The following questions and answers are from Love, Money, Control - Reinventing Estate Planning published by Quantum Press, LLC and of which William R. Black was a co-author.
What's in an estate?
Your estate is, simply, everything that you own. An estate consists of your investments such as stocks, bonds, mutual funds, annuities, bank accounts, and certificates of deposit; your retirement accounts such as individual retirement accounts and 401(k) plans; real estate; and life insurance policies. It also consists of your "stuff"-furniture, appliances, jewelry, collectives, and all the other items of personal property. The value of your estate is the value of all of these assets, less mortgages and any other debt.
What is estate planning?
In its most basic form, estate planning is the process of planning for the management and disposition of your assets and resources when you are deceased or no longer able to manage your own affairs. Most people think estate planning is just worrying about assets or minimizing income and estate taxes, it is really much more. Estate planning is really about accomplishing your goals during your life and beyond.
Isn't estate planning just for rich people?
Estate planning is not about how much wealth you have accumulated, it's about who and what are important to you. Take as an example a widow with two grown children who has only a house and $200,000 from a life insurance policy on her late husband. Does she need estate planning to protect herself and her two children? To some people, $200,000 isn't a lot of money. Even so, the widow wants to be assured that she can live in comfort in her own home. What if her son has an alcohol problem? Wouldn't she worry that he will just drink up whatever amount she leaves him at her death? Wouldn't she feel better leaving money to him in such a way that it could be used for his rehabilitation? It's not whether you have an estate that requires planning, it's whether planning will provide you with a sense of comfort and well-being about your and your family's future.
What is a Will?
A last will and testament is a legal document designed to tell the probate court what to do with your assets at your death. To be valid, a will must comply with the laws of the state where you live. For example all states require a will be in writing and that there be a certain number of people who witness the signing of your will. The requirements vary from state to state. If you fail to meet your state's requirements, your will may be invalid.
A will only governs the distribution of property that is left in the deceased person's name at death. If property passes to a new owner at death, for example by a beneficiary designation or by joint tenancy with right of survivorship, than that property is not in the deceased person's name at his or her death. It is therefore not part of the probate estate and is not governed by the provisions of the will.
If I have a will, does there need to be a probate?
A will guarantees probate. A will generally has no validity until after your death and after it has been submitted to, and accepted by, the probate court. A judge will decide whether the will conforms to state law, and if the judge decides the will is valid, then the judge will order that it be admitted into probate.
What happens if I die without a will?
In a sense, no person can die without a will. Even if you have not created one for yourself, the laws of your state specify how your property is distributed on your death. The state essentially writes a will for you. These laws are referred to as the intestate succession statues, and a person who dies without a written will is said to have died intestate. These laws distribute your property to your family based on their relationship to you. The process of distributing your property is supervised by the probate court, much the same as with a will. It is poor practice to rely on these statutes for your estate planning needs. With a will, even though it will go through probate, you control to whom, when, and in what portions your estate is distributed.
What is a living will?
A living will, or medical directive or physician's directive, depending on what your state calls it, is a directive to your physician that states that you do not want "extraordinary means" employed to keep you alive should you be in a terminal condition or in a permanently unconscious state. This will not only relieve your family of the burden of applying to the courts to authorize stopping artificial life support but will also relieve your family from having to make this decision at all.
Why do I need a living will? Can't my husband make those decisions for me?
In many cases, the answer is "no." Without written instructions from you to your physician to prohibit the prolonged use of artificial life support, your husband may not have the right to act on your behalf. A living will contains specific instructions from you as to what action you want take or not taken if you are permanently unconscious or when death is imminent. It gives direction and purpose to your loved ones, instead of placing the entire burden on them to make these life-and-death decisions. A living will goes a long way to ease the burden and the guilt that a spouse or other family may bear as a result of having to make this decision without any direction or instruction from you.
I own some property as tenants in common with my brother. Is that the same as joint tenancy?
Tenancy in common is similar to joint tenancy in that it is a form of ownership between two or more individuals who each own an undivided interest in the property. Their interests may or may not be equal.
However, tenancy-in-common ownership differs from joint tenancy in that the deceased tenant's interest does not automatically pass to the surviving tenant, as it would with joint tenancy. Each tenant in common has the ability while living to sell, give away, or in any other way dispose of his or her interest without the consent of the other tenant in common. Each tenant in common also controls who receives his or her interest at death through instructions in a will or a trust. For example, with the property you and your brother own as tenants in common, at your death your undivided interest in the property will be distributed pursuant to the terms of your will or trust. The ability to direct the property at death is the major distinction between this form of ownership and joint tenancy.
Are there any estate planning benefits for owning assets as tenants in common?
From an estate planning perspective, owning an asset as a tenant in common is much like owning an asset by yourself. You can direct the disposition of your interest in the asset at death in a will or trust. If you become disabled, your guardian or other person you have appointed controls your interest, and the other tenant remains in control of his or her respective interest. In other words, tenancy in common does not avoid probate, but it does not prevent you from doing proper estate planning either.
What is a revocable living trust?
A trust ownership is a form of ownership where the legal title to assets is held by the trustee of the trust for the beneficial enjoyment or use by the beneficiary or beneficiaries of the trust. A revocable living trust is a trust created during the trustmaker's life. and the trustmaker retains the right to amend or revoke the trust while alive. While the trust maker is alive and competent he or she can serve as the trustee and is the primary beneficiary of the trust. A living trust contains the maker's instructions for what is to happen to the trust property when he or she dies. Unlike a will, a living trust also contains instructions for what is to happen if the maker becomes disabled or incapacitated.
What are the benefits of a revocable living trust?
In relation to the common goals we mentioned earlier in this chapter, a revocable living trust can provide the following benefits: Avoid probate. As long as all of the trustmaker's assets are funded to the trust, a revocable living trust avoids a death probate, which, among other benefits, results in privacy and lower administration costs.
Plan for disability. If the trustmaker becomes disabled, the successor trustee takes care of the trustmaker's affairs according to the instructions in the trust. There is no need for guardianship proceedings.
Control property during life. Because the trustmaker is both the trustee and the beneficiary of the trust, the trustmaker retains the same control over the property as he or she had before transferring the property to the trust. The trustmaker is free to do as he or she wishes with the property, and there are no worries about a co-owner's creditors or whether the property will end up in the hands of the wrong heirs. Control property at death. The trust controls the property at the death of the trustmaker, and the trust contains the trustmaker's instructions for what is to happen to that property-whom it goes to, how much, and when. It can also provide creditor protection for beneficiaries.
For additional questions contact us and we will attempt to answer your questions directly in an email within three business days. We reserve the right to refuse to answer questions that are too specific or which constitute specific legal advice. These FAQ's as well as the answers to any email questions submitted are intended to provide general information and are not intended to constitute legal advice to anyone reading the answers here or in any emails sent in answer to a questions submitted to us. In addition any communication between you and William R. Black & Associates, PL does not establish an attorney-client relationship but is privilege communications and cannot be shared with any person or entity without your express consent.
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