Protecting Your Children Through Estate Planning
You want to ensure that the money you leave to your children, is available for their use. But, what happens if a lawsuit is brought against them or they are faced with divorce? Attorney Justin Randall was on-set at Local 5 Live to discuss how to protect your children’s inheritance from others.
Lisa Malak: You plan to leave your money and property to your kids when you pass on.
Millaine Wells: But have you ever thought of what would happen if that inheritance and a child gets maybe divorced or there's a lawsuit brought against them?
Lisa Malak: Well attorney, Justin Randall, is here from Hooper Law with the answers to these questions. Good morning.
Justin Randall: Good morning.
Lisa Malak: All right. We mentioned divorces and lawsuits. What types of situations can really put inheritances, for children, at risk?
Justin Randall: So divorce and lawsuits are a big one. Even the most responsible kids can get a divorce or get sued for a car accident or something happens on a property. Another big one is filing for bankruptcy. Medical debt is a huge, huge issue and even again, it can unexpectedly happen. So there's a lot that can place these sorts of things at risk.
Lisa Malak: Financial predator's another one.
Justin Randall: Oh, absolutely.
Lisa Malak: Or high liability careers even.
Justin Randall: Yes. Yeah. Such as attorneys, right?
Lisa Malak: I was thinking maybe physicians with all the insurance they have to get. But yeah. You never know.
Millaine Wells: Let's talk a bit about how estate planning now, though, can really protect some of those assets.
Justin Randall: So the issue is, is a lot of people, their estate plan involves either a will or they just have a beneficiary designation on all of their accounts. The issue is that if you have a will or you don't have will at all, you're sending your assets through probate. So probate is a completely public process. Anybody can go and look up the value of the estate, the accountings, and where you're leaving things to. So information-wise, there's a lot at risk.
Lisa Malak: OK. Now is a trust an option?
Justin Randall: Yes.
Lisa Malak: And are they kind of expensive though?
Justin Randall: Yeah. So a trust is the alternative to a will. A trust is a completely private process. It doesn't go through probate at all. There's no court involvement. The common misconception is that they are more expensive.
Lisa Malak: OK.
Justin Randall: It's true that they are more expensive up front. You generally pay more for a trust to set one up than you do for a will. But the issue is that probate itself is so much more expensive than administering a trust that overall a will, in the long run, does end up being more expensive. The average cost is anywhere from three to six percent of the estate to go through probate.
Lisa Malak: OK.
Millaine Wells: Now what if we have some of these documents already in place or we have at least the bare bones of a will? Can your team kind of take that and build on it?
Justin Randall: Yeah. We review plans that people have had in place for years. The most common situation I see is someone had a will set up when their kids were minors and 30 or 40 years have passed, and obviously, their lives have changed.
So an estate plan is an evolving process. It's not going to be stagnant throughout your entire life. So we commonly do review these and make changes to fit where they currently are in their life.
Lisa Malak: How often do you think we should review our plans?
Justin Randall: Definitely every three to five years. I mean, a lot changes in that period of time. Maybe your life doesn't change at all, but the laws do. A lot of times too, situations that we've dealt with, with our clients, we add language to make them easier to use in the future as well.