Estate Planning Highlights

There are many “moving parts” to a successful estate plan. The information below is a general summary of many of the things you should consider in planning:

  1. If you have no will or living trust, at death your estate will pass to your surviving spouse and children in equal shares. Your “estate” is all money, real property and personal property which you own in your name alone and your interest as a tenant in common with others.
  2. If you own property jointly with someone else as “joint tenants with rights of survivorship”, then your interest in that property will automatically pass to the surviving owner at your death. Your joint interest will not pass under the terms of your will or trust. If you own property with others not as “joint tenants with rights of survivorship”, then you are a “tenant in common” with them and your proportionate share of the property will pass under the terms of your will.
  3. Life insurance policies, retirement plans, annuities, etc. will pass directly to the person(s) designated as beneficiary of those benefits, not under the terms of your will or trust.
  4. If you leave real property which is mortgaged to someone in your will or trust, the property will generally pass to them with the mortgage debt attached to it. If you wish to leave real property free and clear of the mortgage debt, you may include a provision in your will or trust that the mortgage is to be paid from other assets of your estate.
  5. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“Act”), passed in December 2010, increased the estate tax exemption to $5.43 million for individuals ($10.86 million for couples) in 2015. The Act also makes any unused portion of the estate tax exemption in the estate of the first spouse to die “portable” – that is, the surviving spouse can elect to add that unused exemption to his/her $5.43 million exemption. The “net taxable estate” is the gross estate value, less mortgage debts, probate costs, charitable bequests and the value of all property left to a surviving spouse. A person’s “gross estate” will consist of the value of all real and personal property, investments and money accounts owned solely by that person, plus the value of that person’s proportionate share of property owned jointly with another, plus the face value of all life insurance policies insuring that person’s life if he/she owns the policy (that is, has the right to cancel or change the beneficiary), even though the death proceeds may be payable to another as the designated beneficiary.
  6. A will does not affect assets until death, and a will can be revoked or amended at any time prior to death. A will must be probated in court in order to transfer the estate assets, free of the deceased person’s debts, to those named in the will.
  7. A popular alternative to a will is the revocable “living” trust. The trust document contains similar provisions to a will, but it becomes effective immediately after it is signed. The person setting up the trust is called the grantor, and is also the beneficiary of the trust during his/her lifetime. The grantor appoints a person or financial institution to serve as trustee, and the trustee is instructed in the trust document to manage the trust assets and make payments from the trust in accordance with the desires of the beneficiary. The grantor/beneficiary then transfers substantially all of his/her assets to the trustee to manage. At the grantor/beneficiary’s death, the trustee will either continue to hold assets for, or will distribute the trust assets to, the persons named as the remainder beneficiaries (“heirs”) in the trust document. A revocable living trust affects the assets immediately upon their transfer to the trust, and no probate is required to permit the trust to continue after the grantor’s death and to permit the trustee to transfer ownership of assets to the remainder beneficiaries. [Note: Transfers of property to or from a revocable living trust within five years prior to application for Medicaid assistance for nursing home care may adversely affect eligibility for such assistance, and transferring a residence into such a trust will cause the otherwise exempt residence to be considered a financial asset for Medicaid eligibility purposes.]
  8. If a person leaves his/her surviving spouse less assets than the spouse would have received without a will, the surviving spouse may be able to renounce (challenge) the will’s provisions and receive an equal share with any surviving children. A will or living trust can provide that children or other relatives will receive any amount or no amount of the estate.
  9. For parents of young children or incapacitated adult children, an important function of a will or trust is the designation of the person(s) who will serve as the child’s guardian after the parents’ deaths. Guardianships for healthy minors terminate when the child reaches the age of adulthood (21) or becomes married and/or self-supporting.
  10. A person may also establish a trust for an heir, and the money or assets for that heir can be transferred to the designated trustee to be managed and disbursed as instructed in the trust. The creator of the trust can thereby direct the management and payout of the trust assets to the beneficiary after the creator’s death.
  11. A will must name an executor, who is the person responsible for filing the will for probate.
  12. A testator may designate in the will that certain items of personal property shall pass to certain named individuals. These are called “specific bequests”.
  13. Execution of a will or living trust is the best way to determine how your property will be distributed. However, it cannot address important issues regarding who will be able to handle your financial affairs and health care decisions in the event of incapacity. You should discuss the creation of a Durable Power of Attorney and a Health Care Directive (“Living Will”) with us.

If you need caring, expert help preparing a successful plan for your personal and family health and wealth, call Courtney Elder Law Associates today.

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