Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

MORE THOUGHTS ON THE IMPORTANCE OF ESTATE PLANNING
(Part 2 of a 5-Part Series)
(3/10/02)

Last week I discussed proper estate planning, including some of the concerns you might have about the probate process. There are some additional reasons why you might not want your family to be subjected to the very public probate of your Will.

Additional Reasons why you might want to Avoid Probate

Probate is a very public process. As I mentioned last week, an "interested party" can find out details about your estate, your heirs, what they will receive, their addresses, and related information. Sales personnel and solicitors often use this information to troll for business. Many clients have told me their loved ones were barely laid to rest before they were being called by all sorts of slime trying to pry the decedent's assets from their hands. These are the worst kind of riff raff. At a traumatic time like shortly after the death of a spouse or family member, these are exactly the people you do not want to have to face.
You lose control over your family affairs. The probate court, and not your family, will interpret the Will, determine what and when various actions will occur, whether an inventory or accounting (and/or bond) will be required, how much the process will take before it is completed, and essentially how much it will cost. The court also determines what information will become a matter of public record. If you are used to keeping your affairs to yourself, this can be very disheartening. Instead of being able to handle matters privately and independently, you now find your life open to the public and under the control of someone wearing a black robe who may or may not be concerned about your sensibilities. To add insult to injury, you have to pay for this loss of privacy and control.
A Will cannot provide for your disability. A Will only becomes effective at your death. This could well be the most serious and least understood problem with a Will.

By disability, I mean you are no longer able to manage your own affairs, whether because of a mental or physical limitation. What if you develop Alzheimer's Disease or suffer a heart attack or stroke, who is going to step in to handle your finances and make medical decisions on your behalf. At some point, someone is going to want you to sign something, even if only an income tax return or withdrawal from your investment account. Unless you've given someone authority to sign for you, you will not be able to conduct these activities without going through a court proceeding. Powers of attorney and living wills can help ameliorate the situation, but they are not a cure-all. No one can be required to accept a power of attorney, so you are placing your affairs in the hands of Providence.

I don't even have a Will. Where does this leave me?

This isn't that uncommon. I've had several business clients die in the past few years who had all their business affairs in order, but just hadn't quite gotten around to taking care of their personal affairs. Some of these were still in their 30's or 40's, so their failure to implement an estate plan is at least somewhat understandable. Several, however, were already in their late 60's and 70's. They just didn't want to acknowledge their own mortality and chose, instead, to allow their families to flounder when they died before they got their affairs in order.

Let's look at what happens if you haven't done any estate planning. Let's assume you own certain assets in your name only and you suddenly become incapacitated. The first thing that will happen is that the court can take control of your affairs as I explained above. When you die, your estate will still go through probate, but under this scenario, your assets will be distributed according to state law and not according to your wishes.

What if you were estranged from your spouse, maybe even in the process of obtaining a divorce? It doesn't matter. Under Oklahoma law, your spouse is entitled to an intestate share of your estate. If you have minor children, your estranged (but surviving) spouse will receive one-half of your estate outright and, as guardian of the children, will have a significant amount of control over the share of your estate that passes to the children.

Even worse, what if you were happily married. Your surviving spouse will only receive part of your estate. This may or may not be enough for him or her to live on. Even though your spouse is guardian of your minor children, the court will actually control their inheritances and make sure the funds are properly used. Most courts expect your spouse to take care of raising the children with her share and safeguard the children's share for unexpected or future educational or similar needs.

What if both you and your spouse die leaving minor children? The court will appoint a guardian without knowing whom you would have chosen. That means your abusive father with whom you haven't spoken in over ten years could suddenly be raising your children and imparting to them his philosophy on life-which you hate.

What if most of my property is owned in Joint Tenancy?

I'm sure all of you have seen the phrase Joint Tenancy with Right of Survivorship or "JTWROS" on real estate deeds, mutual funds or other investments. If this is how you presently own your property, when you die, your surviving joint tenant takes everything.

This is probably the most common unplanned estate plan in this part of the country. And it causes more problems and unexpected results than any other form of estate plan.

Essentially, by signing off on JTWROS, you have relinquished all control over your property. If you are the last one left, you win. If not, you lose. It's that simple. Even if you have a Will (or a Trust, which I'll discuss later), it does not control jointly held property. As a result, even if you have the best estate planning documents possible for your situation, they will be negated to some extent by the passage of your JTWROS property outside of (and independent of) your Will.

Worse yet, if you are the one who contributed the property to the joint tenancy thinking it was a good way to get property to a son or daughter without having to go through probate, you have created a number of unforseen problems. First, if your son suddenly finds himself in the middle of a divorce, your property could be in jeopardy. Second, if your son is involved in an accident and is sued by the victim, your property is in jeopardy. What if your son gets into financial difficulties and is sued or has to file bankruptcy? You guessed it-your property is in jeopardy. What if your son dies first and your taxable estate exceeds the current unified credit of $1 Million? Right again, you could find yourself facing serious estate tax consequences and paying taxes on your own property-or losing it.

These are just a few of the problems you can encounter with jointly owned property. Next week I'll talk about the problem of giving away property and how a revocable ("living") trust may help you accomplish your estate planning goals with minimal expense and inconvenience.

By the way, thank you to all of you who attended last week's seminar at Autry Vo-Tech. Your interest and questions made it enjoyable for Gary and I to spend our evenings with you. We always learn as much from you as we are able to teach to you, so thank you. We hope to see you at our next seminars in October. I'll provide you with more details as the time approaches.

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