Estate planning is dead?

I came across an article in Forbes today called “Estate Planning is Dead.”  It is dangerously misleading about the need for a proper estate plan, but buried under all of that is the true message that Mr. Scott, the author, believes and was trying to deliver.  And it is a message I can get behind.

That message is that traditional estate planning isn’t about you, it is about what will happen when you die.  It is a plan based around the two great inevitabilities: death and taxes.

Estate planning, with the proper planner, can and should be more.  It should be about your legacy.  What you have brought into this world, and are still bringing into this world.  Proper planning is more than a snapshot of who you are.  It is a projection of what you will be and a plan to be even more of who you are.

Meeting with clients, many have to take a deep breath and say something like “Here we go!” when they start to make their plan.   It feels more like they are about to jump out of an airplane instead of making a sound financial decision.  But it is a sound decision, not just for the estate, but for YOU.  As estate planning draws to a close, my clients feel relief, secure in the knowledge that they can live their lives with a significant chunk put finally in its place.

Dare to reorient your thinking about estate planning.  Think about YOUR future.

Anthony Bourdain’s Will Reveals A Rarely Considered Asset Category

Famous food critic Anthony Bourdain’s fortune, initially reported at $16 million, is being probated in New York at $1.2 million.  This could be just misreported information, but often travelers like himself will have offshore assets that will not be probated in America.

In addition to his cash and tangible assets, most of which was left to his daughter, he left his frequent flyer miles to his wife.  Not all frequent flyer programs will allow miles to be passed on, but if you travel as often, or even a tenth as often as Anthony Bourdain, this is another area to consider when making an estate plan.

How do I change my will?

Everything changes in time, including what we have and who we want to give it to.  Changing your will is not overly complicated, but it is important to do it the right way.  There are a few ways to do it.

  • Add a codicil to your will

A codicil is an addendum that adds to or changes the terms of your will.  Like a will, the document must be witnessed by two uninterested witnesses.  It should be kept with your will, and you should let some trusted people know where it is and that it exists.

  • Rewrite your will

Since most wills are short documents, rewriting a will can also be done relatively quickly and simply, as long as all of the legal requirements of writing a will are met.  The old will should be phyiscally destroyed, and the new will takes its place.

Is an unsent text a valid will?

Last year in Australia a man committed suicide and was found with his phone near his body.  On the phone was a text leaving all of his worldly possessions to other relatives, not his immediate family:

Dave Nic you and Jack keep all that I have house and superannuation, put my ashes in the back garden with Trish Julie will take her stuff only she’s ok gone back to her ex AGAIN I’m beaten . A bit of cash behind TV and a bit in the bank Cash card pin 3636 MRN190162Q 10/10/2016 My will.

The Australian supreme court ruled that the message was a valid will, and the instructions in the text message were carried out.  The Australian law on what makes a will valid is similar to California.  A will must be signed and dated by the maker of the will and witnessed by two witnesses, but the court can overlook those requirements if it is satisfied that a document is meant to be the will but doesn’t meet the criteria.

In that case, there was enough outside evidence to satisfy the court that the will was valid.

Given the general attitude of California cases, California courts are unlikely to find an unsent text to be a valid will.  If nobody witnesses the will, it must be handwritten, signed, and the court must be able to figure out the date of the will.

The court can (but does not usually) ignore these requirements if the writer doesn’t meet them entirely, but even then the will must be signed.  California allows for digital signatures, but an unsent text message is not a digital signature.  Most of the relevant code sections are here.

Either way, it would be an expensive lawsuit in California with claims from both the widow and the other family members.  Even if the man had followed the California instructions for a holographic will,  it would not be cut and dry, and his assets would be subject to probate.

This whole situation could all be avoided by a few hours of preplanning.  Even when using a form will, consulting an attorney will ensure that everything is correctly filled out.  Don’t leave the future of your loved ones to chance.

Last week I participated in a clinic to provide simple wills for seniors.  One senior attended because her doctor recommended that she have a will prepared.  She had a simple estate with only a condo and a few small bank accounts and wanted to ensure that her condo passed to her children.

We advised against doing the will even though her estate was worth only about $500,000.  Why?  Because in California, an estate worth over $150,000 in probateable assets MUST go through the probate process, so a simple will would actually cost a lot more than going to see an attorney.

The probate process is expensive.  The government sets the cost of probate, and this year, probate costs 4% of the first $100,000 of the gross value of the probate estate. 3% of the next $100,000. 2% of the next $800,000. 1% of the next $9 million.  

That means that for a $500,000 estate, probate fees are $13,000.  That is just the state fee.  The attorney and potentially the executor also need to get paid.

The estimated attorney and executor fees, in this case, are roughly equal to the probate fees, so passing the estate via simple will ends up costing well over $30,000.

For typical California homeowners with homes worth over a million, these fees can be over $60,000 easily, and even more expensive depending on the complexity of the assets involved.

Both the woman and her adult children didn’t understand why it would cost so much to pass on something she already owns.  The answer is that there are much cheaper and faster ways to ensure your property gets to the those you love, but none of them are free.  There are various ways to set up the transfer via deed and trust, all of which cost less than $5,000.

I’ll explain why probate is so expensive later this week, but for now, just know that a little preparation, even in the simplest of cases, can save a lot on the back end.

To sum up, even with just a small condo, failure to have an estate plan will cost your estate tens of thousands of dollars, where for a few hundred or thousand up front, you can be sure your property goes to your heirs quickly and efficiently.