July 2008 Topic - "The Uneventful task of Estate Planning"

01.  The Estate Planning Process
02.  Most common questions and answers regarding estate planning
03.  Writing a Will

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1.The Estate Planning Process

Many people believe that estate planning is writing a will. This is a big misconception. A will is a part of the process, however it also involves many other aspects. Some other areas are financial, tax, medical and business planning. Estate planning is necessary for everyone regardless of the size of his or her estate. You should always select someone to manage your assets and personal decisions for you in case a tragedy occurs and you are no longer able to. For those who have a small estate it will be less complicated verses a larger estate.

For instance with a small estate the focus will mainly be on who receives assets after death and the distribution of assets. On the other hand, with a large estate it is essential to discuss ways of distributing the assets to the correct parties. Also, a huge topic should include how to reduce or postpone the amount of estate tax that would otherwise be paid after your death. These are all questions an attorney can answer and advice you on the best path to take. In the end the goal is to be sure everyone is given what he or she are entitled to.

Include all of your assets in this estate planning. Do not leave anything out that has value to you. This may include assets held in your name or jointly with others. The list could go on and on, however the basic ones are bank accounts, jewelry, cars, homes and stocks and bonds. Many people forget about life insurance proceeds and retirement accounts when planning. Keep all of this in mind.

Estate planning is a choice you must make. However, you should be warned if there is no planning done at the time of your death or tragedy a judge will handle it. A judge will appoint someone to take care of your personal care and assets. Intestate succession does play a huge role in where your assets are distributed. Intestate succession is only used when no will or other estate planning is planned prior.

There is a myth out there that states if you do not have a will the state will take everything. Rest assured this is just that of a myth. Your relatives will always be contacted ahead of the state. With that said it is wise to have an estate plan since it will give much greater control over who will inherit what after you are no longer here.

2. Most common questions and answers regarding estate planning

1. What are some things to consider when creating an estate plan?

What assets do I have?

How much are my assets worth? Approximate value is acceptable.

Which assets do I want certain people to receive?

When should my assets be distributed? For instance, your great grandchild is a baby; yet, you want the child to receive a wedding ring you will want to specify when.

Who will be in control of managing my assets if I cannot during my lifetime or after my death?

Who will get custody of my minor children if I become unable to care for them?

Who will speak on my behalf for medical care if I cannot?

How do I want my remains after I pass? Should I be buried, cremated, or put in a crypt? Also specify where.

2. What is a will?

A will is a fancy word for a legal document, which includes your wishes after your death or after you become unable to express them. A will should designate an executor who will supervise by the court to manage your estate the way you stated. It will serve as a lifeline to decide who will receive which assets and when. If there are minor children involved it will nominate someone to care for the children and become their legal guardians.

2. What is a will?

A will is a fancy word for a legal document, which includes your wishes after your death or after you become unable to express them. A will should designate an executor who will supervise by the court to manage your estate the way you stated. It will serve as a lifeline to decide who will receive which assets and when. If there are minor children involved it will nominate someone to care for the children and become their legal guardians.

3. I have heard the term revocable living trust numerous times. What exactly is this?

This too is a legal document that sometimes can be substituted for a will. With this document your assets are put into a trust for you during your lifetime. After you pass away they are all transferred to your beneficiaries. In the majority of cases you name yourself as the trustee. This means you can remain in control of the assets during your lifetime.

The benefit to this is that you can change any terms of the trust at any given time. This matter will never have to go to court since you will name a successor trustee. The successor trustee will take over management should you not be able to. It is still recommended to have a will to cover any assets that are not included in the trust.

4. What does probate mean?

Probate is a process that is supervised by the court. This process includes transferring a person's assets to the correct parties listed in the will after the person's death. Generally, the executor that is listed in the will contacts the courts and requests an appointment. The executor with the courts approval distributes the assets to the beneficiaries.

The disadvantage to probate courts is that anything discussed is public record. For instance, the estate plan and values of the assets will be public record, which means anyone can view them.

5. I have minor children. How do I protect them and provide them should something happen to me?

In your will you will specify a guardian to care for your children and manage all assets left to them. This guardian will be responsible for the child(s) until they are 18 years of age. The advantage to naming someone prior to your death is that there is no argument between family members. As for assets for the children it is often recommended to open a trust account that cannot be accessed until the age designated by you.

6. Does it matter how the titles I have are held?

Yes it does matter, which way the titles are held. An estate planning attorney would be able to advise what is best for your situation. However, below I will list the different ways to hold a title and briefly explain each.

• Community property and separate property. Community property is when you earn assets while being married. Yet, even while married you can own separate property as well. For instance, a gift or inheritance given to you during your marriage is considered separate property.
  
  
• Tenants in common. Owning property this way states that if one owner dies that person's equity and interest in the property would go to the person that they designated in their will.
  
  
• Joint tenancy with right of survivorship. This type of ownership of a property states that if one owner were to die the property would now be solely owned by the other party.
  
  
• Community property with right of survivorship. If you are married you and your partner can choose this title for property. This basically states that if one party dies the other party assumes the property solely.

7. How much does estate planning cost?

This cost will vary depending on which attorneys are chosen. Some lawyers charge a flat rate while others charge hourly rates. It will also be taken into consideration how complex your planning will be.

3. Writing a Will

If at death you have no will, your property will be dispersed according to the law of the state in which you live at the time of your death. This law is called the state's law of intestacy. Although laws of intestacy vary from state to state, in general they provide that some percent of assets of the decedent passes to the surviving spouse and the rest is distributed to the children in equal shares. Writing a will is highly recommended, since the laws of intestacy are rarely the most desirable way to pass property to one's heirs.

Although it is theoretically possible for any individual to write a will on his or her own, it is unwise to do so. Because of the technical nature of wills, it is highly advisable to have a lawyer prepare one. Parents of individuals with disabilities particularly need legal advice, because they often have special planning concerns. If you do not have a lawyer, you can call the local bar association, which will provide you with the name of an attorney in your vicinity. It is preferable, however, to contact a local disabilities group, which may be able to put you in contact with an attorney familiar with estate planning for parents of persons with disabilities. Not all lawyers are familiar with the special needs associated with caring and providing for individuals with disabilities. Before you hire a lawyer, be sure to find out if he or she has ever prepared estates for other parents who have sons or daughters with disabling conditions. If the lawyer has not, it is best to find a more experienced attorney. The cost of an attorney varies according to the attorney's standard fee and the complexities of the estate. The attorney can quote you a price based upon an estimation of the work. If the price quoted is beyond your immediate means, it may be possible to negotiate a payment plan with the attorney, whereby you pay over time.

When making a will, however, remember that not all the assets you control are governed by a will. Joint property with right of survivorship, for example, passes independently of a will. If, for example, Tim and Sarah own a house as joint owners with rights of survivorship, upon Tim's death Sarah automatically inherits the house without regard to what Tim's will might say. Similarly, life insurance is paid out to the named beneficiary without regard to the will. The insurance is a contract between the owner and the insurance company, and the insurance company must pay the insurance to whomever the owner states. Many individuals have death benefits under an employer-provided pension plan. These, too, are not governed by the will but are paid to whomever the employee has designated. (Note: If you create a special estate plan to provide for your child with a disability -- in particular, if you set up a special needs trust -- review any life insurance policies you have purchased, and be sure that you have not designated your child as a beneficiary. The same is true for relatives who may have designated your child as the beneficiary of their policies.)

Personal property, such as clothing, furniture, and household effects, should be distributed by the will independently of the often more valuable assets such as stocks, bonds, and real estate. Personal property is often of great sentimental importance, but may have little financial value. To avoid disharmony after the death of the last parent, it is generally a good idea to make an equal division of the personal property among the children. In some cases, the parents may wish not to include the child with the disability in the division, particularly if that might disqualify this person from government benefits. However, in most cases it is advisable to leave the person with a disability a share of the personal property so that he or she does not feel excluded.

Remember, a will goes into effect only upon the death of the person who created it. Until death, the creator of the will can freely revoke, alter, or replace it.

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Got a question? Then contact our Education Team on 561-883-2398 Ex.310 United conducts regular seminars on financial education, including "How to Budget", come along and join us. To reserve your seat contact our Education Team on 561-883-2398 Ex.310

Newsletter 07
Rev.1
July, 2008