Fundamental Estate Planning
Serving Clients & Their Families in the Birmingham, AL Area
What is Estate Planning?
Estate planning is much more than just executing a Will to give your stuff away when you depart this earth. A proper estate plan will see that your wishes are carried out when you die and also if become disabled, while accomplishing these objectives:
- Include instructions for your financial and medical care if you become disabled before you die;
- Manage the financial risks of incapacity;
- Delegate health care decisions when incapacitated;
- Provide for the needs of your surviving spouse (if applicable);
- Provide liquidity at death;
- Fulfill your charitable intentions (if applicable);
- Promote family harmony;
- Name a guardian and inheritance manager for minor children;
- Provide for family members with special needs without disrupting government benefits;
- Provide for loved ones who might be irresponsible with money or may need future protection from creditors or divorce;
- and Ultimately, give what you have to whom you want, the way you want, when you want at the least cost and in the most expeditious manner.
What is an Estate?
Believe it or not, you have an estate. Nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate.
Estate Planning is for Everyone
It is not just for “retired” people, although people tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages.
Estate planning is not just for “the wealthy,” either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.
Too many people don’t plan.
Individuals put off estate planning because they think they don’t own enough, they’re not old enough, they’re busy, think they have plenty of time, they’re confused and don’t know who can help them, or they just don’t want to think about it. Then, when something happens to them their families must pick up the pieces.
If you have no plan, Alabama has one for you, but you probably won’t like it.
At disability: If your name is on the title of your assets and you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. The court, not your family, will control how your assets are used to care for you through a conservatorship. It can become expensive and time-consuming, it is open to the public, and it can be difficult to end even if you recover.
At your death: If you die without an intentional estate plan, your assets will be distributed according to Alabama’s intestacy laws. The will of Paul the Procrastinator below is the estate plan Alabama has for you if you don’t make your own.
Last Will of Paul Procrastinator as Made by the State of Alabama
First: I direct the Probate Judge to appoint anyone of his choosing to administer all property in my name and distribute it under the terms of this will.
Second: I direct that all my assets be converted to cash, all of my debts paid, including taxes, probate fees, administrative fees, and attorney’s fees.
Third: I direct that the first $50,000 plus one-half of my estate be paid to my spouse if all of my children are also children of my wife. If, however, I have a child by another mother, I direct that only one-half of my estate be paid to my spouse.
Fourth: I direct that the balance of my estate be distributed outright, and in cash, in equal shares to my children. If any child is a minor, I direct that his share be held by a Conservator for his benefit. The Conservator may be anyone of the court’s choosing.
Fifth: When each of my children attains age 19, I direct that his share be then paid to him outright regardless of his financial or emotional maturity.
Sixth: If my spouse does not survive me, I direct that his/her share be added to the children’s shares under articles Fourth and Fifth.
Seventh: If none of my children survive me but my spouse does, I direct that the remainder under Article Third be distributed outright in the following manner:
- $100,000 plus one-half of my estate to my spouse.
- The balance to my parents, if living, otherwise to my brothers and sisters or their heirs.
Eighth: If I am not survived by a spouse, children, or parents, I direct the Probate Court to seek my closest blood relatives and fully divide my estate among them in a way which gives an equal share to my closest relatives and their descendants.
Ninth: If no relatives are located, I direct that all of my property go to the State of Alabama.
Given the choice—and you have the choice—wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer a say in who will raise them if you can’t?
An estate plan begins with a will or living trust.
A will provides your instructions, but it does not avoid probate. Any assets titled in your name or directed by your will must go through Alabama’s probate process before they can be distributed to your heirs. (If you own property in other states, your family will probably face multiple probates, each according to the laws in that state.) The process varies greatly from state to state, but it can become expensive with legal fees, executor fees, and court costs. It can also take from nine months to two years or longer. With rare exception, probate files are open to the public and excluded heirs are encouraged to come forward and seek a share of your estate. In short, the court system, not your family, controls the process.
Not everything you own will go through probate. Jointly-owned property and assets that let you name a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, etc.) are not controlled by your will and usually will transfer to the new owner or beneficiary without probate. But there are many problems with joint ownership, and avoidance of probate is not guaranteed. If a valid beneficiary is not named, the assets must go through probate and will be distributed with the rest of your estate. If you name a minor as a beneficiary, the court will insist on a Conservator until the child legally becomes an adult (age 19 in Alabama).
For these reasons, a revocable living trust is preferred by many families and professionals. It can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets at incapacity, bring all of your assets (even those with beneficiary designations) together into one plan, provide maximum privacy, is valid in every state, and can be changed by you at any time. It can also reflect your love and values to your family and future generations.
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit. Your trust can continue longer to provide for a loved one with special needs or to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending.
A living trust is more expensive initially than a will, but considering it can avoid court interference at incapacity and death, many people consider it a bargain.
Estate planning need not be expensive.
If you don’t think you can afford a complex estate plan now, start with what you can afford. For a young family or single adult, that may mean a will, term life insurance, and powers of attorney for your assets and health care decisions. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced attorney can provide critical guidance and peace of mind that your documents are prepared properly.
The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death strikes. Don’t wait. You can put something in place now and change it later…which is exactly the way estate planning should be done.
The best benefit is peace of mind.
Knowing you have a properly prepared plan in place – one that contains your instructions and will protect your family – will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love. So contact us right away to obtain peace of mind for your family.