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The FAQ section found in the Estate Planning Companion answers some of the questions questions people ask most frequently about estate planning and related issues.
Topics include:
- Estate Planning Issues
- Family and Personal Issues
- Health and Medical Issues
- Other Common Issues
Estate Planning
Why should I go to the trouble of writing a Will?
A Will allows you to achieve many objectives. You can state how your property should be divided, provide for your favorite charity, state who will receive your heirlooms, set up trust funds and nominate a guardian for your minor children. The use of a Will can speed up the process of distributing your property after your death and can save expenses. Distribution of your assets to your family as soon as possible after your death will help them to avoid financial difficulties and emotional stress.
What do I have to do to have a Will?
Anyone of legal age (18 years old in most states) and sound mind can make a Will. If you have property that you wish to distribute at the time of your death, you should have a Will.
When you make out your Will, you'll need to designate beneficiaries and an executor. The beneficiaries are the people or organizations who receive your property. The executor is the one you designate to see that your wishes are carried out.
If you have minor children, you should also nominate a guardian to provide for the physical welfare of your children.
What is the legal age in most states?
In most states, a minor becomes an adult at the age of 18. Once he or she reaches that legal age, certain rights and privileges are granted. That holds true for most states when it comes to making a Will. Forty-eight states currently require the Will maker to be at least 18 years of age. Louisiana sets the minimum age at 16, while in Georgia, you can make a Will as early as 14 yeas of age.
A number of states make provisions for those younger than 18 years of age to write a Will if they are married, economically independent, or a member of the armed forces.
What does mental competence mean?
"Being of sound mind and body" is a phrase made famous by movies and television versions of Will making. And it’s true, mental competence is an essential factor in making sure your Will is legally binding. Being mentally competent means that you know you are executing a Will, and are familiar with your property as well as your family and descendants. Witnesses are required to sign the Will and one of their functions is to validate your mental well-being.
If is it anticipated that dissatisfied heirs might contest the Will based on mental incompetency, extra steps should be taken at the time of the signing of the Will, such as a doctor’s assessment.
What happens if I die without a Will?
Many Americans die without wills. When this happens, state law takes over and provides for dividing your assets, selecting a guardian for your minor children, and appointing a personal representative to administer your estate.
The choices made by the state may not match what you want on these issues. For example, the state will likely provide for distribution to your heirs, but not necessarily in the amounts that you might choose. Or, your well-intentioned relatives on both sides of the family may quarrel over who should be the guardian for your children.
Does a Will cover all of my property?
Certain assets are distributed without regard to the Will provisions. For example, assets held by two persons jointly with rights of survivorship will pass directly to the survivor. Life insurance, IRA, and pension plan proceeds will go directly to the named beneficiary. Property placed into a trust while you were alive is controlled by the provisions of the trust and not the Will. Further, most states have laws that allow a surviving spouse to receive certain property from the estate even though the Will may have attempted to disinherit the spouse.
What is the difference between tangible, intangible, and real property?
Property can be divided into three categories. Tangible property refers to physical items that can be moved, such as jewelry, cars, boats, paintings, clothing, furniture, and coin collections. Intangible property refers to a “right” rather than a physical object. Examples include stock certificates, bonds, bank accounts, and cash. Finally, real property refers to land and the buildings or improvements permanently attached to it.
How do I change my Will after it's been signed?
You cannot simply cross out a sentence or add a new sentence to change your Will. You must either create a “codicil” which is an amendment to your Will, or create a new Will.
A codicil can be used to make minor revisions without changing the entire Will. However, a codicil still must be signed and witnessed following the same formalities that were used for the Will itself.
If you wish to make a lot of changes, you should prepare a new Will and include a formal statement in the new Will that revokes the old Will. In some states, a divorce has the effect of revoking your Will, at least as to those provisions that relate to your former spouse.
How do Wills and Codicils work together?
A Will is a document under which you choose the beneficiaries who will receive your property after your death, name an executor to carry out your wishes, and if necessary, select a guardian who will take care of your minor children.
At a later point after you sign your Will, you may wish to change some of the provisions. One alternative is to prepare and sign a new Will that includes the changes that you want. Another alternative is to use a document known as a Codicil. A Codicil is simply a document that starts with a reference to your original Will, and then explains the changes, usually by setting out replacement paragraphs for the provisions that you want to change.
The Codicil must be signed with the same signing formalities as the original Will, and should be kepwith the original Will. Your "Will" is now your original Will, plus the Codicil.
Usually, Codicils are used only for minor changes, for example, to include the name of a new executor to replace a formerly named executor who has died. If you want to make substantial and/or numerous changes to your Will, it may be preferable and less confusing to simply prepare a new Will.
What is a holographic Will?
In this day and age of computer printouts, typewritten manuscripts, and copy machines, you will not find many Holographic Wills in circulation. These are Wills written entirely in the handwriting of the Willmaker, signed by the Willmaker, but with no verifying witnesses. Holographic Wills are valid in some states.
What is a video Will?
A relatively new type of Will is the Video Will, where the Will maker usually reads his or her Will out loud before a video camera. Videotaping a Will can help avoid a Will contest by showing that the Will maker was competent and following proper signing formalities. Keep in mind that many states will not recognize a video Wills as a substitute for a written Will; the Will maker should do both.
What is an oral Will?
You may think all Wills must be written or filed somewhere for documentation, but Oral Wills are recognized and therefore legally binding in a few states. The legal term for this type of Will is a non-cupative Will.
What is a joint Will?
A 2-in-1 Will, the joint Will contains separate Wills of a wife and husband in one document. This type of Will is NOT recommended because problems occur if the survivor violates the provisions of the Will or signs a new Will.
What is probate? How can I avoid it?
Probate is the court-supervised legal process that determines the validity of your Will (if there is one) gathers your assets, pays your debts, taxes and the expenses of administration; and then distributes the remaining assets to those persons entitled to them. Probate has gotten plenty of bad press for being time-consuming, frustrating, and costly. But times have changed, and the probate process in many states has become less distressing.
In some states, families with very small estates may be able to use abbreviated probate procedures or avoid probate entirely. Even if you have a larger estate, you may be able to avoid probate with careful estate planning. It is possible to structure your finances so that significant assets will pass to others outside of the probate process. For example, a house owned by two persons jointly with rights of survivorship will pass directly to the survivor. Life insurance, IRA, and pension plan proceeds can go directly to a named beneficiary; and property in a trust will be governed by the trust provisions without regard to the Will.
What does it mean when a Will is contested?
A Will is “contested” if someone seeks to have a will declared invalid by filing a lawsuit or other court proceeding while a Will is being probated. Usually, this is a disappointed relative who feels that he or she did not get a “fair share” of your estate, and hopes to gain a greater share by having your Will declared invalid.
Some of the reasons that your Will may be contested include claims that you were not of sound mind and were unable to understand what you were doing, or that you created the Will under the undue influence or coercion of another person.
Some states allow you to include a “no-contest” clause in your Will to discourage such challenges. This clause effectively states that anyone who unsuccessfully contests the Will receives nothing at all, even though the Will may have provided for at least a small distribution to the challenging party. Another safeguard is to choose respectable witnesses who can vouch for your mental state.
What are the signing requirements for a Will?
In order to make your Will valid, you must sign the document in the presence of at least two witnesses. They, in turn, must sign it as well, in your presence and in the presence of each other. At the time of the signing, most states require that you be mentally competent and at least 18 years of age.
Witnesses are very important to the validity of a Will. The signature of at least two witnesses is required in order to affirm that you were mentally competent and under no duress at the time you executed the Will. Each witness must understand that he/she is witnessing the signing of a Will and they must be competent to testify in court. Witnesses should sign in the presence of each other
What are the restrictions on who may serve as a witness?
In many states, a witness cannot be a beneficiary of the estate. States have adopted these laws to prevent any conflict of interest from those who may be in line for gifts, or who may benefit from your death. Some states will allow for a beneficiary to act as a witness, but in doing so, that witness may lose some or all of the property that he or she would have inherited.
How do I specify Beneficiaries?
The reason you are making a Will is to distribute your estate to those you choose. Beneficiaries can be people, charitable organizations or trusts. Generally, you may specify any person or organization.
Depending on the circumstances however, spouses have special rights. Nine states have community property laws which govern the ownership of property acquired by either spouse during the marriage. This community property is equally shared, even if the property is titled in the name of just one spouse. The exception to this rule is for property received as a gift or inheritance during a marriage, which remains the property of the recipient. Community property laws allow each spouse to dispose of his or her one-half share any way he or she wishes. Non-community property states allow the surviving spouse to take an elective share which is usually one-third of the estate.
Your Will does not control the distribution of life insurance and other types of assets like retirement accounts, 401k plans, annuities, or pension plans. These plans already provide for their own specified beneficiaries.
How do I plan for my spouse?
Typically, spouses have reciprocal estate planning documents. For example, in their Wills they each provide that their property will go to their spouse if the spouse survives. If the spouse does not survive, they typically provide that the property will go to their children or other mutually agreeable beneficiaries.
Of course, there is no requirement that spouses choose the same beneficiaries or that they use the same kind of estate planning documents. For example, one spouse may choose to use a traditional Will format, while the other spouse wants to use a Living Trust combined with a Pour-Over Will. While this type of planning is not typical, it can be done.
In some circumstances, the spouses may be independently wealthy, and therefore have no need to provide for each other. In such cases, they may want to independently choose different beneficiaries. Similarly, spouses may wish to choose different beneficiaries if they have had prior marriages, and particularly if they have children from prior marriages.
How can I leave property for my spouse?
Most of the time, spouses are the major beneficiary in a Will. Even so, there are laws in all states that protect the surviving spouse from being disinherited. Some allow the spouse to take an elective share of the estate, usually one-half or one-third, regardless of the provisions in the Will. One method to disinherit a spouse may be through the use of a premarital agreement, but the courts are apt to closely scrutinize such agreements to make sure that the agreement was signed in good faith and with full disclosure of assets.
It's possible to put limitations on the property that you leave to a spouse through the establishment of trusts for the benefit of your spouse that come into existence after you die. You should consider the following factors in deciding what kind of trust is best for your circumstances:
- the possibility that your spouse's needs may increase in the future
- the manner of living to which your spouse is accustomed
- the ability of your spouse to provide for his or her own needs
- the ability of your spouse to manage the trust assets
- the possibility that your spouse may remarry and the effect the marriage may have on your children or other beneficiaries.
Can I disinherit my spouse?
Most of the time, spouses are the major beneficiary in a Will. Even so, there are laws in all states that protect the surviving spouse from being disinherited. Some allow the spouse to take an elective share of the estate, usually one-third, regardless of the provisions in the Will. One method to disinherit a spouse may be through the use of a premarital agreement, but the courts are apt to closely scrutinize such agreements to make sure that the agreement was signed in good faith and with full disclosure of assets.
If you do not want to leave property to your spouse, you should be aware that many states "protect" spouses with laws that permit a spouse to receive a portion of the estate even though the Will does not provide for the spouse. You may want to consult with a lawyer regarding the legal rights of your spouse to receive property from your estate, despite the provisions of your Will to the contrary.
An agreement between you and your spouse, signed prior to your marriage (known as a Premarital Agreement) may permit you to exclude your spouse from your Will.
How can I provide for minor children?
Many times a spouse is given the entire estate with the expectation that he or she will provide for minor children. That expectation is not always sound however, especially when the surviving spouse is not the parent of the children, or if the spouse is not available to care for the children at the time of your death.
One of the most common practices under these circumstances is the establishment in the Will of a minor children’s trust. The trust provides financial support for the children until they become adults, at which time the remaining assets of the trust are distributed to them. It is important to carefully select the trustee, who will manage the trust and make the distributions to your children. The trustee will work closely with the person you've named as guardian to raise your children. In many cases, the trustee and the guardian are the same person.
How can I leave property to my adult children?
It’s common for adult children to receive a significant portion of their parent’s property. On the other hand, in every state except Louisiana, it is legally permissible to disinherit a child, regardless of his or her needs or age. Louisiana law provides that no child under the age of 23 at the time of the parent’s death can be disinherited.
How can I leave property to my grandchildren?
Grandparents often leave portions of their estates to their grandchildren to help pay for special needs or educational expenses. Grandparents may also leave property to grandchildren because their parents already have sufficient assets.
What does it mean to be an Executor?
If you are named as the executor of an estate and the probate court agrees to appoint you, you must collect and inventory the assets, pay the debts, taxes and the expenses of administration, and then distribute the remaining assets to those persons entitled to them. It can be a big job depending upon the size of the estate, and involves a mixture of legal, administrative, accounting, and often personal mediation skills.
As executor you will need to make claims for any life insurance, employee, and social security benefits. You must also file income, estate, and inheritance tax returns, pay the taxes, and sell or distribute all of the assets. Your tasks also require that you present an accounting of your activities to the beneficiaries and the court. Obviously, the job requires a considerable amount of time. It may be necessary or advisable to hire an attorney to assist you.
How should I choose an Executor?
Some state call them executors, others refer to them as personal representatives. By any name, this is the person you choose to carry out the terms of your Will. The responsibilities of the executor are important. He or she must collect your assets, pay all debts, taxes and expenses of the estate, and distribute the remaining assets to your beneficiaries.
You might choose a trusted friend or relative who is capable of handling financial matters. Many banks will serve as executor, but they will charge for the service. In most cases, when a friend or relative agrees to become your executor, he or she will waive or refuse a fee.
There are some restrictions on who may serve as an executor. Many states will only appoint individuals who are residents of the same state. If you want to select a non-resident executor, contact your county clerk of probate court or an attorney to find out what your state allows. It is recommended that a second choice for executor be named in case the first choice refuses or is unable to serve.
Most jurisdictions require that the executor post a bond to protect the assets of the estate. To avoid the expense of the bond, you can request in your Will that the bond requirement be waived.
Can more than one Executor be appointed?
Perhaps the most common reason for naming co-executors is so that two persons can pool their skills and at the same time, each can keep a check on the other. Also, if your state puts limitations on non-resident executors, the court may appoint the non-resident, provided that he or she serves as co-executor with someone who's a resident of your state.
Who shouldn't be an Executor?
One reason you may want to consider excluding someone as your executor is if he or she is also a beneficiary. This will help to avoid appearances of conflict of interest if the other beneficiaries fear that the executor may take advantage of his or her position. On the other hand, the executor is supervised by the court, and a beneficiary as executor is more likely to waive a fee for serving as executor.
State residency requirements also make certain non-residents bad choices to be an executor. Even though some states do not prohibit non-resident executors, some will require the executor to post a bond, or name a resident as the executor’s representative. Time and travel can also slow up proceedings if your executor is a non-resident.
Finally, an executor should not be a minor, convicted felon, or non-U.S. citizen.
What are the responsibilities of an Executor?
The executor plays the key role in the probate proceedings from the very beginning. After residency and bond issues are reviewed, and the court officially appoints him or her as the executor, it is up to him or her to collect and inventory the assets of the estate, pay all debts and expenses of the estate, and then distribute property to the beneficiaries and establish any trusts, if directed by the Will.
It will be the executor’s responsibility to notify heirs, beneficiaries and creditors, obtain a federal identification number for tax purposes, and open a checking account in the name of the estate.
The executor must review all records to determine all of the assets of your estate, and physically take custody of all assets which are subject to probate. After taking custody, the executor must determine the fair market value of the estate property, pay any debts still outstanding, resolve any claims by creditors, and pay the costs of all expenses incurred in administering the estate. The executor may have to sell some of the estate’s assets to pay debts and expenses.
The executor is also responsible for preparing and filing death tax returns. This can include the federal estate tax return and the state inheritance and estate tax returns. He or she will also be responsible for filing your final individual income tax return, the estate income tax returns, and any necessary gift tax returns.
Finally, it is the responsibility of the executor to distribute the remaining estate assets to the beneficiaries, and to establish and fund any trusts specified in the Will.
How do I compare Wills and Trusts?
A Will is a document under which you choose the beneficiaries who will receive your property after your death, name an executor to carry out your wishes, and if necessary, select a guardian who will take care of your minor children.
An alternative to using a Will is to create a Living Trust during your lifetime and transfer all or some of your assets into the Trust. At the time of your death, these assets are distributed according to the Trust provisions, instead of by a Will. A successor trustee carries out the terms of your Trust in a manner similar to the role of an executor.
How do Wills and Trusts differ regarding probate?
A Living Trust can help you avoid probate, but sometimes probate provides protection.
At your death, the terms of your Will are administered by your state's court system--a process known as probate. The court provides some oversight to the activities of your executor.
At your death, your Living Trust is not subject to "probate." In some cases, avoiding probate speeds up the process of distributing your assets. In many cases, there is no difference.
On the other hand, the probate process provides rules and procedures for handling disputes over the Will and disputes among your creditors. This advantage is not available to the same degree if a Living Trust is used. However, most people who use Living Trusts do not view this as a significant disadvantage because they do not expect challenges to their Living Trusts and they do not anticipate any disputed claims with creditors.
How do Wills and Trusts compare in minimizing taxes?
The Will and the Living Trust are equal on this point.
Neither the Will nor the Living Trust has an advantage over the other in minimizing estate taxes. The same provisions that are used in a Living Trust to achieve tax savings can also be used in a Will.
What is the difference between Wills and Trusts in managing assets?
A Living Trust can help manage your assets, if you are no longer able.
Generally, you are both the grantor and trustee of your Living Trust. As the trustee, you have the authority to manage and invest the Trust assets and make distributions. However, you also have the flexibility to delegate these responsibilities to another individual and/or trust department so that you are free from the responsibility.
Perhaps more important, you can provide for a successor trustee who will take over for you if you become incapacitated. This possibility makes the Living Trust an important planning tool for handling aging and disability circumstances. Obviously, a Will that only takes effect at your death does not address this issue. Many people who use Wills as their primary estate planning documents use Power of Attorney documents to address aging and disability issues.
How do Wills and Trusts compare regarding costs?
It generally costs more to set up and fund a Living Trust than it does to prepare a Will. On the other hand, the cost of administering an estate that features a Living Trust is often less than the cost of probating a Will. These costs vary from state to state, and of course, the amount of attorney expertise that you require for your situation can affect both the initial cost, as well as the cost of handling your estate.
How do Wills and Trusts compare regarding privacy?
A Living Trust is more private.
While a Will is generally a very private document during your lifetime, when it is admitted to probate at your death it becomes a public document. In most states, this means than anyone can inspect your Will as well as all other documents that are filed in the probate proceedings. This lack of privacy is very disconcerting to some people, although the general public usually lacks the "how to" knowledge and the inclination to go snooping through probate proceedings.
What is the difference between Wills and Trusts regarding maintenance?
A Living Trust requires more attention during your lifetime.
An estate plan that features a traditional Will does not have significant maintenance costs during your lifetime. However, you can expect to have some additional costs when you make changes to your estate plan to keep it current. If you use a Living Trust, you will also have some additional cost when you make changes from time to time to update your documents. In addition, you need to be careful to transfer newly acquired assets into your Living Trust.
While the cost of making these transfers will often be relatively minor, if you forget to transfer new assets into your Trust, it may become necessary to use your Pour-Over Will to transfer these assets into your trust at the time of your death. This will invoke the probate process (and additional costs) that you were trying to avoid.
How do Living Trusts and Pour-Over Wills work together?
A Living Trust is an alternative to using a Will. You create the Living Trust during your lifetime and transfer all or some of your assets into the trust. At the time of your death, these assets are distributed according to provisions in the trust that are very similar to Will provisions. A successor trustee carries out the terms of your trust in a manner similar to the role of an executor.
A "Pour-Over" Will is a companion document to the Living Trust, and may be important and necessary even though you plan to use your Living Trust as the document for distributing your assets at your death. A Pour-Over Will simply provides that any assets remaining in your individual name at the time of your death should be "poured over" into your Living Trust so that the assets can be distributed according to the terms of your Living Trust.
If you have minor children, you will likely want to use a Pour-Over Will to nominate a guardian for your children. Including your guardian choice in a Pour-Over Will makes it easier to enforce your choice of guardian. A Living Trust is not a good document for including a guardian choice.
Although one of your reasons for using a Living Trust may be your desire to avoid the court administered "probate" system that accompanies a Will, you may need a Pour-Over Will as a safety net. When you set up your Living Trust, you must also take the very important step of transferring your assets into the name of your Living Trust. If your assets are not in the Living Trust at your death, your Living Trust provisions will not distribute them.
The Pour-Over Will serves as a "safety net" to catch and "pour over" into your Living Trust any assets that were unintentionally omitted from the trust. For example, maybe you acquired assets after you set up your Living Trust and forgot to title them in the name of the trust.
The only assets not in a properly funded Living Trust will be personal items, maybe life insurance, and perhaps other assets that can be transferred into your trust or to your heirs without the necessity of admitting the Pour-Over Will to probate.
How do I choose a Guardian for my children?
Perhaps the greatest peace of mind that parents of minor children can have is knowing who will take care of their children should something happen to them. Naming a guardian in your Will helps ensure that your choice is appointed.
A guardian is legally responsible for the child’s physical care, health, education, and welfare until he or she reaches 18 years of age. This will include providing the basic needs such as food, clothing, shelter, health care decisions and education choices. The guardian is not responsible to meet the child's financial needs with his or her own money. Many times, a trustee handles those arrangements with money provided by the estate of the deceased parent or parents. The guardian is not paid for his or her services.
In most cases if your child’s other parent survives you, then that parent assumes the guardianship without any other special actions. However, you need to provide for the possibility that the other parent will not be available to be your child’s natural guardian. Before nominating someone in your Will, it's a good idea that you ask the person or persons if they are willing to become your child’s guardian. A guardian is not legally obligated to serve, and an alternate choice is recommended in case your first choice refuses or is unable to serve.
The person you choose as the guardian should have good parenting skills and values similar to your own. Family members or trusted friends are good options. Co-guardians are permitted in most cases.
Technically, your choice as a guardian is just a recommendation to the court. However, state laws give high priority to your recommendation. The court will honor your choice unless it's presented with compelling evidence against that choice. Some states allow for a minor child to have input in the decision, particularly children who are 14 years of age or older.
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