The pandemic has drastically impacted our society in many ways and the grips of Covid are being felt in every conceivable industry as the world begins to acquaint itself with the new normal. Within the context of estate planning, Covid has sparked many clients to have a greater sense and appreciation of his or her mortality. This is particularly prevalent among younger clients with children, who in the past tended to push-off estate planning—but now these clients are increasingly asking the timeless questions. If I die, who will take care of my children and how will many assets be held and managed?
An estate plan can offer both peace of mind to the person creating the plan (and her family) and give direction as to how she wants her assets distributed at her death. Who should take care of the children if both parents are not living? At what age do the clients want their children to have unrestricted control of their money? For instance, if preferable, a client can nominate certain family members to have legal and physical custody of their children while designating other family members to be in charge of managing the assets for the children. Does the client have an elderly parent with limited financial resources? A properly structured estate plan can provide a mechanism for supporting an elderly parent if that parent is living at the clients’ death.
A trust document, among many benefits, allows clients to craft custom guidance as to how they want their assets distributed and managed at death. Simply put, a trust is a structure in which the creator sets the rules for how he wants his assets distributed at his death, in which he designates the beneficiaries of those assets and appoints an individual to manage the assets and make important decisions on behalf of those beneficiaries. For example, if both parents are not living, at what age should children have complete access to the clients’ assets? Do the clients have a child with special needs that may be eligible to receive certain government benefits? Perhaps they have a child with substance abuse issues who should not have access to money. Trust planning can help to address these concerns in a meaningful way based on a clients’ values and particular circumstances.
Once a client decides to begin the estate planning process, it is important to have a clear picture of her assets and the manner in which a particular asset is distributed at her death. For example, if she owns a home jointly with her spouse, upon her death (in most jurisdictions) full title to the home passes to her spouse by operation of law. By contrast, if she owns life insurance, on her death the proceeds are generally payable in accordance with the beneficiary designation on file with the insurance company. Also, if she has undertaken estate planning in the past, it is important that the terms of her existing estate plan do not conflict with the current updates being made to the plan.
Disputes involving trusts and estates are sometimes unavoidable, even if the testator prepared an ironclad estate plan. The circumstances that give rise to these disputes also originate from personal loss (death of a loved one) so the emotions that interested parties experience can sometimes be the foundation for a party’s willingness to aggressively dispute matters involving a trust or estate. While it is impossible to eliminate the possibility of a dispute, a client should consider the solutions below to diminish the possibility of a dispute.
First, estate planning documents should be kept in a secure place but a client should consider informing the nominated fiduciaries of the location of these documents. What’s the use of the will or trust if the fiduciaries cannot locate it after death? Many U.S. states require interested parties to submit the original of a will to a court to admit the will to “probate”—the process of getting a court to approve the will and to allow an executor to carry out its terms. Some states allow parties to probate a copy of a will, but interested parties will need to demonstrate to the court that the absence of the original will is not the result of the decedent’s intent to revoke it (the absence of the original is generally a rebuttable presumption that the decedent intended to revoke it). The location of the original will is particularly important if the heirs under the will differ from the heirs who would inherit the estate under state law if the decedent did not leave a will. Those who would be entitled to inherit under state statute (called “intestacy”) may be motivated to challenge an interested party’s attempt to probate a copy of the will. Overall, to ensure that a client’s wishes are met, think about how interested parties can access the estate plan documents when necessary.