary designation passing directly to him or her and in their individual name.
Simply naming a beneficiary on your financial accounts may not protect your family and could in fact be very damaging to your family members and to your legacy.
If you have a living trust, you can’t be sued? This is misleading. The most common type of living trust is the revocable living trust and it is most commonly used to avoid probate, ensure privacy of estate settlement, and provide lifetime asset protection for your adult children beneficiaries. However, these are what the IRS call “Grantor Trusts.” In these trusts, you remain the trustee and if you are sued, the trust makes no difference for purposes of asset protection.
You can write your Will yourself and it will hold up in court. This is another misleading piece of legal advice that I hear frequently from financial advisors, bank tellers, and others. If you write your Will yourself, it is referred to as a Holographic Will. When you die, the court will require your loved ones to appear in court to testify that this is your handwriting. This can create a number of issues, especially if your loved ones are not familiar with your handwriting or your loved ones are not around or living out of state. This is not the case when you have your Will professionally drawn up with a “Self-Proving Affidavit” attached. In this case, the court will presume its validity from the two witnesses who signed the Self-Proving Affidavit.”
If your executor is deceased, the court will just appoint one and it is really simple. Also, very misleading advice. If your executor is deceased that you named in your Will, yes, the court will have to appoint a new one, but it is not a simple process. It will require additional court hearings and the family members agreeing on who will be named executor (or personal representative) to administer your probate estate.
You Will doesn’t have to be probated if all of your accounts have beneficiary designations? I hear this very frequently and it is incredibly misleading as one has nothing to do with the other. If you have a Last Will and Testament, your executor has a fiduciary duty to present that Will to the probate court for administration. The executor’s failure to do so can result in personal liability to the estate. Whether your accounts have beneficiary designations or not only has to do with the designation of probate assets and non-probate assets for purposes of administering your probate estate.
The morale of this story … be careful who you accept professional advice from and the professional advice that you rely upon. When it comes to anything regarding estate planning and legal ramification of legal life planning, make sure you get your advice from a qualified and experienced estate planning attorney.
If you have questions about estate planning, schedule a time to meet with your Nashville, Tennessee Estate Planning Attorney to discuss your legal questions and determine which legal options might be best for you and your family.
Call Daniel A. Perry Today at (615) 490-0477 to begin the process of protecting your loved ones and your family today!