One of things I ask people when they approach me about mediation is whether they have an estate plan. Surprisingly, most people do not. Furthermore, many are not clear about why they should have one, to begin with. If you own a home or have children, you should definitely put together your estate plan.
What is an estate plan?
An estate plan outlines what you want to happen should you and your spouse die. You decide who should become the guardians of your children, you decide who the beneficiaries of your home and other assets are. Many people mistakenly believe that a will is sufficient. In the case of property, if there is no estate plan, it will automatically go through probate.
What does this mean? It means the courts get involved. A lot of money goes to pay for a trustee to manage the trust. The money you pay the trustee no longer goes to your beneficiaries. It also means that your will is not enough to get your property to your beneficiaries. Oh, and I forgot to mention: it will be publicly announced, so any long-lost relative (or secret love child) could suddenly show up to contest the will and give all kinds of reasons why they should get part or all of the estate. For these reasons and more, consider getting your estate plan in place.
Whether creating budgets or selecting prudent investments, in many couples, one spouse takes charge of managing the household finances. Naturally, one partner may have more interest or knowledge in specific areas, but it becomes unhealthy when the balance becomes one-sided. This often holds true for estate planning too.
Many men may be left wondering how to feed themselves when their wife dies, while many women may struggle to understand the scope of assets they inherit when their husband dies. While you can certainly leave instructions in the estate plan, collaborating during one’s lifetime will yield a better result. The last thing anyone wants to do is tackle new challenges at an already difficult time.
While you can and should do some planning independently, there will be some crossover, so it pays to craft a plan which keeps one another in mind.
Contradictions equal problems
Let’s say you have a young child. If one of you passes away, the surviving spouse will raise the child. But if something happens to both of you, your minor child must be raised by a legal guardian. Imagine the complications if you named your sister, yet your spouse nominated their brother to serve as guardian. How will a court decide which of the two people should take the role if the child’s parents did not agree?
In the event that you and your spouse do not agree, it is a wise decision to get a mediator, like Alice Shikina, involved to come to a mutual agreement about what goes into your estate plan. Unfortunately, many people simply do not get past this obstacle and it creates havoc and mayhem should both parents suddenly die. In order to spare your family the heartache and fights that ensue, make sure to work through your own disagreements, so that others do not have to do it for you in the event that the unspeakable occurs.
Consider financial realities
What happens if you want to leave your share of the house to your offspring from a previous marriage? Can you be certain that your spouse will honor this wish? What if he or she needs to continue living in the home?
It is also vital to compare the tax implications of joint versus separate assets and inheritances.
A legal professional, like Norton Basu LLP, can help you discover solutions that anticipate all potential scenarios and respect the wishes of both partners. Ultimately, it is far cheaper to put the estate plan in place now versus after something happens to you. Your estate will end up paying tens of thousands of dollars to go through the probate system. Protect what is yours and protect your beneficiaries. Work with your spouse to get through the difficult conversations and get an estate plan in place. Work with a mediator if the conversations are too difficult to work through without one. It’s too important to ignore.
Co-written by Norton Basu LLP and Alice Shikina