Nov 6

Estate planning is often a mystery to clients

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People know at a visceral level what a will is, but do not know the benefits and risks of making a will; and, if asked what a trust is or what its purpose might be, they haven’t a clue.

The reality is that the creation of an estate plan is, like many things, made obscure by those who sell it.   Like many professions, it is in the interest of a practitioner to make a product appear difficult and technically complex to a client, the thinking goes, the more likely the client or patient will rely on “experts” to guide them through the process.  For a considerable fee.  Often at the end of that process, the client has an estate plan that is a routine “product” sold by a law firm and has  no more understanding of the reason for the plan or how it works at the end when he or she writes the check than at the beginning.

At its most basic level, the key central element of an estate plan is a set of documents that provide a road map for the maker’s family of how and when their property is to be distributed after his or her death.  There are other bells and whistles, but that is really all it is.  The set of documents really are the maker’s answers to questions that are often not asked until after his or her death about property, bequests, and who will be in charge of the process.  Historically, these answers have been reduced to a set of instructions called a will, a document considered important enough to have certain formalities and be witnessed to be effective.

A will is an effective device for answering those key questions, but it has difficulties.  First, if this is the only estate planning document, the decedent’s estate will require a probate to be closed.  A probate is a time honored legal process in which a judge oversees satisfaction of debts and requires that the heirs honor the wishes of the maker of the will.  That means the estate will bear the expense of lawyers and the court proceeding, and the maker’s affairs will become public, which many believe to be an invasion of their privacy.

The remedy developed over time to avoid the expense of probate and to address privacy concerns has been the implementation of trusts to take the place of wills in many cases.  Trusts have been developed as devices to separate the legal and equitable ownership of property from the owner, to allow the appearance of a separate entity owning the property, to avoid a probate.  Not surprisingly, this separation of property from the owner has provided opportunity for wealth preservation and tax planning, which is beyond the scope of this entry.  Suffice it to say, that in an appropriate case, a trust or series of trusts can and do defer tax, protect privacy, and act to preserve wealth.

The process begins by the decision of the maker, either an individual or a husband and wife, to plan for the future with the above concerns in mind.  The first step in our practice is the evaluation of the size of the estate, the nature of its assets, and the intentions of the makers, both during their lives and after death.  The easy part is the listing of assets. The difficult part is making decisions about what to do with it.  Often clients making estate planning decisions are not acting in a vacuum, and have considerable family or business pressures that influence their decision making process.  It is our policy to advise clients that they must make themselves happy first, and satisfying the needs or demands of others will prove a set of impossibly moving targets.

After the evaluation of the estate has been undertaken, and the client has made basic decisions to guide the attorney in preparation of important documents, first drafts of estate documents are prepared consistent with the client’s wishes.  This usually includes a will, a trust or set of trusts, an advance health care directive to allow a trusted person to make health care decisions if the maker becomes disabled and cannot make those decisions for him- or herself, special powers of attorney for funding the trust if the maker cannot, and documents conveying or assigning property to the trust or trusts to assure the maker that all of his or her property is “funded” into the trust(s) and will be disposed of as he or she wishes.

The last element of the process, “funding” the trust, is often the least well understood.  If the trust does not have ownership of the property, the maker or successor trustee will have no authority over the property, which may leave property out of the trust, effectively defeating the process of trust creation.

After the trust is made, and has been funded, the frequently held belief is that the trust is chiseled in stone and cannot be changed.  This is only true in two instances.  First, if the makers create “irrevocable” trusts, which cannot be changed without a court order.  There are many estate plans that benefit from irrevocable trusts, for example, life insurance trusts, which benefit from having a stranger as trustee.  Second, if a husband and wife create what is known as an “inter-vivos” revocable trust, when the first spouse dies, significant portions of the trust become irrevocable to protect the intent of the deceased spouse from subsequent change by the survivor.  Otherwise, a revocable trust can be changed at any time by the makers.

To conclude, the process of creating an estate plan should not be a mystery.  It should be a means to clarify and guarantee the makers’ wishes after their death or to implement tax and management strategies that can be advantageous while alive.

If you have questions regarding preparing an estate plan or modifying an existing plan, please email O’Connell & Associates at

  1. saintdo 7 Jan 2012 |

    Good job!