Estate planning can often seem overwhelming and confusing. To add some clarity to the process, our attorneys have compiled a list of our FAQs about estate planning in the space below. If you have further inquiries, do not hesitate to contact our office, and we will happily answer your questions.
Estate refers to an individual's assets, including a property, car, finances, jewelry, and other valuable items. To ensure that their assets are passed on according to their wishes, estate planning involves creating a comprehensive plan. This plan outlines the distribution of an individual's assets, who will care for them if they fall ill and are unable to do so, and who will take care of their children if they are minors. Additionally, the plan ensures that tax expenses are minimized. Although estate planning can seem complex, there are common questions that can be answered to make the process more understandable. By developing a plan, individuals can ensure that their assets will be taken care of, and their desired wishes are implemented.
The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the willmaker dies and the original will is delivered to the Probate Court. Still, everyone with minor children needs a will. It is the only way to appoint the new “parent” of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.
This is the most common form of asset ownership between spouses. Joint tenancy (or TBE) has the advantage of avoiding probate at the death of the first spouse. However, the surviving spouse should not add the names of other relatives to their assets. Doing so may subject their assets to loss through the debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Joint tenancy planning also may result in unnecessary death taxes on the estate of a married couple.
There are often alternatives to probate in each state across the United States. It really depends on the value of the estate and the kind of assets in the estate. Sometimes, probate is the only way, but it is important to speak to an attorney before taking action. Probate and probate procedures can often prove to be a maze to laypersons. Employees at banks and financial institutions will often demand letters of administration or letters testamentary before they are willing to do anything.
These are probate documents. They often make people feel like probate is a must. The reality is, these bank employees did not go to law school. They often receive minimal training on probate procedures and defer simply to what their supervisors told them. It might make their job easier if you went through probate, but it does not make yours.
If the decedent had life insurance, bank accounts, or other accounts on which beneficiaries were named, then probate may not be necessary as the named beneficiaries would have a claim to those items. It would be a simple matter of providing a death certificate to those financial institutions. Alternatively, if the decedent had a bank account without a beneficiary named, probate or a probate procedure may be necessary.
Sometimes called an Advance Medical Directive, a living will allows you to state your wishes in advance regarding what types of medical life support measures you prefer to have, or have withheld/withdrawn if you are in a terminal condition (without reasonable hope of recovery) and cannot express your wishes yourself. Oftentimes a living will is executed along with a Durable Power of Attorney for Health care, which gives someone legal authority to make your health care decisions when you are unable to do so yourself.
Don’t know if you should hire a lawyer to create your will or utilize third-party services such as LegalZoom or other legal document preparation firms? We sometimes compare hiring an attorney to hire a mechanic. If something is wrong with your car, as an intelligent person, you could probably spend the time and effort to educate yourself on what is wrong and attempt to fix it. With trial, error, and some potential mistakes, you could probably repair it yourself. Most people hire a mechanic because it is easier, and they want it done properly by a professional.
Creating a living trust and estate plan is a complicated matter. We have spent years as attorneys dealing with various situations, and trust language is constantly evolving. It is easy to make mistakes in “do it yourself” trusts, and such mistakes can be devastating. Unlike repairing a vehicle, where you could test drive it, a mistake in a trust generally will not be discovered until after you pass, and it is already too late. We commonly deal with the aftermath of flawed trusts, and such mistakes usually result in your beneficiaries having to go through probate.
These mistakes can end up costing beneficiaries substantially more in terms of time and money than what would have been spent on a professionally done trust. As discussed in our probate section, probate fees are based on the estate's gross value and can easily cost tens of thousands of dollars. At Werner Law Firm, our living trust attorneys will tailor and prepare your estate plan to address your unique situation and goals. We will work to ensure that your estate plan is set up properly to take care of your beneficiaries and give you peace of mind.
If you die without even a Will (intestate), the legislature of your state has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Americans currently use it.
You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance death benefits and bank accounts.
These allow you to appoint someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as a guardianship and conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.
This is an agreement with three parties: the Trust-makers, the Trustees (or Trust Managers), and the Trust Beneficiaries. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further “back-up” managers can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the trustmaker’s death. With proper planning, the couple also can avoid or eliminate death taxes on their estate. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding.
Both a will and a trust designate who you want to have received your property when you pass away, how they will receive it, and who will be in charge of distributing the property. You can leave your entire estate to a single individual, split your estate between your children, or designate particular items for particular people. Generally speaking, you have a great amount of freedom in making such designations. Living trusts are generally preferred when you own real property or if you have a large estate.
Almost anyone who owns real property should have a living trust. If you had a will, your real property would still need to be transferred out of your name on death. Naming a beneficiary would advise the court who you wanted to have received the real property. However, you would still have to go through probate or a probate procedure to effect that transfer of ownership. Probate cases can be expensive and can sometimes take over a year to complete.
When considering the amount of money, hassle, and time that loved ones would have to put into a probate case, a living trust is a much preferred and easier alternative.
When you create a living trust, you transfer any real property you own into the trust you want to control. While you are alive, you control and manage the living trust. You can amend it, modify terms, or revoke it. You can sell or refinance any real property owned by the trust, and you sign documents as trustee of the trust.
When creating the trust, you also name a successor trustee. That individual then takes over control of the trust and trust property when you pass away, allowing them to sell and manage trust property without having to go through probate or any court process. Of course, they are responsible for managing and distributing the trust according to your wishes as outlined in the trust.
With a living trust, you also have a lot more freedom to control your property after passing away. For example, if you have minor children, you can set up the trust to receive property when they reach a certain age or even have multiple distributions when they reach certain ages. Instead of receiving assets outright at age 18, a trust can call that their share would be received as follows:
The Werner Law Firm’s estate planning attorneys are dedicated to representing clients who wish to create a smooth succession plan. If you have any questions or want an overview of the process, feel free to contact us for a free telephone consultation. We will explain the legal process of creating these documents, determine what would be most beneficial to you, and figure out a game plan moving forward.
Whether you are young or old, rich or poor, married or single, if you own titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, consider a revocable living trust. A trust allows you to bring all of your assets together under one plan.
Some people take the approach of simply transferring assets or signing a deed to put their children on title to their property. This is generally a bad idea, for a number of reasons:
You are essentially giving away your property while you are alive. By deeding them property and putting them on title, they have an immediate ownership interest in the property. While family members usually will honor your wishes, we have seen situations where there is a falling out between family members years later. In such a case, you could potentially be evicted from your own home as they now have an ownership interest.
By giving family members immediate ownership interest in the property, you are exposing your property to that family member’s creditors. For example, if you put your son on title to property, and he has a substantial amount of debt, his creditors could sue him and go after the home. Even if he does not have debts, he could accidently cause a car accident or injure someone, which could expose him to liability. If he is sued, and there are major damages involved, the house could be put at risk. While the odds of this happening are hopefully slim, it is something that people need to be aware of.
One of the most compelling reasons to have a living trust is the benefit your beneficiaries can receive in terms of avoiding capital gains tax. Generally, if you sell your property while you are alive, you will be taxed on the difference between the amount you originally purchased your property for and the amount that you sell it for. For instance, if you originally purchased your property for $100,000 and you sell it for $300,000, then the $200,000 increase in value could be subject to Capital Gains Tax.
When you transfer ownership to a family member, their basis for capital gains tax purposes is the value of the property as of the date of the transfer. Since property values traditionally go up as time goes on, it is better to have that transfer occur later in time. A trust can allow that transfer to occur later in time, when you pass away. Alternatively, if you put them on title before you pass away and they later sell the property, they are much more likely to pay more in terms of capital gains tax.
Given all of the above, setting up a living trust and estate plan is generally the best plan to take care of your family and beneficiaries. If you have any questions or would like an overview of the process, feel free to contact us for a free telephone consultation. We will explain the legal process in creating these documents, determine what would be most beneficial to you, and figure out a game plan moving forward.
