During every one of the initial consultations I have with clients we go over the three basic estate planning paths; no planning (intestate), will based planning (testate), and trust planning. Each planning path has its own positives and negatives, and each path is not suitable for every person or family.
No Planning (Intestate)
If you choose not to plan or fail to plan, congratulations the State of Idaho has put a plan in place for you. The Laws of Intestate Succession are generalized ideas of what a typical person would have wanted to happen to their estate if they had planned. A typical person is a subjective idea, as my view of a typical person is different than your view of what is a typical person.
Benefits of Intestate:
No out of cost expenses for drafting a will or trust based estate plan.
Drawbacks of Intestate:
Your wishes or desires will not be taken into account;
Does not provide you with ability to name specific people to serve in vital roles, ie Guardian and Conservator of minor children or Personal Representative of Estate;
Does not provide you with planning for while you are alive, ie Powers of Attorney for Health Care or Financial decisions or a living will;
Any person in the world can apply to serve vital roles in administering your estate; and
Your estate will go through Probate which is a public process, that generally lasts anywhere from 4-12 months, and costs anywhere from $2,000 to $10,000 (depending on attorney fees and whether or not there are contests).
Will Based Planning (Testate)
If you choose to create a will based estate plan, your wishes and desires will be followed by the probate court. Like all plans, there are up upsides and downsides to a will based plan.
Benefits of Testate:
Your wishes and desires are taken into account;
You do get to name Guardians and Conservators for your minor children;
You do get to select who will serve in the vital roles in administering your estate;
You do get to plan for living but incapacitated scenarios;
Creditors have a small window to make a claim and then lose their ability to; and
You can state who is not allowed to serve in any vital role.
Drawbacks of Testate:
The Probate process is Public, meaning anyone can find out what you are leaving and who you are leaving it to;
The Probate process lasts 4-12 months;
Probate is an expensive process;
Does not allow for structured giving of assets, or conditions to receive assets, ie minor children or children with special needs or substances abuse problems; and
Not a good tool for blended families.
Trust based planning
Think of a trust as both a private contract and as a separate legal entity, like an LLC or a Corporation.
Benefits of Trusts:
All of the benefits of a will, plus;
Private. If the person is not a beneficiary, they have no legal right to know what is in the trust;
You may structure distributions to beneficiaries over time, and not all at once as a will based plan requires;
Does not go through Probate court;
Organizes all of the assets;
Seamless transition from one Trustee to another after you pass away; and
Allows for creative distributions, which is ideal for blended families, families with small children, and families with substantial assets.
Drawbacks of Trusts:
If an asset is not controlled by the Trust, it is not bound to pass;
More initial planning is required; and
More costly up front, but can be significantly less expensive when you look at your complete life cycle. Jeppesen Law charges $1495 for a trust, while a will for a married couple is $770, plus $1995 per person to probate their wills, would cost $4760 over your life times.
Schedule a conversation with Justin Jeppesen to take the first step towards creating your complete estate plan! With our Free Initial Consultation we help our clients explore their own situations and plan for their futures. If you have more questions, we'd love to help! Contact Jeppesen Law now. (208) 477-1785