Real Talk: Why You Need an Estate Plan in 2023

About the Episode

Do you have an estate plan? Understand the basics of estate planning and how to start protecting your assets in 2023 by listening to the latest episode of Making it Count! Our hosts are joined by Mary Kaplan, attorney and owner of The Kaplan Firm, and Emily Ostresh, Legal Specialist at Addition Financial. We cover the important vocabulary and documents associated with the estate planning process so you can get started on your own plan today.

02:38

Will asks Question 1: “Let's jump in with our first question. We're going to start at the basics. What is estate planning and what documents are included?”

Mary responds: “When people think of estate planning, usually they think of wills. A will is a document that will basically dispose of your property. When you pass away, you can also specify whether you prefer cremation or burial, and any requests like that.”

“There are many other documents that are considered to be part of estate planning. There's a document called a revocable trust. That's pretty common for those that may have an issue with probate. A durable power of attorney is another document that all Floridians need, and probably anybody in any of the States, actually. Healthcare surrogate is another document that designates someone to have all medical decision-making power for you, if you ever become incapacitated.”

“Also, a lot of people get living wills confused with wills. They are two different things. A living will deals only with the end of life and medical decision-making, whereas a will again, disposes of property upon death.”

04:11

Cristina asks Question 2: “Only one-third of Americans actually have a will. Why do people need a will? And why do you think so few people have them?”

Mary responds: “If you don't have a will then the state of Florida, if you live in Florida, will dictate where your property goes. So if you're married, for example, when you pass away and you don't have any children, then your spouse will inherit a hundred percent of your property under Florida law. And maybe you're fine with that. And maybe you're not.”

“If you have minor children, then they have a right to inherit your property. However, if you have minor children, you're definitely going to need a will in order to set up some basic trust provisions for them, because you cannot leave more than $15,000 worth of property to a minor child. If you do that, then someone will have to set up a guardianship of the property. Even if there is a surviving parent of that child.”

“I've had a client like that where her husband had left a life insurance policy to their daughter who is around age six or seven at the time that he passed and the mother thought she would just manage the money for her daughter. She had to go to the court and open a court case and set up a guardianship of the property. And still to this day, she's having to file annual accountings every year with the court to account for every dollar of that money. This could have been avoided if they would have had wills with trust provisions in them that held that money in trust for that child until she turned at least age 18. Sometimes people want to make that an older age.”

“If you have minor children you can designate who is your personal representative, which is the person in charge of all the decision-making – like who's getting the money, managing where the money is invested, and making sure all your bills are paid off. You have some family members that might be good at that, but others that might not be so good. You're probably going to want to specify who that person is that's going to be in charge of those decisions. And you're going to want to make sure that that person is enabled to make those decisions without having to go to the court every time they want to do something.”

“And if you don't have a will, they'll have to go to the court for things like selling off a piece of property or signing some sort of contract, anything they need to do. That's kind of major. They'll have to go to the court and ask permission without a will. So that's another reason you'll need a will.”

07:31

Will asks a follow-up question: “Emily, what prompted you to get a will?”

Emily responds: “My husband and I had never considered doing any kind of estate planning. One day someone very close to me said I really ought to, considering we have a minor son. We had created very informal guardianship paperwork that we thought was pretty good. And someone said, well, you really need to consider who would be the worst person that you could think of that might take your son from you, should you both simultaneously pass? And my mind started racing. He said I really need to make this formal and need to go to an attorney and get everything done. And we did, and it was an investment, but it was a very wise investment and we've never regretted it.”

08:57

Cristina asks a follow-up question: “Besides a fireproof safe, what other options should I consider for storing my will?”

Mary responds: “I like the idea of the fireproof safe. Safe deposit boxes are secure, but they're almost too secure sometimes. They can be notoriously difficult to get into after someone passes away. With most banks, if the person that you want to get into that a safe deposit box has not walked into the branch and signed that signatory form with you present before something happens, then they're not going to be able to get in to that safe deposit box, even if they are named as your personal representative or your agent under power of attorney.”

“We actually have to get a court order to open that box, which requires you to open a probate case. And sometimes that's the only reason we open the probate case is to get that order, to open that box. And then a lot of times you open the box and it's empty, or there's like one thing in there that's insignificant.”

“So I would recommend against the safe deposit box. You want to have those documents accessible. And for things like wills, you're going to need to know where the original is, so make sure you keep it. I like the safe set in someone's home. Just make sure somebody besides you and your spouse knows the combination or knows where the key is.”

10:39

Will asks Question 3: “Mary, you brought up probate. Explain to us what it means to go to probate.”

Mary responds: “To go to probate means you're opening a court case. You have to pay a filing fee, which can be around $400 if you have to do a formal probate and $350 for a summary probate. Those are the two different types. As a court case, you have to hire an attorney to represent you, which can be expensive. That's our requirement in Florida for the formal probate cases. In Florida, the attorney can take 3% of your total probate estate, the dollar value as their fee. So that can add up pretty quickly.”

11:36

Cristina asks a follow-up question: “Do you have to go to probate or does this help you avoid probate?”

Mary responds: “Not everyone will have to do a formal probate, which is the one where you have to pay the 3% to your attorney and you have to be represented by counsel. Those are only for people who pass away owning more than $75,000 worth of assets in their name. When they pass away, if they have less than that, then they can do what's called a summary probate. It's a little bit easier and quicker. Even though you don't need to be represented by an attorney in a summary probate, most people do hire an attorney just because they don't know how to do it.”

“Anyway, if you want to avoid the whole probate altogether, what you'll probably need to do is a revocable trust. It acts like a will, but you set it up and put everything in it beforehand. So before you pass away, you take the steps of putting your property, like bank accounts and real estate into that trust. We help the clients with that. And then everything's done so that when you pass away, nobody has to open a probate case because the trust owns all. You technically don't own it. So there's no need for a probate.”

13:11

Will asks a follow-up question: “So Emily, you help your clients draw up these trust documents. Then when they seek an account where to put these funds, maybe they come to Addition Financial, that's where you kind of help review those documents ahead of the account being opened, right?”

Emily responds: “They'll go into the branch or mail them in right now because of COVID. The branch will forward them to the legal department and that's when I'll go ahead or me and my team will review the paperwork. We look at trusts, powers of attorneys estate and guardianship paperwork. Once we're done with our review process, then we'll forward that back to the branch and they get back to the member or future member.”

14:00

Will asks another follow-up question: “Mary, you mentioned you've seen an uptick in these things?”

Mary responds: “Yes, especially at the beginning of the pandemic we saw a huge increase in the amount of powers of attorneys that came our way and also trusts have been increasing too. It may be they weren't current or recently drafted but now people are realizing they need to do something with them. They may have had them for years and they just didn't submit them to the credit union in order to be added as either the power of attorney on the account or open the trust account or update a trust account that we currently have.”

Will responds: “For me personally, during this whole year I've been taking little things that I haven't been getting done for a long time and getting through them slowly. Not anything as important as estate planning but that could be one reason.”

Mary follows-up: “We think of estate planning as the end of life, but right now we are seeing people that are healthy and they are coming in just in case or they are all of a sudden incapacitated and need help. The current environment has some of them considering that they may need someone to take over their account or act on their behalf. A lot of older people have had their kids going after them for years to do this type of paperwork in case something were to happen.”

15:53

Cristina asks another follow-up question: “Do you have any tips that would help move that process along or prevent the process from becoming held up?”

Emily responds: “If I had to give one tip I would definitely say to stay away from online forms. It's really not advisable because we are very strict and we follow Florida statutes very carefully. We look for certain words and phrasing that are on an attorney prepared form that are most likely not going to be on an online or catalog document.”

Mary also responds: “It's been interesting this year. There were very few people coming in but now I guess everyone has decided this isn't going away and we really need to get these documents done. Trusts are very popular because people really like the idea of not having to burden their family with going to a court or attorney. If you do everything in a trust and you really cross all the T’s and dot all the I’s, your family is really set up and they don't really have to do anything.”

18:24

Will asks Question 4: “You used the word ‘intestate.’ I know that means without a will, but can you explain what that means – and especially here in Florida?”

Mary responds: “Intestate is the latin term for ‘without a will.’ There's a different set of things you have to do in Florida and other states as well. You get to specify who does what, who gets the money, who serves as the representative and if you want to benefit other family members other than whom the state of Florida says should inherit your money.”

“There are also other docs that we as attorneys have to do for those who are intestate that we don't have to do for those who are testate. One example is an affidavit of heirs. We only have to do it if someone dies without a will. Someone is going to have to go back and trace the family tree and then get a third party to sign it who is not inheriting and then swear to all of its contents.”

20:30

Cristina asks Question 5: “Let’s talk about leaving money to kids. What are the laws in Florida about that?”

Mary responds: “Most couples leave 100% of their estate to their spouse. The will specifies that if both parents are deceased, this money will pass into a trust for their heirs and it will be held and managed by the person named to be the trustee. The trustee is not entitled to take the money for their own benefit. They are simply managing the money for the children under the specified age which is commonly set at 25. They will pay the educational, medical and daily expenses out of the account until the child or children are old enough. Trusts are very customizable, you can break it down and say each child may receive a certain amount at this age and receive the other half at another age.”

22:17

Cristina asks Question 6: “What is a revocable trust? I’ve heard that term but I don’t understand it.”

Mary responds: “The revocable trust is a modifiable trust that is set up during your life. It is a flexible document that you or an attorney can draft for you. A joint trust means both partners have pulled all of their money together in this one trust. Mine personally specifies my two children will inherit what is in there at the age of 25.”

24:29

Will asks Question 7: “What happens if you become incapacitated before you die? People get sick or they’re in an accident or something – how does that fit into estate planning?”

Emily responds: “Unfortunately because of COVID and other things going on in the world, the assigned or appointed child of an incapacitated parent may be separated from their family and present a power of attorney and it may be rejected. And the appointed agent can’t be redone if the parent is unable to be reached. We really advise that everyone do this as early as possible and try to have a power of attorney.”

27:16

Cristina asks Question 8: "One of the things I’ve heard people talking about is joint ownership. If you co-own property or a bank account – or anything, really – doesn’t that pretty much take care of it?"

Mary responds: "A lot of people use joint ownership to get around the probate problem. Sometimes this can work, however, problems may arise if both owners die simultaneously. It's not likely, but it does happen. When it does, we have to open a probate to figure out who's going to inherit your assets. If you don't have a will, the state of Florida will appoint someone to manage your estate to determine where the money goes. This person may not be the best choice since they could mismanage your money or take your funds.”

“The same applies to a bank account. Say you have a child who is handling your finances, so you add their name to the account to make it easier. Even if you specify that you want to divide your assets equally among your children, the money’s going to the one whose name is on the account – unless you specify otherwise."

30:11

Will asks Question 9: "Now, earlier you mentioned two things I think we should talk about: health representatives and a power of attorney. Why should people have those?"

Mary responds: "The power of attorney or durable power of attorney is a document of financial matters. If you’re incapacitated in any way, the person who has your power of attorney is the one who can pay bills on your behalf, sell property and make sure that you’re taken care of. On the other hand, a health representative or medical proxy is the person you specify who’ll be in charge of making medical decisions on your behalf if you can’t. So, if you specify in your living will that you don’t want extreme measures to be taken to keep you alive, that person is the one who will intervene on your behalf to make sure your wishes are honored.”

31:39

Cristina Question 10: "How often should people revisit their wills and estate plans?"

Mary responds: "For people with small children, they should revisit their wills and estate plans every two or three years. You should also name the guardian of your small children in case you and your spouse both pass away. For people with older kids, I recommend updating your will every two to five years. Laws change and people change which is why it's smart to update your will. For people with children who have disabilities, there are extra steps you need to take for that child. For example, setting up a will with a special needs trust in it.”

35:00

Cristina asks Quick Question 1: “At what age should people make a will?”

Emily responds: "As soon as they have a full-time job is a good time. You’ll need to amend it throughout your life but it’s never too early to start. In some cases, it may make sense to do it earlier than that. I keep reading about kids who start businesses before they’re 18. Anyone who has substantial assets should have a will."

35:45

Will asks Quick Question 2: "What happens if you own property in a state other than Florida – or in more than one state in general?"

Mary responds: "If you have this issue, please come see myself or another estate planning attorney. A revocable trust is your best bet. Without one, you can end up in probate in both states, the state where you live and the state where you own property. That’s right – and that means probate fees and attorney’s fees can be double what they would ordinarily be."

36:35

Cristina asks Quick Question 3: “What about timeshares? Do they count as out-of-state property?”

Mary responds: "Yes, they do – but they can be included in a revocable trust as well. A lot of people overlook timeshares in estate planning because they only own the property in part. From a legal perspective, though, it’s still ownership.”

37:15

Will asks Quick Question 4: "Is it ever a good idea to draft a will on your own?"

Emily responds: "No, definitely not. Wills are legal documents and it’s easy for a layperson to use improper language or miss out on legal nuances that can end up causing big problems for their heirs and representatives after they die. If your estate is simple, it won’t cost much to hire a lawyer to do it for you.”

38:22

Cristina asks Quick Question 5: “How much does estate planning cost?”

Mary responds: "Well, that depends on how large and complex your estate is. But for the ordinary person, it shouldn’t be prohibitively expensive. Some law firms, including The Kaplan Firm, offer flat rate estate planning packages that are very affordable. You can always do some comparison shopping before you agree to a price."

41:05

On this episode, we shared three resources to help listeners get started on their estate planning journey: