Jeff Fouts: “There are many, many different options for you to choose from in the way you can do estate planning. Basically, it boils down to five broad choices. Let’s talk about them. Number one is called “Spend It All”. It’s the most fun. Spend it all. Spend the last dollar, then on the last day, let the check to the undertaker bounce. While that may sound like a lot of fun, no one’s ever going to do it. Why? You know why they’re not going to do it? They’re afraid of running out of money. So let’s check that one off the list.
The next option is called “Dying Intestate”. That is the situation where you die without having any estate plan at all. Here’s the bad news for that option. If you die without an estate plan, the bad news is that the state of Georgia, and every other state, has an estate plan for you. I do not think you’re going to like the state’s estate plan. It uses something called the law of consanguinity that goes back to the Middle Ages in England. So let’s mark that option off the list.
The third option is a “Simple Will”. This is what I call an “I-Love-You Will”. Here’s the way it works. Everything goes to the spouse upon the death of the first spouse. Then, at the death of the second spouse, everything goes equally to each of the children. That’s an “I-Love-You” will. The next option is to use some type of revocable living trust. Oftentimes revocable living trusts are set up just like a simple will, in other words, everything goes to the surviving spouse and then everything goes to the kids, except it has a probate-avoidance wrapper around it. At least that’s what people think it has – probate avoidance.
Unfortunately I’ve got some bad news for most folks that have revocable living trusts. After reviewing hundreds of estate plans over the years, here is what I can tell you and you can “take it to the bank”. At least two-thirds of all revocable living trusts are not going to avoid probate at all. Not at all. Zero. Why is that? You may say, ‘Well, Jeff. I’ve got a beautiful estate planning portfolio. It’s a burgundy portfolio. I got it at downtown Atlanta (or Alpharetta or at the Galleria near Smyrna). I paid $500 (or $5,000) for it.’ You know what? It really doesn’t matter what you paid to have your estate plan created.
It doesn’t matter if it has the words “Revocable Living Trust” written in alligraphy on the cover of your portfolio. It doesn’t matter that inside the portfolio it has thick ivory colored linen paper. It doesn’t matter that the document says, “Revocable Living Trust” inside. Those are not the determining factors as to whether the estate plan will work or not. Those things don’t matter. The reason it doesn’t matter is because just because it says “Revocable Living Trust“ in no way mean it’s going to actually avoid the probate process.
Why will the revocable living trust estate plan not work? Because people do not understand the interplay between the titling of assets and the estate plan. You can have an estate plan that lay out everything you want to achieve, and say, ‘A, B, C, D,’ everything is in there. Yet, the odds are pretty high that your written estate plan will accomplish nothing that you want to achieve. Absolutely nothing. I could tell you story after story about these estate plan failures.
I’ll tell you just one story that comes to mind, it’s about a gentleman that meant to leave $50,000 to his daughter from the first marriage. The man had the $50,000 in his assets. He had a Will that said, ‘I leave $50,000 to my daughter.’ The Will was legally enforceable. But how much did the daughter actually get? Nothing. Zero. She got zip. Why? Because he did not understand the interplay between his assets and his estate plan. Thus his estate plan failed. It’s very sad and serious.
If you want truly do want your estate plan to actually work, and not just appear that it will work, then you need an estate plan that’s comprehensive enough to accomplish what you want, but not overly complicated. So these are the major options you have when creating your estate planning. If we could ever help you in any way, like maybe reviewing your estate plan, let us know. Thank you.”