Estate Planning is Not Just for the Wealthy

There is a common misconception among the public that estate planning is only for the wealthy; that cannot be further from the truth. Estate planning is commonly linked with tax planning, but with Ohio estate taxes eliminated and Federal estate exemptions exceeding $5 million, utilizing estate planning for taxes is less common these days. In fact, those who have little wealth cannot afford not to complete basic estate planning documents such as a Will, Health Care Power of Attorney, and Financial Power of Attorney documents. Why is that? A failure to have basic estate planning documents in place can lead to additional costs and attorney fees from the administration of a probate estate or guardianship, which costs often exceed $5,000. Those with modest assets and lower income can less afford such additional attorney fees and administration costs.

If you die without a Will, your family members are more likely to dispute who should administer your estate, which can cost money to resolve. This type of dispute can potentially be avoided by a Will that states your intention as to who shall serve as your Executor. Without a Will, the Court will almost always require that your family member post a bond, which is generally not required if you execute a Will waiving bond and the Executor you name lives in the state. Obtaining a bond can require good credit, and some family members may not qualify, which may force the person to hire an attorney or other third-party to serve as the Administrator. In addition to potentially having a stranger administer your estate, this can add to greater expense, which lower income families generally can less afford. Further, a properly executed Will generally authorizes the Executor to sell any real estate without an order from the Court. Without a Will, your Administrator must obtain an order from the Court to sell the property, which again will cost more in attorney fees, and could potentially delay the sale.

If you become incapacitated or incompetent, and do not have a Health Care Power of Attorney and Financial Power of Attorney, chances are that a Guardianship must be established. This can take time and requires a medical expert report, which costs money, as well as a hearing, for which you should enlist the services of an attorney. Obtaining and maintaining a guardianship for potentially many years can cost thousands of dollars in administration costs and attorney fees. And, while a family member is trying to establish the guardianship, your taxes and other bills could go unpaid, leading to default, penalties, higher interest rates, and even repossession or foreclosure.

For a guardianship in Ohio, Courts generally require the guardian to receive permission to spend funds of the ward on their behalf. The guardian must also file an annual report on the ward’s well-being after a doctor evaluation, file an inventory, and then file an annual or biannual accounting. These all take significant time and money, and almost always require hiring an attorney. If you have a Health Care Power of Attorney and Financial Power of Attorney, then a guardianship generally will not be necessary, hence your family may be able to avoid all of these additional expenses.
Probate and guardianship attorney fees and costs of $5,000 – $15,000 are not uncommon and may be relatively insignificant for the wealthy, but for the lower income families this is a serious amount of money that could be preserved for lower-income family members and at relatively little upfront cost with simple estate planning documents. That is why it is so important for people even with modest assets to complete their estate planning, which may be as simple as setting up real estate to transfer on death to a beneficiary, naming a beneficiary to your retirement and bank accounts, and executing a properly prepared Will and Power of Attorney documents. If you have children, a simple trust is also recommended.

The delay caused by the probate and guardianship processes can lead to unpaid bills and default on debts including the mortgage. Proper estate planning that includes power of attorney documents, and in some cases transfer on death accounts, can allow someone to step in quickly and pay bills to prevent default. This saves significant money for those who can afford such extra costs the least. With low and modest income families, the cost of not meeting with an estate planning attorney can be much greater than the cost to meet with one.

For more information, please contact Christian Donovan. Christian will create the right estate plan for your situation, and budget and guide you through the process every step of the way.

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