Estate planning often brings out emotional decision-making relative to asset division. Many people think that if they love their family, they can solve estate concerns by leaving everything to their loved ones in a will. Unfortunately, however, wills are (contrary to their name), not the most caring way to plan your estate. It’s important to understand the risks leaving your estate plans mapped out in a simple will.
“I Love You” Will
Have you ever heard of an “I love you” will? This is a common name for a will wherein the maker leaves all of his or her assets outright to his or her surviving spouse. Many people consider this approach because they think that leaving assets in trust shows they don’t trust their spouse. They may also think that a lack of federal estate taxes protects their assets from getting into the wrong hands. Sadly, many also believe that a will can be used to avoid probate. Unfortunately, none of these things are true.
Why “I love you” wills aren’t effective
Do you want to make sure your spouse gets access to your wealth upon your death? If you leave your spouse an “I love you” will, he or she will have to go to probate court to validate your will and ultimately transfer assets. Since this type of arrangement grants assets outright, your spouse’s estate plan will eventually control the distribution of whatever assets are left at the time of his or her death. This could prove problematic because your spouse could alter their estate plan at any time. If this happens, any verbal agreements about asset distribution could go out the window, contrary to your wishes or other agreements you have made.
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You could inadvertently disinherit your children.
If you use an “I love you” will, your assets are left for your surviving spouse to leave. For example, your wife could leave her assets to her own kids, a charity, a lover, or a new husband. Likewise, assets left outright to children could be lost in a divorce.
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Basic planning with outright inheritance sets heirs up for asset protection issues.
Once your assets are owned outright by your beneficiaries through a direct inheritance, those assets can be seized by creditors, divorcing spouses, or through bankruptcy. Even if your estate falls below the exemption for the death tax, predatory creditors and lawsuits could still spell trouble.These wills would still have to go through probate. Unfortunately, surviving spouses do not receive an exemption from probate. Even a simple will has to go through the process. On the other hand, trusts need not go through probate.
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An “I love you will” will not protect against guardianship or conservatorship court involvement for you or for your beneficiaries.
For example, do you plan to leave all of your assets to your husband? A guardian or conservatorship court would control his entire estate if he develops dementia.
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Basic plans pile more assets into survivors’ estates.
Although portability between spouses can help, it won’t eliminate the generation-skipping transfer tax (GSTT). Portability isn’t available for non-spouse beneficiaries. This affects a very narrow group of people with very high net worth. In a changing tax policy landscape, keep yourself as informed as possible for ongoing success.
Explore lifetime beneficiary directed trusts
Comprehensive, trust-based estate planning with lifetime beneficiary trusts provide a safe inheritance for surviving spouses, children, grandchildren, or other beneficiaries. If you leave your assets in lifetime beneficiary trusts, you retain control over where assets end up in the long run. Plus, your beneficiaries obtain robust asset protection features that can keep wealth safe from courts, creditors, and divorcing spouses. Your family’s private information remains out of public record. You can also take advantage of more sophisticated tax planning than you can with a basic will or trust with outright distributions.
With this approach, you can focus enjoying your life with the knowledge that a qualified estate planning attorney is working for your best interests now as well as down the road. Now that’s something to love and truly expresses “I love you” to your beneficiaries.
About Skvarna Law Firm in Upland and Glendora
A skilled attorney can assist with your estate plan. Contact us today to learn about your options (909) 608-7671. We operate offices in Glendora and Upland, California. We provide legal services for individuals living in San Bernardino, Los Angeles, Orange and Riverside Counties. This includes the cities of Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Montclair, Pomona, La Verne, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma. Visit SkvarnaLaw.com to learn more.
