Now that we know wills are a pretty poor way of planning your estate, the good news is that there are some much better alternatives. And no, you will not have to hire a $5,000 estate planning specialist to use them.
We’re going to discuss alternatives to wills, but first, a few general comments.
If you believe me that there are better ways to plan your estate than simply with a will, the obvious question is, ok, so what are they?
Glad you asked!!
The first thing you have to do is to lose the mindset that there is any one “perfect” or “one size fits all” solution. For some reason when people promote or advocate for a tool, they always want to believe that it is universal.
I’m sure you’ve heard people tout the benefits of a will. I’m sure you’ve read or heard of the blurb marketing books or programs like “Avoid probate with a living trust”, and so on.
All of these are wrong to the extent that what is promoted is a universally superior option. The reality is that there is no such thing as a universal estate, there is no such thing as a one size fits all estate plan. To try to use one method for every estate, for every kind of property and for every kind of desired disposition is simply delusional.
There are a lot of tools and methods that you can employ and the wise planner will pick and choose the ones that work best for a given situation.
With that in mind, we can take a look at options other than a will, bearing in mind that different options work better than others for a given situation. We’ll list some options here generally, then in later posts, discuss in more detail.
1.Lifetime conveyances
This one is almost a no brainer, and while we’ll discuss it a little more, it’s really pretty simple. The premise is that if you’re going to give something to someone, why is it necessary to wait until you die?
2.Survivorship property
This is another one that is so simple that it’s almost painful to see people fail to use it. Real estate, bank accounts, stock brokerage accounts and lots of other things that could be “estate” property, can be held with a right of survivorship. That is owned together by two or more people with the provision that upon the death of one, the property belongs to the other(s). It’s automatic. Nothing has to be done. It’s simple. It’s easy. It’s cheap.
3. Trusts
This can be a little more complicated because there are so many – virtually limitless in fact – possibilities. You really can use trusts to tailor an estate plan down to almost microscopic levels, all without ever probating an estate. We’ll be talking about these in much more detail in subsequent posts.
4. Business Entities
People seldom associate the formation of business entities such as corporations and limited liability companies with estate planning, but the truth is, they can work very well. Just because they are commonly referred to as “business entities” does not mean they cannot be used for other things. There are plenty of LLC’s and corporations around that have never conducted the first bit of business or commercial activity. The major advantage of a business entity in the context of estate planning is the continuity of existence. If a shareholder of a corporation, or a member of an LLC dies, unless it is the ONLY shareholder or member, there is no consequence for the entity. It keeps functioning just as it did before the death. Sure, there may be management changes. There may be some realignment of shareholders or members. But the entity itself keeps on chugging along just as if nothing had happened. In later posts we’ll discuss how to use these entities for estate planning in much more detail.