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Dear Friend,
I'm excited that we can visit a little every month via this newsletter. I have so much to share with you. Each month I will touch on just a few of the "secrets of wealth preservation" I have discovered over the 30+ years I have been practicing as an Estate Planning Attorney.
My favorite quote of the month:
" For most of life, nothing wonderful happens. If you don't enjoy getting up and working and finishing your work and sitting down to a meal with family or friends, then the chances are you're not going to be very happy. If someone bases his happiness or unhappiness on major events like a great new job, huge amounts of money, a flawlessly happy marriage or a trip to Paris, that person isn't going to be happy much of the time.
If, on the other hand, happiness depends on a good breakfast, flowers in the yard, a drink or a nap, then we are more likely to live with quite a bit of happiness." ---Andy Rooney
A Visit with My Dentist
Yesterday, I enjoyed a pleasant visit with my dentist. Undoubtedly, it was all the more pleasant because our visit was taking place in his home rather than in his dental office. His comfortable couch in his beautiful living room was far superior at promoting conversation than any dental chair could ever be. And so, my dentist friend and I were able to experience an enlightening discussion. As often happens (I suppose, because of my profession), our conversation turned to a disquieting question. He asked it bluntly. “Steve, what will happen to my home when I pass away?”
Having been down that road, many times, with many people, I settled in more comfortably, drew a deep breath, and began my critically important response by asking a few pertinent questions. His answers allowed me to explain the situation. Because his home was held jointly by his wife and himself, I confirmed that the home would belong to his sweet wife if he were to go first. It would likewise become his if his wife preceded him. My friend smiled and nodded, obviously approving the ownership of the home passing in such a manner. However, his smile immediately faded when he heard my next question: “But, John, what would happen if you both were to die?” I paused, then continued, “Since you have not written a will, your home, as well as your other assets, would be tied up in the courts. All your assets would be untouchable until the probate could be completed and your home sold or transferred to your children.”
No will?
The laws of your state WILL take over!
I explained to John that dying without a will is called dying intestate. The family of those who die without a will soon discover that the state in which they reside has already written a will for their deceased loved one. Looking him in the eyes, I gently declared, “John, I’m sorry, but your estate will be distributed according to the will that the state legislature has written for you. Knowing you, you will not be very happy with a will that has been written by a bunch of politicians.”
Raising up in his seat, his eyes snapping, he agreed, “I most certainly will not! I had no idea that would be the case.” More calmly, he continued, “But my wife has an extremely hard time discussing the issue of our deaths, especially since the death of her own father. She was very upset with the manner in which his will was probated. After experiencing the messy handling of his estate, she doesn’t want anything to do with a will.”
I tried to convince him that the situation is much worse when there is a death with no plan. But John was not too eager to do any estate planning. He was of the opinion that there would not be much left of their estate after they helped their children with college and other expenses. So why have an estate plan? I kept answering his questions, hoping to help him understand.
Only a house?
After a short lull in the conversation, John questioned, “So what would happen if only our house were left?”
I love it when I can detect the beginnings of a change in attitude toward the importance of estate planning. I eagerly explained that because of the value of his house, it would still require a probate. “A probate just for the house?” John protested.
“Yes,” I replied, “just for the house.”
I could see the wheels turning in John’s mind. Because he was a good friend, I went a step further and asked, “John, what would happen to your dental practice if you were no longer around to manage it?” He replied that it would simply die. Responding to that statement was incredibly easy, “But John, your practice has some inherent value. In addition to the expensive X-ray machines, dental chairs, and other equipment, there are the patient lists and the established goodwill. Wouldn’t you like your wife or family to be able to sell the ongoing practice? Wouldn’t you want them to be able to do so in a timely manner—without waiting while your estate was tied up in the courts—so that your business would not lose its value?”
Estate Planning: Not just for the dead.
John agreed that, of course, he would want that for his family. He was beginning to see some serious value to this estate planning concept. I then proceeded to explain that he could protect his business from long waits in the probate court by using just a few available estate planning tools. John needed to incorporate his practice as a professional corporation. The corporation would own his business and its assets. The corporate stock could be owned by a professional corporation trust, a revocable living trust designed to hold professional practices. The trust would continue upon John’s death. It would avoid probate. His wife could sell the practice to another dentist before the practice lost all its value. (When John died, his patients would still need dental care. They could not wait years for probate to end. All his patients would find new dentists. And the value of John’s dental practice would plummet!)
In addition to avoiding probate, a professional corporation would provide John several tax benefits during his lifetime. Those benefits are secrets that will be disclosed in a future newsletter.
Choose the right lawyer!
John’s home and other assets could also be held by a revocable living trust and everything could then avoid probate. This could save thousands of dollars for the family. It would also enable them to settle the estate swiftly and efficiently. When I explained this, John became a bit agitated. “My uncle is a prominent attorney! Why in the world hasn’t he explained these things to me?” It was an exciting moment to finally see the fog clear for John. I knew that he would now take the steps necessary to protect his family in the event of his death.
I smiled as I responded to his question with one of my own, already knowing the answer, “What kind of law does your uncle practice?”
“He is involved with bankruptcy and criminal law.”
“And that would be the reason right there, John. Your uncle doesn’t have the background and experience in estate planning or business law. Like doctors, we attorneys have learned the many advantages of specializing. That is why lawyers so often hire other lawyers.”
In estate planning, it is not simply a matter of choosing between a will or a trust . . . one must also choose the right lawyer!
Secret 1: Decide to do something now!
The first step, and the first secret to wealth preservation, is to decide to do something. NOW! Don’t wait. Click here to read: "The High Risk of Waiting -- or Why Otherwise Responsible People Procrastinate Estate Planning"
Secret 2: Avoid the probate process!
The second secret is to avoid the probate process. You must avoid probate to preserve your estate. Click here to see the red tape involved with probate.
Secret 3: Have the proper business entity!
The third secret is to have the proper business entity. You may need a professional corporation, as my friend the dentist needs. Or perhaps your business would best be organized as an LLC, an S-corporation, or a family limited partnership. Click here to learn more about business entities.
Secret 4: Select the right attorney!
The fourth secret is to chose the proper professional to help with your decisions in estate planning. Click here to see “14 Tough Questions You Should Ask Your Attorney Before You Write a Check”
I hope this has been helpful to you and that you now know a little more about the importance of proper estate planning. Be sure to watch for next months "Secrets of Wealth Preservation."
Until next time,
Steven W. Allen
Legal Awareness Series, Inc.
1550 E. McKellips Road, Ste. 111
Mesa, AZ 85203
info@legalawareness.com
1-800-733-LAWS (5297)
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