One of the first questions clients often ask me is, what is the difference between a will and a trust, and why should I want one or the other? There are five key things a will can’t do – avoid the expense of probate, immediately transfer your assets to your heirs, protect you and your heir's privacy, avoid estate taxes, and provide incapacity protection. But a complete estate plan with a living trust can handle all of these things.
A Will Does Not Shield Your Heirs from the Expense of Probate
This often comes as a surprise to many people, but it’s true – wills do not avoid probate. If the gross value of your estate is over $150,000 in California, your heirs will have to go through the entire slow, expensive and public process of probate even if you have a will. And probate is expensive. Even a modest estate of $200,000 would incur $14,000 in attorney and executor fees.
A Will Won’t Immediately Transfer Your Assets to Your Heirs
While it is theoretically possible to conclude a probate matter in about 6 months, most estates take even longer. What this means is that your beneficiaries may need the money from the estate but they won’t have access to their inheritance until after the court is satisfied that all creditors have been notified, and the estate is in a position to be closed, and the assets distributed. A trust puts the successor trustee immediately in charge.
A Will Won’t Protect You or Your Heirs’ Privacy
Probate is a public court proceeding. One of the required documents for a probate case is a complete inventory detailing all of the assets, and all of the expenses and all of the income during the time of the probate case. The order for distributing all of the assets details exactly who gets what. In today’s world of identity theft, this information is a treasure trove from a scammers perspective.
A Will Can’t Protect Your Estate from Estate Taxes
Estate tax planning for high net worth individuals involves a number of different legal strategies, but none of them involve creating a simple will. The reason is that a will deals with what is in your estate, and in order to deal with estate taxes, we look at ways to move assets out of your estate.
A Will Provides No Incapacity or Disability Protection
A will only takes effect at a person’s death. But if you are unable to make medical or financial decisions, who will be able to make those decisions on your behalf? An executor under a will won’t be able to help you.
The One thing Only a Will Can Do
In California, the one thing a will can do, but a trust can’t, is nominate a guardian for your minor children. That is one reason why all of our estate plans that include a living trust also include a will. A will is always included as a backup document to a living trust.
Some of the most disturbing crimes against the elderly involve financial exploitation. While physical abuse is often easy to spot, financial abuse can be more difficult to detect, as victims often have no idea they’re being swindled until their money suddenly vanishes.
Most victims are more than 70 or 80 years old, and involve crimes like fraud, embezzlement, identity theft, along with welfare and insurance scams. If you’re caring for an elderly loved one, be on the lookout for the following red flags of financial abuse:
1. Unusual financial transactions or spending
The most obvious sign an elderly family member is being exploited is if there are sudden changes to their spending, banking, and/or financial practices. At the same time, the person may start behaving secretively, confused, or otherwise atypical about money matters. A few of the most frequent actions include:
● Someone who is normally meticulous about their finances suddenly starts seeing unpaid bills, non-sufficient funds warnings, and/or unexplained credit card charges.
● The elderly person starts opening, closing, or changing banking and investment accounts, especially without regard to penalties or fees.
● Someone with consistent spending patterns starts showing a sharp increase in spending and/or investing.
● The person’s account sees a suspicious increase in ATM use, withdrawals, and/or checks made out to unfamiliar recipients.
2. The appearance of a “new” person in their life
Because they’re often alone and isolated, seniors are particularly susceptible to being “befriended” by strangers who take advantage of their loneliness to exploit them. And it may not be a stranger—relatives who haven’t been around for years can suddenly start spending lots of time with the person.
This situation is particularly dangerous when the new acquaintance, caregiver, or relative spends time in the person’s home, where they have easy access to the person's accounts, financial statements, and personal documents.
One sign that something is amiss is if the senior acts unusual when it comes to the new caregiver or friend. They may seem nervous when that person is around, stop participating in their usual social events, or be reluctant to speak about the person with you. This is a red flag the new person may be trying to isolate or control them.
3. Unneeded goods, services, or subscriptions
Outside of loneliness, the elderly are often physically unable to handle household chores and maintenance like they used to. Given this, they’ll likely need service providers to take care of the work for them. But every new person they surround themselves with is a potential swindler.
Watch for unscrupulous door-to-door salesmen and home repair contractors, who stop by offering unsolicited products or services, especially related to home remediation issues. And they don’t have to physically present to perpetrate fraud—there are countless telemarketing and email scams that target unsuspecting seniors in order to make a quick buck or steal their identity.
One fairly common scam involves inviting the older person to a free lunch or dinner in exchange for listening to a “seminar” about a financial product or service. The elderly often feel obligated to “buy something” after getting what they thought was a free meal.
Make sure that another adult relative is present before signing any contracts, and always consult with us if you’re unfamiliar with a new investment or financial opportunity.
4. Changes to wills, trusts, titles, power of attorney, etc.
The worst cases of financial abuse of the elderly can even involve the person making changes to wills, trusts, and other estate planning documents. Other potentially harmful changes can involve deeds, refinanced mortgages, property titles, and/or adding someone to a joint account.
Pay especially close attention if the older person seeks to grant power of attorney to someone out of the ordinary, as this can open the door for massive theft of assets and potentially fatal changes in a senior’s caregiving services.
One major advantage to establishing a relationship with a lawyer during your early years is so we can get to know you while you’re young, healthy, and clear, and then monitor if anything goes awry in your later years.
One reason financial scams are so hard to detect is that the elderly—like all of us—are embarrassed to admit they’ve been swindled, or they may not want to get a new “friend” or relative in trouble by telling others about their suspicions.
However, anyone can fall prey to financial fraud, so it’s important the elderly know that you’ve hired us as your Personal Family Lawyer® to provide trusted advice and guidance for all financial and legal matters. We can help secure your family’s most valuable assets with robust legal protections to prevent fraud and scams of all kinds. Call us today to schedule a Family Wealth Planning Session to make the most empowered and informed decisions for yourself and the family members you love.
Assuming you’ve created a plan that contains your unique goals and wishes for your family, the next step is to ensure that your plan is carried out. The first tip is to not hide your estate plan. It’s easy to hang on to “important” paperwork for years, burying the legal “treasure” (your estate plan, and other helpful information) in a mountain of irrelevant papers. Let’s create an effective map by following these steps:
Fully Fund for Future Feats of Family Fealty
Sorry, just like Jack Sparrow can’t resist Spanish gold, I can’t resist an alliteration.
When you leave assets out of your trust, the plan you carefully crafted with your attorney could go by the wayside. Create your plan, then transfer your assets into it. But beware – assets like life insurance and retirement plans have special rules; don’t transfer those assets into your trust without careful instructions from your attorney.
There are two key things I think every parent should communicate to their family, no matter how private they wish to keep the other details of their estate plan.
The first is, tell people who will be in charge, especially the one who will be in charge. The successor trustee needs to be ready to step in at the right time. If they don’t know that they’re “it” they won’t know to act. And everyone else needs to know who to talk to in order to get things moving.
The second thing is that the person who will be in charge next needs to know where the documents are. And have the ability to get those documents. If you use a bank safety deposit box, make sure their name is on the account for the box. Bank safety deposit boxes often present a problem, because the legal documents granting you the authority to access the bank safety deposit box are locked securely in the safety deposit box. A fire safe box at your home keeps the documents accessible while keeping them safe.
What You Don’t Have to Say
You don’t have to spill the beans on how much money you have or the details of all your assets. How much, and where are details for another day. But they are important details for that other day, as I discuss in the last point.
You don’t necessarily have to go into the details of who is getting what. I do think generally the more you communicate on this point, the more problems you’ll avoid for your beneficiaries down the road. If the conversation is going to be too awkward, work with your attorney to communicate some of the “why” behind what you’re doing, either in the estate plan or in a separate letter. Confused kids cause chaos, and chaos leads to expensive litigation.
Create a Map for Later
Stop and think for a minute. The person you’ve chosen to be the successor trustee has a big job. At some point in the future, they’re going to be all alone, handling your affairs, using the information you’ve left behind. Every year the state spends a lot of your money that sits unclaimed, mostly because the people who would have benefited from it had no idea that money was there. We all have buried treasure; the question is what clues will we leave behind for those who follow.
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Growing up my family did a lot of camping. Mountains, plains, rivers, lakes, desert, you name it, we probably set up a tent there. Got to get up close and personal with some amazing places, and not just the usual Lake Tahoe, Yellowstone, Yosemite places.
One of our rituals at the end of every trip was to pick up the camp site. And by that, I mean we would scour the place. By the time, we were done, it would look like only chipmunks had lived there.
I’m sure the next person to arrive at our former campsite appreciated it.
Question: when it’s time for your kids to handle your estate, what will they find? A clean orderly campsite?
A friend of mine remarked recently, “If I don’t get an estate plan in place, my daughter will hate me forever.” Probably a bit of an exaggeration. Probably.
Make your kids love you forever – leave a clean campsite.
To get started with your estate plan, schedule your free vision meeting.