Have you ever solved a Rubik’s Cube?
Of course not. They are scientifically impossible. Just a way to keep kids quiet on long road trips.
But you’ve definitely seen a Rubik’s Cube at some point. And although the concept seems simple enough—get the same colors on the same side of the cube—all the moving parts and three-dimensional reactions make your brain hurt.
Estate planning sometimes seems like a Rubik’s Cube.
You have all of these lengthy legal documents with strange words that do all sorts of different things that an attorney explained to you once but which you have now mostly forgotten.
Take trusts, for instance. You generally get a trust to avoid probate. But by itself, a trust is just some paper. It may be fancy paper—and it’s likely expensive paper—but it’s still just some paper. And paper alone usually does not avoid probate.
Real property (which I will use interchangeably with “real estate”) is often the most valuable type of asset a client owns. That makes it all the more important for those assets to avoid probate.
How do you do that? By funding your trust.
Everybody knows what a “bucket list” is, right?
It’s a list (duh) of things you want to do before you die (i.e. “kick the bucket”). I won’t get into the weeds about the concept, so if you want to learn more about bucket lists and also ugly-cry through two boxes of Kleenex, watch the 2007 film The Bucket List with Morgan Freeman and Jack Nicholson.
But back to the blog.
Just as you and Morgan Freeman and Jack Nicholson have a bucket list for life, you should also have a bucket list for estate planning. Ask yourself: What do I need to do to arrange my affairs before I die?
Estate planning is about more than just legal documents. A good plan means accounting for your assets and providing the information, documents, and knowledge necessary to ensure a smooth transfer of those assets to the people you want to have them.
To help you create your own estate planning bucket list, here are 10 tips you can use to organize your estate before you die:
Of course the first item on the bucket list is to create an actual estate plan. I’m an estate planning attorney writing on an estate planning blog. What did you expect?
Formal estate planning documents such as a Last Will and Testament or a Living Trust are crucial to make the administration of your estate as easy as possible. Without them, your estate could be tied up in messy probate — in some cases for years.
I am a lawyer, not a healthcare professional.
I mean, I did alright in chemistry, but I also don’t know my own blood type. So I am usually not the best person to ask about health-related issues. Nevertheless, I get the same question about once a week:
“What’s the difference between Medicare and Medicaid?”
Healthcare is confusing even under ordinary circumstances. But navigating federal programs like Medicare and Medicaid can feel overwhelming. Surprisingly, though, estate planning and other legal techniques can help with the process. (I will discuss some of those techniques in a forthcoming article.)
For now, however, let’s answer the question posed above and begin with a brief rundown of the differences between these two programs.
Medicare is a health insurance program administered by the federal government through the Center for Medicare & Medicaid Services (CMS). It primarily serves people over 65, regardless of income, but it is also available to younger individuals with certain disabilities or illnesses.
You are going to live forever.
You can eat whatever you want and drink whatever you want and run for as long as you want forever. Because you are invincible and nothing bad will ever happen to you.
Did you buy that? No?
Unfortunately, people don’t stay young and healthy forever. We don’t like to think of a time in the future when we will no longer be able to take care of ourselves, but it is incredibly important that you do so. Ask yourself:
If you become incapacitated, who will have the legal authority to take care of you?
If a parent or other loved one becomes incapacitated, who will be able to assist them with managing their assets or healthcare?
If you die before your children reach adulthood, who will have custody over them or be able to take care of their inheritance until they come of age?
You may not know the answers to these questions, and that’s fine. That is probably why you are reading an article on an estate planning website. (Either that or you are very bored.)
Whenever we ask questions about capacity or managing someone’s financial or medical care, we enter the realm of guardianships and conservatorships. Two big legal words with two big legal explanations. So, let’s dive in and learn more about these concepts.
A guardianship is a court-supervised process whereby the judge appoints a guardian to manage the personal care of a ward (i.e. someone who is physically or legally unable to manage their medical care). Similarly, a conservatorship is a court-supervised process whereby the judge appoints a conservator (similar to a guardian) to manage the assets of a ward (i.e. someone who is physically or legally unable to manage their assets).
“Probate” is a dirty word to most people.
Sure, sometimes it can be helpful. But you generally want to avoid it.
Think of it like the raw broccoli that for some reason is included on every party platter everywhere, but without the dip. No dip, just raw broccoli. Avoid. It.
One of the ways to avoid probate is by naming beneficiaries on your financial accounts and contractual policies.
In estate planning, a beneficiary is a person or entity who receives part of your estate after your death. You can name a beneficiary through your estate planning documents OR through a contract such as a life insurance policy, IRA, or agreement with your bank.
If you designate a beneficiary on an account or policy, then the assets or proceeds of that account or policy will pass directly to the named beneficiary, probate-free, after your death.
Sounds cool, right?
Right. It is very cool.
However, sometimes beneficiary designations can have unintended (and undesirable) consequences. Here are some mistakes to avoid when naming beneficiaries:
This one seems obvious, but it’s worth mentioning because it is so easy to avoid.
If you do not name a beneficiary (or take other steps to avoid probate), you are virtually ensuring that your estate will be probated. And although probate is not the worst thing in the world, it is costly and time consuming. It is also usually avoidable.
Even if you believe all your accounts and policies have named beneficiaries, double check. Triple check. Check once a year. Do everything you can to make sure you don’t make the silly mistake of forgetting to name a beneficiary.
However, designating beneficiaries is not always as easy as it sounds…