 |
||
|
 |
|
     |
||
|
||
|
|
|
|
||
|
    |
|
This section provides general answers to common questions. These answers are necessarily brief and incomplete, and you should not rely on them in making any legal decisions. Estate planning is entirely fact specific and it is possible that this information is inapplicable to your particular situation.
An estate plan is a set of documents created to: 1) ensure that your estate passes to your intended beneficiaries at your death; 2) nominate the person who will administer your estate at your death; 3) nominate someone to make medical and financial decisions for you if you become incapacitated; and 4) nominate a guardian to care for your minor children. What documents are typically included in an estate plan? Almost every estate plan we create includes a Will, a Durable Power of Attorney for Financial Affairs, and a Durable Power of Attorney for Health Care (also called an "Advanced Health Care Directive"). Estate plans for larger or more complex estates usually include a Revocable Living Trust. What is the difference between a Will and a Living Trust? Both documents are created to ensure that your property passes to your intended beneficiaries at your death. The major difference is that a Will is subject to probate and a Trust is not. When a person dies with a Will, their estate is subject to "probate" which is explained below. (One very important exception is that there is typically no probate required when a married person gives their entire estate to their spouse.) When a person transfers most of their assets to a Living Trust, there is nothing in their estate when they die and therefore there is nothing to probate. Estate planning attorneys often disagree on this question. Some lawyers believe everyone should have a Trust because it is cheaper and easier to administer a Trust than a Will. While this is generally true, we believe other factors should be considered. For example, Trusts are more expensive, and we believe older clients of limited means should not spend money on a trust that will do them very little good while they are alive. In general, a Trust becomes more attractive as your estate gets larger and you get older. Couples with children from a prior marriage will usually want a Living Trust. The two most compelling reasons for creating a Living Trust are probate avoidance and mitigation of federal estate taxes. Probate is a court supervised process of collecting the assets of a decedent and distributing those assets to his or her heirs. People generally try to avoid probate because it is time consuming and costly. Probate takes at least nine months. The fees associated with a probate are roughly 3% of the value of the whole estate to the executor and 3% to the attorney for the executor. When the decedent has a Trust, the successor trustee performs essentially the same functions as the executor of the estate, but he acts on his own, without court supervision. A trust administration is usually completed in less than nine months (unless federal estate taxes are due) and our office can usually complete a trust administration for less than 1% of the value of the whole estate. Do I need to worry about federal estate taxes? You need to worry about federal estate taxes if your estate (or the combined estate of husband and wife) approaches the federal "Applicable Exclusion Amount." The "Applicable Exclusion Amount" is a complicated way of saying "the amount that each person can give away – during lifetime or at death – without paying federal estate taxes." The Applicable Exclusion Amount is changing over time as follows:
Any amounts over the Applicable Exclusion Amount will be taxed at a rate of up to 55% (the highest federal estate tax rate) depending on the year in which you die and the amount subject to tax. For example, if you die in 2004 with an estate of $1.4 million you will pay no federal estate tax. If you die in 2004 with an estate of $2 million, $1.5 million would be excluded from tax and you would pay tax on the $500,000 over the Applicable Exclusion Amount of $1.5 Million. This tax scheme might lead to some absurd results. For example, a person who dies in 2010, leaving an estate of $10 million to his children, would pay zero federal estate taxes and his children would receive all of the $10 million. If the same person died in 2011, he would pay taxes on the $9 million over the Applicable Exclusion Amount and his children would receive only $5-$6 million. Many people believe that Congress will pass a new law before 2010, but we can’t be sure of that. The result is that estate planners are operating in an atmosphere of extreme uncertainty. When we plan your estate we are necessarily making reasoned estimates about how long you will live, how much your estate will increase or decrease, and what Congress will do with the federal estate tax laws. It should be noted that there is no federal estate tax on estates passing to a surviving spouse, regardless of the amount. Thus, if Husband died leaving a $10 million estate to his wife, there would be no federal estate taxes due at Husband’s death. However, Wife would then have a $10 million dollar estate that would be subject to tax at her death. Does a living trust ensure that my heirs will not need a lawyer when I die? No. Some commercials imply that if you create a living trust you and your heirs will never have to visit a lawyer again. This is probably not true. While it is possible for your successor trustee to complete an entire trust administration without legal advice, the vast majority of successor trustees will want to see an attorney to help them with the administration. What documents should I bring to my initial appointment? Please bring a completed Client Estate Information Form, which can be downloaded here, copies of your current Will or Trust, and copies of the grant deed to any real property (real estate, home, vacation home) you own. What else should I consider before my first appointment? Obviously you should decide what individuals or charities you would like to name as beneficiaries of your estate. In addition, please consider the following:
What is the role of the executor or trustee? The executor or trustee is the person (or persons, if you name cotrustees or coexecutors) who will collect all of the assets in your estate when you die and distribute those assets to your intended beneficiaries. It depends on your particular circumstances. Simple estate plans can be completed for less than $1000, while complex estate plans may cost $5000 or more. Most couples will pay from $2000-$3000 for a complete estate plan including a Living Trust. What factors might make my estate plan more expensive?
Do I need a Life Insurance Trust? Probably not. Life insurance can be a valuable estate planning tool in some circumstances; however, in our experience, it is usually unnecessary to create a trust to hold the life insurance policy or proceeds. When do you become my attorneys? We become your attorneys after you have met with us, provided us with a completed Client Estate Information Form and any other necessary documents, and signed a written fee agreement. At our initial meeting we will recommend a course of action and give you an estimated cost for the work to be performed. If you decide you’d like to hire us, we will sign a written fee agreement.
|
|
