At the Law Offices of Mary A. Miller, P.C., we field many questions about estate planning from residents in the area. That’s only natural, given the complexity of law in general, and the unique difficulties that many people can face when confronted with estate planning issues. Many of those questions are asked with some degree of frequency, so it’s helpful to share them – and our answers – with everyone in the community. Here are some of the most frequently asked questions about estate planning that we receive.
Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain intact as it passes to your beneficiaries, instead of being siphoned off to government processes and bureaucrats.
YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex, governmental process that can become a nightmare. Then there is the matter of the state and federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? While some estate planners favor Wills and others prefer a Living Trust as the estate plan of choice, all estate planners agree that dying without an estate plan should be avoided at all costs.
A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the Will.” Upon your death, the Will becomes a public document available for inspection by all comers. And, once your Will enters the probate process, it’s no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family’s time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a Will to prey on survivors. A Living Trust avoids probate because your property is owned by the Trust, so technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets and distributes them exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Living Trust can help you preserve and increase your estate while you’re alive, and offers protection should you become mentally disabled.
Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs. These “court-appointed agents” must file a strict accounting of your finances with the court. The process is often expensive, time-consuming and humiliating.
YES. In fact, people who create most Living Trusts act as their own trustees. If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your Trust. In the event of a mentally disabling condition, your hand-picked successor trustee, not the court’s appointee, assumes control over your affairs.
NO. The purpose of creating a Living Trust is to avoid living probate, death probate, and reduce or even eliminate state and federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your Living Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.
YES. In fact, all real estate should be transferred into your Living Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate anywhere.
NO. The Living Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system. A Living Trust avoids probate so that your estate is settled exactly according to your wishes.
NO. A Living Trust can help anyone protect his or her family from unnecessary probate fees, attorney’s fees, court costs and state and federal estate taxes. In certain circumstances even individuals with small estates can derive meaningful benefits.
YES, but you would be better off choosing an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys receive continuing legal education on the latest changes in laws affecting estate planning, allowing them to stay on top of the latest laws and techniques to help you meet your needs.
The federal estate tax is a tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.
A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Many states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government.
Portability is where the surviving spouse can use the amount of federal estate tax exclusion that their deceased spouse left unused at their death. Portability has been part of the law since 2011, though it was temporary until 2013.
Yes. Portability must be elected on a timely-filed federal estate tax return. This is the case even though a federal estate tax return would not otherwise be required, such as if the estate of the deceased spouse is below the threshold for federal estate taxation.
If you weren’t concerned, you’d certainly have plenty of company here in the U.S. Most estimates suggest that less than half of the adult population has even a basic will. That suggests that most people don’t give it much thought at all. The question to ask, though, is this: do you want state law to decide who gets your property when you die, or do you want a say in that process? Do you have children who need to be cared for when you’re gone? Is there a loved one with special needs whose care you’re responsible for? If you have actual last wishes that you want respected, your estate plan is the way to make that happen.
Estate planning is not just a rich man’s game anymore. These days, we all need some form of estate planning, just to navigate the minefield of laws on the books at both the federal and state levels. Moreover, estate planning isn’t just about what you have now; it’s about creating a plan that maximizes that wealth, protects and grows it over time, and ensures that it’s there later in life for you to use in your retirement and pass on to your heirs.
Sadly, the answer probably isn’t what you want to hear. Your Last Will can express your last wishes and direct the disposition of your property, but it needs to go through probate to do that. If you’re looking for a way to keep your estate out of probate, you should be considering additional asset transfer tools like trusts.
Those formulaic wills are quite popular these days. Lawyers see a lot of them too – usually when we’re addressing their failures or revising them so they accomplish what the client was promised. Look, a downloadable will might work for you if you’re fortunate. But it also might leave you open to a wide array of mistakes that could cause the entire will to be tossed aside when you die. The smart option is to rely on a professionally-created will from an attorney who stands behind his or her work.
Trusts aren’t something that everyone wants, but they can provide a host of benefits for anyone who has one. They eliminate the need for probate and offer another way to deliver assets to heirs without that lengthy and costly process. Different types of trusts exist, so you can use them to help give an inheritance to an heir with special needs – without causing any disruption in his government benefits. There are trusts to provide for your pets’ care, trusts that can protect assets, and trusts that can continue to support your charitable groups even after you’re gone. They can shelter assets from the estate tax and help you better prepare for those Medicaid benefits you might need when you’re older.
Nursing home costs have exploded in recent decades and few seniors can afford to cover those costs on their own. Unfortunately, it can sometimes be difficult for them to qualify for Medicaid benefits that could help pay for that care, since the asset limits are so strict. Medicaid planning provides a way to structure those assets so that the program doesn’t count them when it calculates eligibility. And since that planning should be done at least five years prior to any application for benefits, it’s always wise to begin Medicaid planning as early as possible.
You might not be incapacitated now, but incapacitating injury and illness is always a possibility in the future – and so is old age. There is no denying that we are all subject to these ailments, and any of us could be struck down with an incapacitation at any time. You need to be prepared for that eventuality with a financial power of attorney and advance directive for health care that ensures that someone is there to make decisions on your behalf when you can no longer do so yourself. Without those protections, and things like a living will and HIPAA release forms, your family may be forced to deal with guardianship issues in the probate court.
You might be surprised to learn that plenty of people go through life without ever being considered “rich” and then die with assets that are worth far more than they ever imagined. If you have a business, life insurance policies, real estate holdings, or other assets of value, it’s quite possible that your final estate value assessment could end up triggering the estate tax. While that might not ever happen, it’s always prudent to plan as if it could. Besides, most of the asset protection strategies used for estate tax planning provide many other benefits for those who use them.
You’re here! At the Law Offices of Mary A. Miller, P.C., we can provide the guidance you need to answer your toughest questions and get the solutions you need to resolve your estate planning needs. If you’d like to discover how our team of experts can assist you with all your complex estate planning issues, contact us online or give us a call at (914) 939-6565 today.