Yes, you do need an estate plan
What is your estate? Put simply, it’s everything you own—from personal possessions and real estate to things like mutual funds, rights and licenses, stocks, bonds, retirement accounts and life insurance death benefits.
It’s also everything you owe. According to Virginia and Kenneth Morris, authors of Standard & Poor’s Guide to Saving for Retirement, “Just as everything you own is a part of your estate, what you owe reduces its value.” They explain that before you could determine the value of your estate, you’d need to subtract from it things like “income taxes, mortgages or other debt, funeral expenses, and the costs of settling your estate.”
So, who needs an estate plan? The notion that it’s a concern for the wealthy is prevalent. It’s an idea people arrive at because they’re aware that the federal estate tax applies only to estates worth $5.45 million or more. Many locals may also know that Nevada doesn’t collect an estate tax. However, according to information on the State Bar of Nevada website, “If you’ve had your 18th birthday, you need your own estate plan.” And here’s the kicker: the reason it’s so important is that laying out what will happen with your assets—however great or little—after you’re dead, is only a part of the equation. An estate plan will also set up the legal framework to determine things like “who makes medical decisions on your behalf if you are not able to do so yourself” and “who raises your children if you become incapacitated or die.”
It’s pretty easy to learn the basic components of an estate plan through online sources. From Forbes to Fidelity Investments, most lists include the same basics: a last will and testament, durable power of attorney, health care power of attorney, living will and possibly a trust.
Having a basic understanding of these different documents can help you decide which ones you might need. But from there, you’ll have another important decision to make. Will you draw up the documents on your own using an online resource, or will you turn to an expert for help?Where there’s a will
A will, as you probably know, is a document you create to direct the distribution or management of your assets upon your death. It can also be used to leave details regarding things like funeral arrangements and who you want to care for your minor children.
Arguably, the most important thing to know about a will is what happens if you die without one. The legal term for this is dying “intestate,” and what happens to your assets in this case depends largely on you’ve left behind.
Let’s say, for example, that you have a spouse but no children, and you have two living parents. Because Nevada is a common property state, any income you earned or property and assets you acquired during your marriage would go to your spouse. In fact, if your entire estate were worth less than $100,000, everything left over after debts were paid would. If, however, you were worth more than that, your spouse would only get half of any property and assets that are considered “separate”—including anything you brought into the marriage with you and any inheritances or gifts you received. The remaining half would be divided equally between your parents. (Las Vegas attorney Thomas R. Grover maintains a website that includes more information about Nevada intestacy laws and how they work: bit.ly/2wzy8XI.)
Another important thing to consider with wills is when they may need to be supplemented. For example, while a will can be used to designate who you want to care for your children if you die, Northern Nevada estate planning law firm Anderson, Dorn & Rader notes on its website that “permanent guardianship in a will is approved by a court, which may take weeks or even months.” To ensure that kids don’t have to spend any time in child protective services or foster care, the firm recommends parents take advantage of a Nevada law that allows them to appoint short-term guardians for a maximum of six months. And, according to the firm, “In order to protect the children, there must be a separate legal document appointing short-term guardians.”Tried and trusted
Perhaps you’ve heard a bit about living trusts and have found yourself wondering if this could be an option for you. The Reno law firm Cross Law maintains a website with information about trusts that starts, helpfully, with a fairly clear definition:
“Most people like to think of a trust as a legal entity, similar to a corporation. And many lawyers will even explain trusts using this analogy. Although thinking of a trust this way can make it easier to conceptualize, it’s not technically correct. … A trust is a relationship between three parties: the settlor, the trustee, and the beneficiary. Under this relationship, the settlor transfers property to the trustee, who then promises to hold such property on behalf of the beneficiary.” It also notes that “there is usually a written agreement to formalize this relationship, but it is not required.”
A living trust allows you access to your assets while you’re still alive, and—like a will—it clarifies who gets what after you’re dead. It’s worth noting that living trusts are generally more expensive to draw up than wills, and they may have associated administrative expenses going forward, especially if the trustee is a bank or trust company. But they come with advantages, too. One is that a living trust will allow you to put restrictions on inheritances to control how and when they’re spent by beneficiaries. The second—and most commonly touted benefit—is that they can keep your estate out of probate.
Probate is the court process that’s undertaken to verify a will’s validity and execute it. In a report available online explaining the process, Reno probate attorney Bryce L. Rader wrote, “If the deceased person’s assets exceed $20,000, or if there is real estate involved, probate is normally required.” Trusts don’t have to go through this process—which many people also avoid for privacy reasons. (Like most court files, probate files are public records, and any member of the public can walk into the court clerk’s office and request to see them.)
If at this point you’re thinking that wills and living trusts seem like an either-or decision, you may want to think again. A 2015 article in CNN Money notes that not only are wills important for things like naming guardians for kids, they can also be used to make sure assets you intended to put into a trust before dying—but didn’t—make their way there after you’re gone.Power to the people
Wills and living trusts make up only a part of estate planning—the part that comes into play after you’re dead. But, however awful it is to consider, your estate may need managing before you’re gone. With the right documents in place, you can determine who will make financial and health care decisions for you if you’re incapacitated.
When you choose a person to manage your finances or health care decisions, it’s called a durable power of attorney. Since you’re still alive and kicking, you’d want to draft what’s known as “springing” powers of attorney—meaning they wouldn’t go into effect unless you were incapacitated. The people you designate in these documents become your “attorneys in fact.” With a financial power of attorney document, you can designate a person who can access your money, pay your bills and even buy and sell assets in your name. If you designate a medical attorney in fact, he or she will be able to make health care decisions for you—up to and including whether or not to pull the plug.
You may not be comfortable handing over the reins on your health care decisions to someone else. If that’s the case, you probably want to check out Living Will Lockbox. It’s a program run through the Nevada Secretary of State’s office that will allow you to file an advance directive—a document specifying the types of care you do or don’t want to receive. You can print a registration form online. Send it to the secretary of state’s office with a copy of your advanced directive, and it’ll be kept online, where health care professionals can access it any time.Dare you DIY?
Is doing your own estate planning a good idea? Well, it depends on who you ask. There’s a bevy of online estate planning resources available. Some, like Nolo—a publisher in Berkeley that puts out do-it-yourself legal books and software—suggest that there’s no problem with going it alone but advise having an estate lawyer at least look your documents over.
But information on the Nevada State Bar website warns against this: “While it may appear that you are saving money by not paying legal fees, it is likely to cost you, or your beneficiaries, more money in the long run or your plan may not actually accomplish what you intended or even be completely enforceable.
“For example, what if an inheritance you pass to a loved one disqualifies her from receiving governmental assistance? What if your daughter’s inheritance is taken by a divorcing spouse or used to pay a judgment in a car accident law suit? What if your documents are legally invalid and the court chooses who raises your minor children or they are placed into foster care?”Shop around
There’s a lot to consider, and you may not yet be ready to decide whether you’ll take on the task yourself or hire a professional. If that’s the case, there’s a free series of educational workshops underway now you may want to look into.
Sponsored annually by KNPB, the Community Foundation of Western Nevada, and other local nonprofits, the Family Estate Planning Series consists of one-and-a-half-hour-sessions with experts, covering different aspects of estate planning. The workshops are held Wednesdays from 10:30 a.m. to noon and 1:30 to 3 p.m. at the Sierra View Public Library inside the Reno Town Mall, 4001 S. Virginia St. There are five remaining sessions between Oct. 4 and Nov. 1, including “Wills, Probate and Trusts,” “Responsibilities of Fiduciaries, Executors” and “Power of Attorney, Health Care Directives, DNR [do not resuscitate forms].” You can reserve a seat at these by calling 333-5499.