Estate Planning for Beginners Part 1: Wills
June 25, 2011
Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will. A will is the most well-known of all estate planning documents, it is generally the simplest and easiest to create (although some wills can be very lengthy and complex), and in most states a will can contain within it instructions for peripheral topics such as guardianship of minor children or the final disposition of your remains.
But everybody knows that the main purpose of a will is usually to dispose of your assets and effects. In its most basic form, a will should include these important parts:
- The testator’s (Will-Maker’s) name and crucial information
- Nomination of an executor to carry out the wishes of the testator
- The names of the beneficiaries
- Instructions as to how the estate should be distributed to the beneficiaries
- Signature of the testator and the date signed
- Signature of witnesses and the date signed
As mentioned above, this is a will in its most basic form, but in fact most wills will also contain instructions for probate, instructions regarding the payment of debts and taxes, the names of any organizations to receive charitable distributions, a mention of relatives who may purposefully NOT have been named, and more.
Because a will can be so basic, many people believe that a will can easily be created on one’s own, without the help of an estate planning professional; in fact, there are plenty of companies who offer “Do It Yourself” will creation software for a fee. However, it is important to understand that while a will itself can be very simple, the federal and state tax and probate laws are rarely so. If you feel your estate is small and your wishes are modest then by all means keep your will short and sweet. However, we strongly urge ALL of our readers (even those with small and simple estates) to have an estate planning professional at least review your will and advise you as to its validity before you sign it and tuck it away.
A Low-Pressure (And Fun) Way to Discuss Legacy and Estate Planning
January 11, 2011
The hardest part of legacy planning or estate planning isn’t necessarily choosing the right fiduciaries, or deciding how to distribute your wealth fairly among your loved ones… the hardest part of legacy planning or estate planning is often simply talking about it with family. In fact, having “The Discussion” can be such a daunting task that many families simply don’t do it, choosing instead to take their chances when the family patriarch or matriarch passes away and the succession plan is revealed.
But avoiding the subject isn’t going to do you or your family any favors. More family infighting takes place after a death than at any other time. After all, this is when loved ones are grieving and emotions are high, when the central family figure or peacemaker may no longer be with you, and seemingly unequal inheritance distributions can no longer be explained.
What if there was a way to have “The Discussion” before it was forced upon you? What if there was a way to make that legacy and estate planning discussion low-pressure and even fun? That is exactly what husband and wife psychologist team Carolyn Friend and James Weiner have done with their book and accompanying card game, The Legacy Conversation: the missing gem in wealth planning.
A review of the Conversation Starters card game in Forbes gives a more detailed description of the game, including 7 or so sample questions to get the juices flowing; obvious questions such as “What cherished possession might your family fight over?” to the not-so-obvious questions such as “Have you ever found wisdom in a song’s lyrics? Name that tune.” The point of the Conversation Starters is not merely to discuss the family legacy, but to get to know your family members better, enjoy each other, and perhaps even grow closer in the process.
If your family has been putting off the necessary discussion of succession and legacy planning, this might be just the game you need. Don’t be afraid to tackle the difficult subjects, you might find you enjoy them more than you expect. And when you’re ready, we’re here to help with the practical details and legal legwork.
What Is Probate?
October 20, 2010
With all the recent news about what will happen with estate taxes, the process of probate has come up quite a bit. Sometimes probate is mentioned in a low-key, matter-of-fact kind of way; at other times it is presented as something scary, and to be avoided at all costs. We know our readers have seen the term often enough here in our blog, but under the circumstances we thought it a good idea to go back to basics, and have a discussion of exactly what is probate, and what’s all the fuss?
Probate is the process by which the court identifies the assets of a person who has died, and facilitates the distribution of those assets and transfer of title to the persons entitled to them. It sounds like it should be simple, but even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.
You may wonder why probate can take so long, especially if the deceased person has left a will making their wishes clear. A good will can certainly make the process easier, but even with a will, there are certain steps that must be followed to complete the probate process, some of which can be very time consuming. Some of these steps include:
- The appointment of an executor or personal representative
- Verification of the will
- Taking an inventory of assets belonging to the deceased
- Giving notice to creditors
- Paying valid claims against the estate
- Preparing and paying taxes
- Notifying beneficiaries
- Distributing the assets to the beneficiaries or heirs
If you think that just reading the above paragraph takes your breath away, imagine the confusion of having to actually go through all of those steps—and possibly more!
Whether or not your estate will eventually be subject to a lengthy or expensive probate often depends on a number of factors: the size of your estate, how your assets are held, and how cooperative your next of kin may be. But one way to increase your chances of avoiding probate is to have clear (and clearly valid) estate planning documents which are designed to do just that. This would usually mean a revocable living trust. If however, your assets are valued at less than $100,000 at your death, then in California there is a simplified procedure to avoid probate even if you do not have a revocable living trust and provided that your designated beneficiaries or heirs cooperate with one another. There are other ways to avoid probate by titling assets in a certain way, but these alternatives are usually only effective in limited circumstances and often create other problems. These include: joint tenancy, Pay On Death (“POD”) and Transfer of Death (“TOD”).
If you are concerned about probate, or would like to know more about how you can protect your assets and help your loved ones avoid a lengthy probate, contact our office—or a qualified estate planning attorney in your home state—to discuss your options.
The REAL Reason to Plan Your Estate
August 19, 2010
We write often on our blog about specific pieces of the estate planning whole: elder law, retirement planning, estate administration, etc… But sometimes it’s important to pull back and look at the big picture—to remind ourselves why we’re doing all this in the first place. And the plain truth is that there is one main reason we do this: Love.
Now, “love” may sound sappy and sentimental, but when it comes down to it love truly is the only reason we would spend time and money thinking about the unpleasant subject of death, and planning for a time that we won’t be around to enjoy life with our loved ones.
Estate Planning Ensures Your Minor Children Have a Home
Part of creating your estate plan includes nominating guardians for your minor children. Without this nomination, your children are at the mercy of the court should anything happen to you. Estate planning also allows you to ensure that your minor children and their guardians have the financial security they need to make a smooth transition during a difficult time.
Estate Planning Preserves Sibling Relationships
There are fewer things more stressful to a family than the death of a beloved parent. And it is at this time more than any other that fights are liable to break out between normally loving siblings: Fights over what to do for mom’s funeral, over who gets treasured heirlooms, over who dad would have wanted to distribute the estate. All of these fights can be easily avoided by creating an estate plan that spells out your wishes in clear and loving terms.
Estate Planning Allows You to Provide for Your Children and Grandchildren
You spend a lifetime raising and caring for your children knowing that someday, when you’re gone, they’ll have to fend for themselves. Creating an estate plan allows you to leave a little bit behind, a cushion your children can hold in reserve in case of emergency. An estate plan allows you to continue providing for your children even after you’ve gone.
Estate Planning Leaves an Enduring Legacy
Estate planning is not just about finances and paperwork, it’s about relationships. Creating your estate plan allows you to brush away life’s minor details and minutia and focus on what’s really important, allowing you to connect with your loved ones in a more meaningful and lasting way than ever before. Your estate plan expresses your enduring values, leaving a legacy for your family that will live on for generations to come.
Will Long-Term Care Living Arrangements Prevent You from Leaving an Inheritance?
August 16, 2010
In our last post we wrote about what matters most when choosing a long-term care living situation, suggesting that it’s not always the place that matters most, but the mind-set of the elderly person who will be living there, and how involved that person is in the decision-making process. However, this does not mean that the quality of each living place doesn’t matter at all. In fact, according to the Wall Street Journal great care should still be taken when selecting a long-term care living situation… especially if you’re considering a Continuing Care Retirement Community (CCRC).
If you are considering a CCRC for yourself or an elderly loved one, you may want to read this article in the WSJ, which mentions that although more and more older Americans are drawn to the benefits offered by a Continuing Care Retirement Community, those benefits “often come at a steep price and ‘considerable risk.’”
The article goes on to mention that “So-called CCRCs—which typically offer fine dining, health clubs and on-site long-term care—have grown in popularity along with the aging of the population, particularly among the upper-middle class and affluent,” but that “the economic downturn is making it tougher for potential new residents to sell their existing homes and fill openings in new and expanded communities, which are generally regulated by state governments. As a result, low occupancy levels are challenging the industry’s financial models.”
We mention this because many of our clients are at a time in their lives when they or their elderly parents are looking into long-term care living situations, and we see how difficult it is to sort through all the choices and find a place that fits. Not only is quality of life an important factor (maybe the most important factor), but for many people the cost of the place they choose may mean the difference between leaving their children an inheritance and dying penniless.
We urge any of our readers who are in the market for long-term care living arrangements to look carefully at all their options; ask questions, do the research, and don’t be afraid to ask for help or a second opinion.
Jane Austen’s Will: It Used to Be So Easy
August 9, 2010
Many clients are shocked when they see the sheer volume of paper in a truly well-done estate plan. A trust by itself can be hundreds of pages, not to mention the other 6 to 16 documents you may or may not have—depending on your family situation. You may find that the “simple” estate plan you thought you were getting has turned into something of a size that would rival War and Peace!
It didn’t always used to be this way. The last will and testament of the great Jane Austen, for example, was only one paragraph long:
I Jane Austen of the Parish of Chawton do by this my last will I testament give and bequeath to my dearest sister Cassandra Elizabeth everything of which I may die possessed, or which may be hereafter due to me, subject to the payment of my Funeral expences, & to a Legacy of £50. to my Brother Henry, & £50 to Mde de Bigeon – which I request may be paid as soon as convenient. And I appoint my said dear sister the executrix of this my last will & testament.
Jane Austen
April 27 1817
Although this simplicity may have worked in 1817 England, it isn’t practical in the here and now. Things just aren’t that simple anymore. First of all, although Austen appoints her sister Cassandra as the executrix of her will, the will itself neglects to specify what powers are included in that appointment, leaving Cassandra effectively unable to carry out Austen’s wishes. Secondly, the will neglects to make alternative provisions—what if Cassandra had unexpectedly died before Jane? Also notably lacking (from our contemporary perspective) are any provisions for estate taxes. And finally, discerning readers may notice that the will does not include the signatures of any witnesses, something which would have been required if her will had been type-written. Likely, it was only because her will was written entirely in her own hand, and her hand-writing was later authenticated by witnesses who authenticated her hand-writing, was the will upheld as valid. In California, a type-written will must always be signed by at least two witnesses; the only exception to this requirement is a “holographic” will, which is a will that is completely handwritten by the testator.
We all may long for simpler times, especially when it comes to something most people think will only benefit their heirs and not themselves; but many of the rules and regulations that are dismissively thought of as “hoops to jump through” are there for your best interest. They exist to protect your heirs and your legacy from fraud, misuse, greed and neglect. Far from being a chore, creating a thoughtful and legally valid will these days is actually an act of love… One might even say it’s a matter of sense and sensibility.
Stay Current and You’ll Stay Protected
May 27, 2010
In many of our previous posts we’ve stressed the importance of keeping your estate planning documents up-to-date. Changes to the law, as well as changes to your own personal, medical and financial status can wreak havoc on a well-crafted estate plan if these changes aren’t addressed. A good rule of thumb is to have your attorney review your estate planning documents every 2-5 years, but are there other changes or life events that might necessitate a more immediate review or update? The answer to that question is YES!
Andrew Chan has written a short article for the Boston Globe in which he lists 13 significant life events that should have you reaching for the phone to call your attorney. To go to the article and read his list click here. To Mr. Chan’s list we would add just a few more life events that could have an effect on your estate plan:
The approaching need to rely upon assistive living care from caregivers in the home, assisted living or nursing facility.
Concerns about the decline in cognitive mental abilities of yourself or your spouse.
A change in residence—especially if you move to a new state.
Children or grandchildren turning 18 or graduating from college—this may or may not change your estate plan, but at the very least your young adults will now need their own health care directives and privacy forms.
If you anticipate one of your relatives or heirs disagreeing with your wishes and challenging your will, trust or overall estate plan.
There are of course a great number of things which could impact your estate plan, not all of which can be named in one article or blog post; but if you stay aware—and stay in touch with your estate planner—you can rest easy that your plan will continue to function exactly as you intend.
Recent Deaths Bring Home the Consequences of No Estate Tax in 2010
May 8, 2010
There was too much confusion to be much rejoicing when the estate tax was repealed for a year on January 1st, 2010. Although the words “no estate tax” may sound good, nobody really expected the state of affairs would last. Most experts believed that Congress would never actually let it happen in the first place; then when ’09 became ’10 without any action on the estate tax repeal that the George W. Bush administration had put into place experts warned people not to get too comfortable, that a retroactive estate tax would likely be implemented.
Well, we’re 4 months into 2010 and there is still no retroactive estate tax—but there is also still no rejoicing. This is because the lack of estate tax has actually created more problems than it has solved for the wealthy and affluent. According to this article in Financial Advisor Magazine the recent deaths of Texas billionaire Dan Duncan and Taco Bell founder Glen W. Bell, Jr. have only made it clear to tax attorneys that “lawsuits of various kinds will blossom in the estate-tax vacuum. The more money left on the table when the wealthy die, the more likely heirs are to fight for years over who should inherit.”
And you don’t have to be a billionaire to feel the consequences of the lack of tax. This article in Bloomberg Businessweek explains that those who think they’re catching a break on the estate tax could instead “…wind up paying stiff capital-gains taxes on inheritances. That’s because of the disappearance of what’s known as the “step-up” in basis, which allowed assets to be revalued for tax purposes at the time of death.”
But even this is preferable to finding yourself unintentionally disinherited by standard estate tax clauses included in older wills and trusts, a scenario that is more likely to happen than you may think if your spouse or parent hasn’t had their estate plan reviewed yet this year. For more on this see Attorney Gene Osofsky’s article, “Estate Tax Repeal Creates Planning Dilemmas: Some Spouses May Now Be Left ‘Out In The Cold’”.
What is the bottom line? Every silver lining has a dark cloud, and you want to take every precaution possible to keep your heirs safe from the storm during this “gap year” in the estate tax.
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