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Estate plan essentials: When a will is not enough

Last will and testament

It’s true — a will is a foundational part of your estate plan. In fact, it’s often the first thing that comes to mind while considering your legacy and passing down hard-earned assets.

However, creating a will is only part of a comprehensive estate plan, and unfortunately, it won’t save your loved ones the hassle of a date with probate after you’ve passed away. Here in California, it’s most likely a series of long, expensive dates.  Make no mistake about it, if the primary document in your plan is a will, you’re likely adding probate to your family’s list of final affairs on your behalf.

We believe that an effective estate plan should aim to keep your family away from court and out of conflict. However, by relying on a will as the centerpiece, there are several potential pitfalls that are simply unavoidable at death or incapacity.

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Here’s a shortlist of why having a will may not be enough:

Your family will still end up in court

When you die, there’s a legal process for wrapping up your final affairs. A family member or close friend is likely appointed in your will to handle this process. While some believe that creating a will essentially passes down assets free from court involvment, this is simply not the case.

In short, to transfer your assets to your family, friends, or favorite charity, your will must first undergo the burdensome legal process called probate.

Probate can be costly and overwhelming for your family for several reasons. First, the court proceedings can be prolonged for several months or even years here in California where our court system is severely backed up and impacted by our population.  Secondly, attorney fees and court cost may consume nearly 5% of your estate, which only compound the effects of high burial expenses and paying off your final debts. Finally, probate is a public legal process which means the assets and final wishes in your will are subject to be viewed by and potentially targeted by society’s financial predators.

Myth: Making beneficiary designations for life insurance and similar policies will completely eliminate probate process. Truth: Did you know that federal law requires that testamentary gifts left directly to minor children must pass through probate despite designation in a policy?

A will does not address incapacity issues

Who will make health care and financial decisions on your behalf if you cannot?
Sure, a will spells out your final wishes and distributes your property at death, but it’s limited to just that. A will only “speaks” at the time of your death.

If you become incapacitated, California law requires separate legal documents which permit others to make important medical, financial, and legal decisions on your behalf. Without these documents, your family may need court approval (conservatorship or guardianship), which only further complicates matters. Moreover, the additional time and costs involved may be insurmountable if faced with an emergency.

A will doesn’t address lawsuits, creditor claims, or bad spending habits

Distributing your property using a stand-alone will leaves assets and your heirs vulnerable to life’s unexpected events and unfortune circumstances.

So, what could possibly go wrong? Here are a few examples: Your child goes through a nasty divorce where the spouse goes after the inheritance you’ve left, your surviving spouse is found liable for money damages after a car accident which exceed insurance policy limits, or maybe your college-age child is not ready for the large in-flux of cash you’ve left in a life insurance policy. Whatever the issue, life happens and it often does so with a hefty price tag.

A will does not allow the level of control necessary to address the specific needs and life circumstances that may impact your beneficiaries.

Alternatives and additions to traditional wills

We are not here to disparage your will. It certainly serves an important role within the overall estate planning scheme. However, as a stand-alone option, it leaves much to be desired in the way of offering comprehensive protection for your assets and family.

As an alternative, consider adding a revocable living trust along with the appropriate medical and financial directives to fortify your plan in preparation for critical life events. Your family will thank you for it.

Contact us today to scheduling a planning session or to discuss your family’s unique circumstances in more detail.

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