4 Questions You Should Ask Before Making An Estate Plan

by | Feb 11, 2016

Love and Marriage and Estate PlanningLike snowflakes, no two Marriages are ever alike — and the same is true for a carefully crafted estate plan. These days, the “traditional” American family model (i.e., husband-and-wife on their first marriage with kids who were from that marriage) is not as commonplace. It’s not unusual to see someone on their second or third marriage with multiple children from multiple marriages. In addition, we often see the following factors:

  • Adopted children;
  • Special needs children;
  • An adult child who is on their second marriage, or going through a divorce of their own;
  • A former spouse that has passed away or remarried as well; and
  • A child who is a spendthrift or is irresponsible with their money.

The Issue: All of these different factors add to the level of complexity in your estate planning process. Carefully considering these factors is crucial when you start to plan your estate. So, where do you begin?

We recommend you start by asking the following questions, which cover estate planning basics, and then seeking the guidance of an experienced estate planning attorney.

1. Who do you trust to manage your money?

That is to say, who do you want to name as executor of your estate and trustee for the beneficiaries who inherit your assets?

An executor’s responsibilities include:

  • Having your will admitted to probate;
  • Filing an inventory of your estate assets;
  • Taking charge of and securing your assets after you die; and
  • Distributing your estate to your beneficiaries in a timely manner.

A trustee’s responsibilities include:

  • Managing the assets within the trust for current and future beneficiaries;
  • Recording and managing distributions from the trust;
  • Filing taxes for the trust; and
  • Generally manage all the investments within the trust.

These responsibilities are not short-term ones, but can last for years and even decades depending on the size and complexity of the trust as well as the number and age of the beneficiaries. These decisions are ones that should be carefully considered, and the person or persons who are named as executor and trustee should be involved in this decision making process when feasible.

2. Is there a former will?

If there is no former will then you’re just starting from scratch. However, if there is a will then your actions will be determined by the extent of the changes you’re wanting to make. Minor changes, like changing executors or adding a legacy, can use what’s called a codicil.

A codicil is like an amendment that’s separate from the will, but the documents are kept together — which is important because they can be lost easily. A lost will or codicil can raise questions about the legitimacy of the documents. For larger changes to the will, it’s best to rewrite the will entirely. If a brand new will is made then the former will needs to be destroyed.

3. Are your children protected by your estate plan?

This question can be broken down into a number of other questions:

  • Are there children from a former marriage?
  • Are there children from a new spouse’s former marriage?
  • Are there children with a new spouse?
  • Are there adopted children?
  • Are there children with special needs?
  • Are there children who are married and/or divorced?

Starting to comprehensively answer these questions can help you to determine what kind of provisions should go into your will.

kidsIf there are minor children and one of the biological parents dies, or becomes incapacitated, then the other will gain sole custody. If both parents die then the child goes to a guardian — either a guardian that’s named in the will of the last parent to die or one named by the court if no guardian has been named. Asking the right questions while forming your estate plan ensures you have accounted for all scenarios to protect your children, and your wishes for them.

When you assign a guardian in your will you’re giving that person responsibility for raising the child. You need to decide if you want this same person to control your child’s money if any is inherited. If the guardian is good for raising children, but isn’t trustworthy with money then you can assign a separate person to be guardian of the child’s estate or to serve as trustee of the child’s inherited trust.  This separation of powers creates a system of checks and balances when needed.

If there’s a special needs child who inherits a significant amount of money then that inheritance could disqualify that child from government benefits. It’s common practice to set up a special needs trust managed by a trustee — this trust allows the child to receive government benefits while also having access to medical needs not covered by the government.

If there’s an adult child who will potentially get divorced, then you’ll want to ensure their assets are protected and they don’t lose money to their future ex-spouse. In general, if there is a large inheritance somewhere in a person’s future these assets should be addressed in your estate plan to make sure your beneficiaries are protected. This concern is commonly addressed by having the child’s inheritance placed into a trust.

If you know that your adult child isn’t good with money then you want to protect their inheritance so it can’t be wasted irresponsibly. You can do this by appointing someone other than the child as trustee of the child’s trust.

4. Are there former marriages?

Former Marriages can complicate Estate PlanningFormer marriages are one of the most complicated aspects of estate planning. Wills, trusts, and beneficiary designations all play an important role when putting together an estate plan with a new spouse. It’s quite possible that a former spouse is listed as a beneficiary for an account and through the divorce decree they maintained that beneficiary status.

If this is true, the new spouse wouldn’t be able to be listed as a beneficiary for that account. The same is true for house titles, life insurance policies, and anything else where the former spouse has a stake.

If there are children from the former marriage, then you’ll want to ensure they’re protected as well — that is, if the current spouse is the beneficiary of the entire estate without any restrictions, then the current spouse could ultimately disinherit the children from the prior marriage.

This covers most of your estate planning basics, but we recommend seeking out an experienced estate planning attorney to navigate you through this complicated process. An estate lawyer can provide a springboard of very important questions that should be considered when planning an estate with your spouse. At Romano & Sumner, we pride ourselves on our ability to assist our clients in navigating complex legal processes like estate planning or creating a will. If you have any questions, please feel free to contact us today.