There are five major problems that can arise as a result or no, or poor, estate planning. Here’s what you want your family to avoid:

1. Living Probate. If you become disabled, the probate court will decide how your estate is to be managed so your medical and nursing home care bills can be paid. This can include the decision to sell your home, for example, to pay nursing care expenses. The Living Probate process is, in and of itself, costly, lengthy, and stressful for your heirs.
2. Death Probate. As mentioned earlier, the court process used to distribute your estate after your death is lengthy and expensive for your family.
3. Death Taxes. In Massachusetts, the combined state and federal death taxes can consume over 50% of your estate’s worth.
4. Nursing Care Expenses. If you or your spouse needs to be in a nursing home or rehabilitation facility, or need home care, expenses mount quickly and can deplete your estate.
5. Death of your Values. Without proper planning, the values and principles you hoped would be reflected in the distribution of your assets may be glossed over or worse, ignored altogether.

Probate is a legal process that pays debts owed by your estate and applicable death taxes, and distributes the remainder of your estate to your designated beneficiaries.

There are two kinds of probate: Living Probate and Death Probate.

Living Probate occurs if you become disabled and have not established a Living Trust to hold title to your assets. Under this condition, the probate court will decide how your estate is to be managed so your medical and nursing home care bills can be paid. This can include the decision to sell your home, for example, to pay nursing care expenses. The Living Probate process is, in and of itself, costly, lengthy, and stressful for your heirs.

Death Probate is also a consequence of not establishing a Living Trust. If your assets are not held in a Living Trust, the court will determine how to distribute your estate after you die, and after all the bills have been paid. This process is lengthy, and expensive for your family. Under death probate, your assets are subject to the discretion of the court and the lawyers appointed to administer it. It also leaves your estate open for public scrutiny.

The best way to avoid Probate is to have a Living Trust that holds title to your assets.

5. Avoids Estate Taxes
The federal government allows your beneficiaries to receive up to $5,340,000 (indexed for inflation) without paying death taxes. In Massachusetts, if you die with $1,000,000 or less, your family will usually be exempt from death tax (although there are exceptions). But with a properly planned Living Trust, a married couple can leave double those amounts to their heirs without paying death taxes.

6. Controls Your Estate—Even in Death
With a Living Trust, long-term distributions can be made to your exact specifications, even after your death. For example, you can turn assets over to your children when they reach a particular age you designate so you can still support their education and future wellbeing. You can also set up your insurance proceeds to be paid directly to the trust to control how those proceeds are distributed.

7. Protects Your Children from Their Creditors and Ex-Spouses
You may want to ensure your children from prior relationships are treated fairly after your death. Your Living Trust can be written specifically so that distributions intended for your children (including children from a prior relationship) will be protected from their former spouses or current creditors.

8. Ensures that Your Wishes are Carried Out After Your Death
If your Living Trust contains a “no contest clause,” disinherited heirs and beneficiaries and their lawyers cannot get more than you intended for them to have from your estate.

9. Finds True Peace of Mind
When you know that your estate is safe and will be managed by someone whom you know and trust, you and your family can enjoy your later years without worrying how your estate will be distributed after your death. A Living Trust is the best measure for securing peace of mind.

1. Eliminates Living Probate
A Living Trust helps your family avoid court expenses and time-consuming procedures if you become mentally or physically incapable of managing your assets. The successor trustee you have chosen in advance will manage all of your affairs to your written specifications.

2. Protects Assets if You are Disabled
Getting quality nursing home and rehabilitative care if you or your spouse become disabled or incapacitated can be extremely expensive. A Living Trust can help you qualify for government assistance with those expenses. In this scenario, neither caretakers nor the government can deplete your estate, and Medicaid may even pay for your nursing home or in-home care.

3. Avoids Death Probate
Without a Living Trust, your estate will have to go through the very long and expensive process of Death Probate in court, even if you have a Last Will and Testament. When you have a Living Trust, you avoid those costs and your estate can be distributed quickly by performing a Trust Administrator without court interference or public scrutiny.

4. Maintains Privacy
Everyone from neighbors, to relatives who feel slighted, and ambitious sales people and scam artists can view every detail of your estate when it enters probate court (including your assets, debts, beneficiaries, and more). This lack of confidentiality is completely avoided by a Living Trust because it is administered privately.

A Revocable Living Trust is the most reliable and thorough foundation for an estate planning portfolio, and provides the most complete financial protection for you and your family. It holds title to all of your major assets. As Trustee and Beneficiary, you have total control to make decisions regarding your assets (property, investments, cash, etc.) during your lifetime. Following your death, a successor trustee takes over the trust and fulfills the wishes you have articulated in the trust. A Living Trust avoids Probate, can finance your final health care expenses, and supports the values that are important to you.

Contrary to what you see in the movies, A last will and testament does not have the final say on how your assets will be distributed after death. Some assets are even out of the estate before the will is triggered. If you have only a last will and testament, the only thing you can be sure of is that your estate is guaranteed to go into probate: period. In general, the Last Will and Testament is an inefficient and poor planning tool.

Joint Tenancy refers to ownership of property by two of more people. This protects property from probate as deceased’s portion of ownership passes to other joint tenant(s). You might think that a will would override joint tenancy laws. Not so. Since the transfer of a jointly held asset essentially occurs automatically upon death, it’s out of the estate before the will is even triggered.

Imagine two cousins own a piece of property as joint tenants. When one dies, his will states that his wife should inherit all of his assets. But because the property is owned in joint tenancy, the surviving cousin (Joint Tenant) owns the entire property; the surviving spouse has no claim on the property! This and other problems of joint tenancy can be avoided with a good estate plan.

Your “estate plan” is a legally binding plan that defines how your wealth will be managed if you need to be cared for in sickness, plus how your wealth will be distributed after your death. The estate plan also serves to preserve the values that matter most to you, so that after your incapacitation or death, your estate lives on in a manner that you, not the courts, decide.

When planning your estate, there are four basic courses of action:

1. Do nothing,
2. Establish Joint Tenancy for your assets,
3. Draft and execute a will, or
4. Establish a Revocable Living Trust.

Option 1. Do Nothing

Studies indicated that up to 70% of Americans don’t take any action to prepare for illness or death, either because it’s not something they want to think about or because they don’t know what to do. Of the remaining 30%, most have only executed a simple will or rely on the laws of joint tenancy to pass on their assets to their spouse. However, without a Revocable Living Trust, which I’ll explain shortly, most estate distributions will be determined by state law, not by the wishes of the deceased.

When the government steps in to determine your wealth distribution, your family’s best interests are of little concern. The estate is simply distributed according to the letter of the law. The chances increase that your estate will accumulate high death taxes, legal fees, and probate costs. Plus, the stress resulting from a poor plan can be divisive, and has even destroyed families.

Option 2. Establish Joint Tenancy for your Assets

As it’s formally called, Joint Tenancy with Right of Survivorship is a situation in which two or more people share title to an asset. When one of the owners passes away, his or her share of the ownership passes to the other “joint tenant” automatically. The “right of survivorship” term means that whomever lives longer gains ownership of the asset.

You might think that a will would override joint tenancy laws. Not so. Since the transfer of a jointly held asset essentially occurs automatically upon death, it’s out of the estate before the will is even triggered.

Imagine two cousins own a piece of property as joint tenants. When one dies, his will states that his wife should inherit all of his assets. But because the property is owned in joint tenancy, the surviving cousin (Joint Tenant) owns the entire property; the surviving spouse has no claim on the property! This and other problems of joint tenancy can be avoided with a good estate plan.

Option 3. Draft a Will

Movies dramatize a “last will and testament” as the final say on how an estate will be distributed. In reality, a will isn’t as ironclad as many people think, and doesn’t hold sway over joint tenancy laws or insurance proceeds. In fact, once the will enters into the probate court system, it’s not in the hands of your family any more, but in the hands of the court and probate attorneys, where it’s subject to their discretion and open for public scrutiny. There is no guarantee that your wishes will be fulfilled.

The mere drafting of a will, alone, creates even more problems because a will doesn’t gain relevancy until after you die. Therefore, it doesn’t help with planning for illness or long-term care. In general, the Last Will and Testament is an inefficient and poor planning tool.

Option 4. Establish a Revocable Living Trust

A Revocable Living Trust is the most reliable and thorough foundation for an estate planning portfolio, and provides the most complete financial protection for you and your family.

When we set up a Living Trust in your name, title to all of your major assets is transferred from your name to the name of the trust. You are listed as the Trustee and Beneficiary, so you still have total control to make decisions regarding your assets (property, investments, cash, etc.). After your death, your successor trustee will take over the trust. Your family won’t have to endure the lengthy and costly process of probate court, and because the values that are important to you are written into the trust, you can be assured that your estate will be handled in accordance with your wishes whether you are sick and unable to manage it, or pass away. Your trust can even determine how your health care will be financed in the event that you or your spouse becomes disabled, thereby minimizing the expense to your estate. A Living Trust avoids Probate, can finance your final health care expenses, and supports the values that are important to you.

What is Considered Part of Your Estate?

Your “estate” includes every asset you own or in which you hold an interest, including real property, investments, business interests, insurance proceeds, personal property, and possessions. If you jointly own an asset with another party, your share is considered part of your estate. For example, married couples often hold title to property as “Separate Property” or under “Joint Tenancy.” Understanding the difference before one person dies or becomes ill is essential for keeping your family protected when circumstances change.

• As Separate Property: one spouse owns the entire property, which was usually acquired before marriage or was inherited by that spouse during the course of the marriage.

Under Joint Tenancy: ownership is shared, and when one owner dies the other owner(s) automatically acquires that person’s interest in the property.

People generally don’t give much thought to their own deaths while they are alive. But when it comes down to the inevitable, not planning properly for estate management and distribution can place a tremendous strain on a grieving family due to money lost to avoidable taxes, excessive legal fees, demands on their time, and stress.
When planning for old age, disability, and death, most people have four goals:
1. If they become disabled, they want to avoid losing the assets they’ve spent a lifetime building to a few years of health care costs.

2. When they die, they want to be sure of exactly who will receive which assets from their estate.

3. They want things to be easy for their family; e.g., they want to pass on their property easily, quickly, and without high legal fees.

4. They don’t want to pay any more taxes than necessary (e.g., they want to avoid or minimize state and federal death taxes.)
An estate plan protects your estate from heavy expenses and other undesired outcomes, while the absence of a solid estate plan puts each of these goals in jeopardy. By creating an estate planning portfolio, you can rest assured that if you become disabled, and when you die, your estate will be handled to your precise specifications.
Soon you’ll be acquainted with everything you need to know to make sound legal decisions about your—and your family’s— financial security. Specifically, you’ll learn:

• Your four primary options for long-term planning
• The five least desirable outcomes of poor planning
• How to protect your assets if you become incapacitated and/or must enter a nursing home
• How an Estate Planning Portfolio can protect your estate from heavy expenses
Some of the laws I review pertain no matter where you live, but some are specific to the state where I practice: Massachusetts. Be sure to find out what state laws apply to your own estate.

Before we get into these topics, there are a few basics you’ll need to understand.