I tried for 15 years to get my friend to do some basic Estate Planning. I urged him, at a bare minimum, to create a will. Better, do a full estate planning package: will, living trust, etc. He assured me he didn’t need my help, and that he had everything “under control” without spending money on an attorney to do a Will and a Trust. My friend died and I had to help his widow through the financial mess he left behind. So far, his mistake has cost his widow over $100,000—and it was completely avoidable.
My friend was an extremely intelligent man and very capable in many ways. But he did not have things “under control”. Now, his widow will have to spend thousands of dollars in attorney fees, put his estate through probate, and lose almost 1/3 of the assets they worked so hard to accumulate. His widow is learning through my friend’s mistakes that if you do not have an estate plan, the State will determine who gets your assets, not you.
This article gives an overview of the ways one may transfer assets upon his or her death, discussing the risks and rewards of each method in Nevada. We will also discuss the estate planning tools that are available to you to avoid the risks associated with each transfer method.
What Happens to My Stuff if I Die With or Without a Will?
No matter how many times you tell your spouse that you want “Johnny” to get your Ford Motor stock, your survivors will not decide who gets your assets upon your death unless you complete some basic estate planning. Those who die without a Will or who do not title assets such that they pass to a designee by operation of law or under the terms of a contract (discussed below), allow the State to determine who will receive their assets upon death. Assets that are not titled to provide for transfer at death may only be transferred by court order.
Unfortunately, those court proceedings are expensive. It is estimated that the average cost of these types of court proceedings is $10,000. Compared to the cost of simple estate planning devices, this is a great expense and is very avoidable. Having a Will does not even protect you from having to go to court, however. A Will is nothing more than directions to a judge saying “Dear Judge: I do not want my assets to pass according to statute. Instead, I want them to pass as follows . . . .” In other words, a Will virtually GUARANTEES that your loved one will have to go to court and spend attorney fees. There has to be a better and less expensive way, right? Read on.
How Can I Make Sure my Assets Pass by Operation of Law?
Some forms of ownership of an asset declare legally who will receive the asset upon your demise. Owning property in joint tenancy, as community property with right of survivorship, or designating that assets are held for the benefit of, payable on death to, or to be transferred on death to a designee are recognized in the law as valid ways to transfer ownership of an asset upon your death.
While these methods are fairly easy and cost-effective, people usually get into trouble when they THINK they have made these designations, but have not. My friend “forgot” to title cemetery lots and to designate a beneficiary on a bank account and stocks even though he thought he had everything “under control”.
How Can Contracts Help me Pass Assets on my Death?
You can designate by contract that upon your death, certain assets pass to your designee. These contracts include life insurance policies, partnership agreements, shareholder agreements for closely held corporations, trusts, retirement benefits, stocks, etc.
How Can an Estate Plan Help?
A proper estate plan can help to make sure your assets pass to those you intend to receive them. It can ensure that your dependents are cared for both financially and physically (especially for minors). An estate plan can also help reduce taxes and attorney fees and keep your loved ones from having to go to court. The cost of a simple estate plan is a fraction of the average cost of going to probate court.
Many people think that a Trust is only for rich people. They would be wrong.
A Living Trust is a tool that should be utilized by anyone over 18 years old who has children and/or real property. When properly formed and funded, a Trust replaces a Will and will provide for the management and distribution of your assets upon your death without having to go to probate court. During your lifetime, you have complete control over your assets, even though you would place all assets (homes, bank accounts, stocks, etc.) into the Trust (meaning the Trust is the owner of the assets). You will need to designate a successor trustee, whose job it will be to transfer the property in your Trust according to your written desires. A Trust can be changed as often as you like after it is formed. When you die, your successor trustee will simply follow your directions and may transfer your assets without having to go to court or incur those attorney fees.
Of course, there are other estate planning tools that we recommend along with a Trust. Those include a Living Will (directive to doctors whether you desire life support, etc.), a Pour-Over Will, Power of Attorney, and others depending on the scope of your needs and amount of your assets.