Know Your Goals

Jesse Bifulco, Attorney, Camden Maine

Create a plan that addresses your goals for you and your family.

 “If probate in Maine is “user-friendly” what is wrong with our TOD (Transfer on Death)/beneficiary designation accounts?” “Why would I need a Trust?”

This question is a bit confusing, but I understand the concern. We are often asked at our Free Workshops about Maine’s Transfer on Death and Maine Beneficiary Designation Accounts. Some attendees are at first concerned about the upfront planning costs of creating a Revocable Living Trust.  The question sometimes is: what is the benefit for creating such a trust when you can simply make TODs and use probate? TOD means transfer on death. If you have an investment account that transfers to someone on death it will avoid probate. The same is true with assets that have a named beneficiary. You fill out a form and name who gets the property – no probate. Any property owned outright will still need probate or administration.

Estate Planning: Probate Avoidance and Cost Savings verses Achieving Your Goals

There are multiple problems with TOD and named beneficiaries as an “Estate Plan”. Yes. They will avoid probate. But frequently there are assets that are not TOD that must still be probated. To get what you want for yourself and loved ones,  you have to know your goals. Is your only goal that of probate avoidance, and up-front cost savings?

Why might probate avoidance not work as a plan?

Most people’s goal is not to avoid probate, and up-front costs, but to make sure that 1. They maintain as much control of their property as long as possible; 2. That they benefit from their property as long as possible; and 3. that the people or charities they choose get as much benefit out of their property when they are finished with it; and 4. Enjoy the most overall savings and costs, as opposed to up-front costs. With these 4 goals, avoiding probate is a factor. But TOD and named beneficieries are not the solution.

What’s wrong with “user friendly” probate anyway?

The number one concern is privacy. Probate is a public proceeding. Presently in our office, there are 4 contested probate proceedings. Yes the ticket to entry in Maine probate is “user friendly”. But a revocable living trust would have avoided all 4 of those contested probate proceedings. And contests and bogus creditor claims cost your estate money. In probate the value of your estate will be filed with the Court. At the same time the Court publishes in the newspaper a Notice to Creditors. I received a notice for a $30,000 bill against a probate estate after one of those notices was published. There was no invoice, no contract, no evidence. But I could not ask the deceased about it. That too would have been avoided with a trust.

Planning for Life (Not just End of Life)

Won’t TOD and named beneficiaries avoid that?

Yes, they also avoid probate. But TOD, like probate only deals with end of life decisions. What if you aren’t dead, but you can’t manage your property? Now, while you are able, wouldn’t you like to choose who is going to manage your property if you become disabled? Who can determine if you are disabled (a court or a group of people you trust)? Who manages your property? How you can benefit from it, or others? Whether or not active steps can be taken to preserve your property so that you have as comfortable a life as possible in a period of disability? TODs and named beneficiaries won’t do any of that.

What about goal “3” above – making sure the people or charities you choose get the benefit of what’s left?

TODs and named beneficiaries certainly won’t ensure that. Yes, they may work, but what if your TOD has a creditor at the time they are getting the property? What about getting a divorce? Frequently our planners develop a “fortress” trust provision for their next beneficiaries. Sometimes we want to provide protection and even structure for these subsequent beneficiaries. Structure means some discretion about how money is spent or saved. What about that kid who inherits an IRA and withdraws the entire account to buy a Porsche? That money could have grown tax-free for many years to come.  In answering this question, I didn’t address asset protection for you during your lifetime. In that regard, we only talked about giving someone else the option to do last minute planning if you become mentally incapacitated. This planner did not want to give up any control of any property during their life and capacity. That’s fine. But if they become incapacitated, they can leave the door open for crisis planning if need be. You may be surprised at how much control you can keep.

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Share your goals with family and loved ones.