PLANNING FOR THE UNEXPECTED

     Tragedies in recent years that have occurred in this country and around the world are grim reminders of how fragile and fleeting our very existence on this earth is. We tend to take our health, friends, family, good fortune, and life itself, for granted - until they are taken from us. To lessen the blow of your incapacity or death, you must take steps to plan how your estate will be managed and passed on, whether or not it occurs as a result of an unexpected event.

     The news over the past few years has been full of stories of victims who have faced tragedy. These stories serve as prime examples of why estate planning is essential. Without proper planning, probate (and estate taxes) may apply at your death. Probate is the legal process for the payment of debts and distribution of property according to a Will, or by state law if you have no Will. The Court appoints someone to handle your affairs and the process takes about a year; for complex estates even longer. These proceedings are public record open to the public for review. Furthermore, a separate probate must be filed in every state where you owned property. The cost to your family may be 6% or more of your total estate value.

Consider the following examples:

Example 1: Ann and Joe were recently married. Ann, a stock broker, was working in her office when a vehicle accidently crashed through the side of her office building and killed her. She owned most of her assets in her name alone and had not taken the time to execute even a simple Will. Joe must now take her estate through probate to transfer ownership to her assets. Had Ann set up a Living Trust, Joe could immediately take title to her assets without having to open a probate court proceeding.

Example 2: Bob and Liz worked at the same company. When a fire broke out in their building they were trapped and both perished leaving 3 minor children. They had executed simple Wills years ago leaving everything to each other, or to their children upon the last one’s death. Since both Bob and Liz died, presumably, at the same time, both of their estates will need to be probated to pass their assets to their children. In addition, since all of their children are under age 18, a guardian will need to be appointed by the court to take possession of and handle their inherited assets. Had Bob and Liz set up a Living Trust naming a successor trustee to handle their assets upon their deaths, no guardianship would be needed to handle the inheritances of their minor children.

Example 3: Todd, a 30 year old fireman, was killed in a building which collapsed while he was helping to evacuate those inside. He was unmarried and owned everything individually. While he had a Will leaving everything to his parents, he had no other planning in place. Todd’s parents must take his estate through probate to acquire title to his belongings as specified in his Will. Had Todd executed a Living Trust, no probate proceeding would be required to transfer his assets as he intended.

Example 4: Bill, a 54 year old wealthy executive who had just moved his family from the California to Florida, was flying home to organize the move. His plane crashed killing all on board. As president of computer company, he owned a majority of its stock in his name alone. There was no business succession plan in place. He also had a sizeable personal estate and a large life insurance policy. He and his wife, Carol, had simple Wills. Because he owned the stock individually, his estate must be probated to transfer or sell it to someone else. Also, since Bob and Carol’s combined estate was quite large, Carol’s estate will be subject to estate taxes on her death. Had Bob and Carol established a Living Trust, Bob’s stock could be owned by the trust and would not be subject to probate. Bob also could have set up a buy/sell agreement or other arrangement for someone to take title to the stock by transfer or purchase. In addition, had Bob and Carol incorporated estate tax planning in a Living Trust, Carol’s estate taxes may be minimized or even eliminated.

     Most events do not end in unexpected violent tragedies, but many do end in natural death events which often happen when least expected. Had those in the above examples planned for unexpected events by establishing a Living Trust or providing for business succession, probate could have been avoided and their assets would have passed immediately and directly to their surviving loved ones.

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