I am an estate planner by profession, and an all-around planner at home. To be called a planner in all senses of the word is a badge I wear with pride. I even have an estate plan. Just not an up-to-date one. What?!?
That’s right, I confess. I have not updated my estate plan since our second child was born, and yet this is what I do as my profession! I work with clients who span three generations in age, from families just starting out in their late 20s or early 30s to the 90-something year old who has met his or her great-grandchildren. And, from this, I know I am not alone in passing over my estate planning for more pressing items on the to-do list.
So now that you know we’re in this together, I’ll share with you my answers to three common questions I am often asked about estate planning: “When do I need to do my own estate plan?” “Should I have a trust?” and “Should I talk to my kids about this kind of stuff?”
WHEN SHOULD I DO MY ESTATE PLAN?
Even if you have done nothing, it turns out you do have an estate plan—it just might not be to your liking. California’s “intestate succession” laws (i.e. a fancy way of saying you do not have a Will) dictate who gets what if you do not have a Will or trust in place at your death. Aside from the fact that a one-size-fits-all plan is rarely the right answer, this off-the-shelf plan may have unexpected results. For example, California is a community property state and the California intestate succession laws distribute your community property differently than your separate property, if you have not specified for yourself.
Overwhelmingly, clients affirmatively do something about their estate plans just before or after big life cycle moments – an upcoming marriage or the end of the relationship, the birth of a child, or the death of a parent or spouse. Understandably, these are all reasonable transition moments where our wishes for what should happen if we are not around are placed front and center and we are forced to confront whether our affairs are in order. Estate planning, though, is not a one-and-done activity. Our lives are constantly evolving, the relationships with our family, friends and advisors are changing, and so a periodic 3-5 year check-in on your estate plan is a healthy interval to keep in mind.
SHOULD I HAVE A TRUST?
There is a general preference among planners in California to use a revocable (amendable) trust, sometimes also referred to as a “living trust” or a “family trust,” as the principal document in your core estate plan, rather than relying upon a Will as the principal document. Primarily, this is because assets held in a trust are not subject to a public court supervised probate proceeding at your death. The trustee can privately administer the trust and carry out your wishes according to the instructions left in the trust. There are also numerous other types of trusts used for more specific purposes, including irrevocable trusts that are often tax planning vehicles for wealth transfer and privacy trusts used to shield from public view the true identity of the owner of an asset.
A trust is not the only mechanism for transferring assets without a court supervised probate. Assets held “with rights of survivorship” or with a beneficiary designation pass by the terms of the instrument or designation without court involvement. This can apply to life insurance and retirement plans with proper beneficiary designations, banking and investment accounts held with rights of survivorship or with a “pay on death” or “transfer on death” designation, and real property held with rights of survivorship or, in very limited circumstances a transfer on death deed designation. In some circumstances, these forms of ownership and succession can be appropriate, and sometimes preferable or complementary, to use of a Will or trust, and can provide some solutions for transferring ownership at death without probate if a comprehensive estate plan is not yet in place. Certain forms of joint ownership can have unintended consequences, so be sure to speak with an appropriate advisor before utilizing one of these forms of non-probate transfer.
SHOULD I TALK TO MY KIDS ABOUT THIS?
Talking money is off limits, right? Maybe not anymore. In my time as an estate planner, the conversation about how and when to talk with your children, not just about estate planning matters, but generally about financial responsibility, has become increasingly prevalent. Many advisors offer “Next Gen” classes and financial boot camps for emerging adults. At the recent LABJ Women’s Council breakfast, I shared with the audience a short story about my son’s piggy bank that has four slots — one to save, one to spend, one to invest and one to donate. If we are not willing to talk with our children about money and wealth planning issues, how can we expect them to be responsible and competent in these areas when we are not here?
When planning structures and wealth come as a surprise after the senior generation’s passing, pulling back the curtain all at once can be overwhelming – emotions that one faces can include surprise, resentment, frustration, all while coping with a significant family loss. This is true not just for the next generation, but even in some instances for the surviving spouse. By opening the door to these conversations during our lifetime, we can frame the discussion and contextualize, instead of relying on our estate planning documents to explain what we did not during lifetime.
Whether this is discussing and demonstrating financial responsibility from an early age or discussing with our older children our wishes for when we are not around, this starts with us being willing to have the conversation.
It’s time to move this up on our to-do list.
Stefanie J. Lipson is a Partner with Greenberg Glusker LLP. Her practice focuses on providing families with counsel in all aspects of their personal legacy planning, including operation and succession planning for family owned businesses, tax efficient long term wealth transfer solutions, and funding and ongoing administration of family foundations. Learn more at greenbergglusker.com. This article does not constitute legal advice and does not establish an attorney-client relationship.
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