Old McDonald had a farm EIEIO. And on that farm he had a chicken. A greedy ole chicken that hatched a plan to trip Old McDonald and steal his bucket of corn. The chicken’s evil scheme resulted in a broken leg and lengthy stay in rehab for Old McDonald. Lying in his hospital bed, Old McDonald had lots of time to think about the moment his life and corn kernels flashed before his eyes. He realized he could no longer put off completing a will even though it was upsetting to think about his own mortality. His dream of passing on the farm to his son, Young McDonald, gave him the courage to make a call to his good friend who was an accredited estate planner EIEIO.

Most of us will never encounter an evil chicken setting the stage for a disability claim. Nevertheless, none of us can predict our time of passing, catastrophic injury or long term illness. There are many reasons why people rationalize delaying their estate planning. For instance, you know you don’t possess a plethora of assets other than a futon and a card table. You maintain a healthy lifestyle as evidenced by your will power to choose Greek yogurt over regular. You don’t have time to plan, because you’re a professional Uber driver for children and their pressing appointments. You’re not sure you can afford a professional, but question your cousin’s credibility who stated he can totally google how to do this. 

As we age, we generally settle into the idea of planning for the protection and distribution of assets to our heirs, just as the wealthy are more likely to seek ways to preserve their wealth. With this observation of human nature, estate planner with Equitable Bank, Tim O’Connor CLU, ChFC says, “Estate planning isn’t just for retired people or the very wealthy. Families with modest assets benefit the most from comprehensive estate planning, because if not planned efficiently they stand to lose a larger percentage of their estate to legal costs and fees.” If your situation is not lending itself to a complex estate plan now, at least consider these 3 things:

  • Creating a will
  • Buying term life insurance
  • Appointing powers of attorney for business assets, personal assets and health care decisions

Then, let the planning develop as your needs change and finance situation improves. Thereafter, it’s best to revisit and amend your estate plan shortly after major life events such as:

  • Getting married
  • Having children
  • Buying property
  • Starting a business
  • Inheriting property
  • Retirement
  • Passing assets on to heirs

Trying to save money by doing this yourself guided by your cousin and Google, could lead to costly mistakes. Hire a reputable lawyer preferably one who is experienced in estate planning to make sure your documents are prepared properly the first time.

O’Connor warns of a cautionary tale, “If you don’t have a plan, your state has one for you, but you probably won’t like it.” At the time of death, if you don’t have a will or trust, a court appointee, not your family, will make decisions for your care and distribution of your property. Family businesses or family operated farmland could be used to pay off medical expenses leaving the next generation without their livelihood. In addition, if there is no intentional estate plan your spouse and children may only receive a fraction of your estate as a result of court and legal fees consuming their shares. This is especially crucial, if you have young children and both parents perish. As a parent, you want a say in who will raise them, not the court.   

Where does one begin with the daunting task of establishing an estate plan? You start with a will or living trust. What is the difference between the two? A dirty little word called “probate.” Probate is court approval regarding the validity of a deceased individual’s will. The probate process is a costly and lengthy procedure. Probate can take anywhere from 6 months to 2 years or possibly more, leaving families and family owned businesses in limbo. The old saying, “time is money,” holds true here. Jointly-owned property and assets with a named beneficiary such as: life insurance, IRAs, 401ks, annuities, etc. generally transfer easily and aren’t subject to probate, as long as everyone dies in the right order. Which means, if you outlive your beneficiaries, those assets are no longer shielded from probate.

If a preference must be named, many individuals, families and business owners choose a revocable living trust. The word, “revocable,” meaning- able to make changes, allows you flexibility to adjust your estate plan as your situation changes with major life events. Other benefits of a trust include:

  • Preventing court control of assets
  • All assets are incorporated under one plan
  • Provide privacy

For individuals who stand to inherit a family business, land or equipment a trust helps survivors manage assets, free from court supervision.

Upfront a living trust is a bit more expensive than a will. With that being said, many people place greater value on dodging court intrusion and expenses with regards to their family’s wishes.  
“Having a properly prepared plan in place with your directions is the best way to protect your family when you are no longer able to do so,” says O’Connor. “You can’t point to the calendar and determine your date of death, but you do have a choice. A choice to handle your affairs privately, by you and your family, not by the courts.”  

With the help of an estate planner, Old McDonald was able to protect his family and the farm he cherished from crippling taxes and court costs. To equalize Old McDonald’s gifts to his heirs, Young McDonald took over the ownership of the family farm and daughter McDonald, now living in New York City, will be the beneficiary of a life insurance trust. Another risk Old McDonald mitigated for his family farm was the possibility of the need for long term care. He chose an insurance policy that would provide cash flow to pay nursing home expenses, thereby, protecting the farm from mounting financial burdens. As for the evil chicken, she was granted a pardon for a first time offense, and was given her own corn contract on the Chicago Board of Trade EIEIO. 

Mandy Sullivan freelance writer/columnist invites you to read about her precarious experiences as a caregiver for multiple generations. So sit back and enjoy a fun read in the only room of the house you can find some peace, even if you have to make a stink to do so! 

© Mandy Sullivan, 2018. Unauthorized use and/or duplication of this material without express and written permission from the author is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Mandy Sullivan with appropriate and specific direction to the original content.