Q: Just be happy you are not an old person like me. Day in and day out people call and I get mail asking me to go to seminars. I go to a few. But then I find they are trying to sell living trusts or are just putting their own spin on "investments" which usually turns out to be another annuity product. What's a person gonna do?
A: Well, I am not exactly a young whippersnapper myself but literally daily I hear complaints from people who are pressured to buy or to convert into a living trust and purchase annuities. I won't, in this column, discus the advantages or the disadvantages of annuity but we are lucky in Colorado (unlike many states where living trusts are necessary) and can have an estate plan that is simple but effective.
First, in Colorado a Will works just fine, even for people with tax problems and even if probate Colorado style is necessary. There are three general kinds of Wills. For a married couple with a net worth (including the face amount of insurance and retirement accounts) of less than $700,000.00 a standard Will is all that is needed and here in northern Colorado it will probably cost between $100.00 and $150.00 for each.
A second kind of Will is called a Testamentary Trust Will and is the document needed by a couple with a net worth of $700,000.00 or less but with a beneficiary, such as minor children or a parent in a nursing home, who needs special financial protection. For this type of Will expect to pay between $175.00 to $225.00.
Finally for a couple with a tax problem (a combined net worth of more than $700,000.00) a Tax Will should be considered. And even though these Wills can save hundreds of thousands of dollars in estate taxes, each Will normally costs between $400.00 and $500.00 here in northern Colorado.
As a footnote, thanks to our leaders in Washington, the consensus among financial planners now holds that if it is possible that one person would die before 2011 and the surviving spouse in 2011 could have a net worth of $675,000.00 or more (remember insurance), Tax wills should be done now even if the couple currently does not have a tax problem.
A second document that should be considered is a Durable Power of Attorney. Without one, no one, including a spouse, has the legal right to step forward and do for you legally what you could do for yourself. Thus many of us like to do a comprehensive Power without conditions that also includes medical powers and at least one or two backup agents. I also like to see up to four original Powers executed, in case a third party refuses to return the Power after the task has been done and the Principal is not able to sign additional ones. The cost to do four originals is usually $50.00 to $75.00.
Finally, if shutting off the medical machine is an important issue, then a Living Will using the Colorado format should be considered.
Thus, an estate plan includes a Will and possibly Durable Powers of Attorney and a Living Will, all for a few hundred dollars.
Additionally, make a list of assets, advisors, and other information that a Personal Representative (Executor) would need and keep everything together in one place where it will be safe and accessible by those who would need to pick up the pieces and handle things.
In closing, and just as a suggestion, at the next seminar and during the sales person's dog and pony show, ask questions pointing out the financial issues and practical problems with living trusts and annuities. If the presentation is really a seminar and not just a sales hype, he or she should not mind discussing the advantages and the disadvantages of the topic of the meeting. In fact this should be part of the information covered anyway.