Many people want to keep their arrangements as uncomplicated as possible when it comes to estate planning. After all, the more complex an estate plan is, the more expensive it is, right? The team at Smith Barid often hears this from our clients, and we understand the perspective that simpler is better.
In some cases, that could be true; however, there are many instances where a simple will is likely to create big headaches and a more complicated situation in the future. In these cases, paying more for a solid plan upfront can absorb complications and additional expenses down the road for you and your heirs.
Circumstances When a Simple Will Won’t Cut It
The best-case scenario is that when we die or become incapacitated, all our affairs are in order. That way, our wishes for how to proceed in our absence can be followed to the letter. The truth is, there are likely a lot of factors you may not be considering, which could make a simple will alone more difficult and/or expensive to enforce. Here are just a handful of common ones to consider when deciding.
Probate: Probate is a lengthy court process where assets are transferred after your death to individuals named in your will. Probate is public, time-consuming, and comes at an additional cost. In the state of Georgia, establishing a living trust is often a great solution to avoid probate. This comes with up-front costs, but will effectively prevent a complex probate proceeding.
Taxes: Georgia has no estate or inheritance tax, and federal estate taxes apply to people who meet a specific asset threshold ($12.06 million). This doesn’t mean that anyone with an estate under that amount should forget about tax planning. Suppose you have property or assets in other states, or assets that can generate subsequent earnings after your death. In that case, you should speak with a legal professional with tax expertise to help make an informed choice about your estate plan. You also need to keep in mind that the estate tax changes every so often and your plan needs to be updated to reflect those changes.
Minor Children: Parents of minor children need a will to nominate a guardian. You may also consider setting up a trust to hold any inheritance for those children. If both parents pass away, and there is no trust, the child’s inheritance could be held by the court until they turn 18. At that time, the entire inheritance may be given to the child. This leaves the parents without the power to designate the purpose and manner of spending those assets.
By setting up a trust, you can specify how the inheritance should be used (education, living expenses, etc). You can also place conditions on the inheritance, such as ensuring a responsible lifestyle, directing when sums of money are received, and when your heirs may receive the inheritance outright. Someone of your choosing will administer a trust to ensure the money is managed in accordance with your wishes. You can also protect the inheritance from other family members or people who may wish to contest your will and other creditors.
Second Marriages and Blended Families: Especially when married spouses have children from a prior relationship, a “simple” will may not be adequate. Generally, when spouses execute a simple will, they leave their estate to the living spouse and then divide assets among their children. This can get complicated after a divorce and remarriage.
After the first spouse passes away, the second spouse inherits everything. The inheritance can get increasingly complicated if their estate is left to a spouse and/or children from another marriage. The children from the first marriage may even be left out of the inheritance altogether. Spouses should establish a marital trust to ensure children of both spouses will be provided for.
Incapacity Planning: Consider what happens if you become disabled or otherwise unable to make financial and medical decisions for yourself. You need to have proper documents in place to ensure you are protected in the event of your incapacitation. Otherwise, it may be left up to a judge, or worse, somebody who doesn’t have your best interests in mind.
There are many instances where a simple will fails to provide adequate protection for a seemingly straightforward estate. If you’re interested in learning more about what kind of estate plan would be appropriate for your situation, the team at Smith Barid LLC is here to help you make educated decisions about your future. Contact us today for more information.