Kent Larsson writes about the proper use of wills, advance directives, trusts, and other estate planning tools, and how how they play a vital role in you receiving proper medical care and helping you to preserve and pass on your assets to your loved ones.
The new tax law has enough big changes that you need to review your estate plan to make sure that you are taking advantage of the best options in the new environment.
It is a good idea to review your estate plan with sufficient frequency to make sure it still does what you want in the most effective way. However, you should not wait to review your plans when something significant changes.
The significant change can be something in your life, such as a new spouse, a divorce, another child or a large increase in income. The significant change can also be a change in the legal environment, as is the case with the recently passed tax overhaul.
Many estate plans will need to be changed to take advantage of the new law as the Wills, Trusts & Estates Prof Blog discusses in "A Gift from the New Tax Act: Kill That Trust."
One of the key changes for estate planning purposes, is that the estate tax exemption has been doubled.
This means people with estate plans that created trusts for the sole purpose of limiting their estate tax exposure may want to revisit their plans. They might now be better off revising those trusts or even getting rid of them altogether.
Make sure that you visit an estate planning attorney before you make a decision about your trust on your own. The doubling of the estate tax exemption is scheduled to expire in the future, so you will also want an expert opinion about how you should handle that.
Reference: Wills, Trusts & Estates Prof Blog (Dec. 26, 2017) "A Gift from the New Tax Act: Kill That Trust."
It is best to consider all possibilities when making plans to protect your family.
In addition to creating your will and an estate plan, you might consider that while you are at the attorney's office you should also get plans for what might happen if you become incapacitated, according to the Times Herald-Record discusses in "Make plans in case you are incapacitated."
The issue is that if you are incapacitated, someone else needs the legal authority to act on your behalf.
Someone will need to be able to handle your bills and to make medical decisions for you, should it be necessary.
If you do not plan ahead, it can be a difficult process for someone else to get the legal authority.
Someone will have to hire an attorney and go to court to get a judge's permission to act as your guardian.
Fortunately, planning for what will happen if you become incapacitated is not difficult.
You just need a general durable power of attorney and a health care power of attorney.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances.
Reference: Times Herald-Record (Dec. 12, 2017) "Make plans in case you are incapacitated."
State laws are similar, but differences can turn out to be important.
If you relocate to another state, it is important to revisit your estate plan because there are a number of variables that have an impact on the plan, according to The Times Herald in "Moving can affect your financial planning."
Generally speaking, if a will you had drafted was valid in the state in which it was drafted at the time it was drafted, the other states will consider it to be valid.
Trusts are valid in every state, since the state in which they were created always governs over the trust.
Most of the time your estate plan will be valid in your new state. However, there can be some issues, especially if you purchase real estate in your new home state. Some states have particular rules about how real estate has to be handled.
You should also be aware that your new state could have tax laws that are different than your old state. Something you have done in your estate plan might still be legal and valid, but it might not be tax-wise.
It would be prudent to obtain the advice of an estate planning attorney in your new state of residence, in case your plan needs updating.
Reference: The Times Herald (Dec. 1, 2017) "Moving can affect your financial planning."
Knowing the basic concepts is enough to get you started on the right track.
You don’t have to have an estate plan. However, if you don’t, the courts will decide where your assets go using statutes written by your state government.
Getting started in planning can be a challenge, if you don’t have the basic information needed, according to Cincinnati.com in "Now is the time to consider the basics of estate planning."
The biggest things people need to know are what is involved with wills and trusts and how they differ.
A will is a formal written document you can use to establish how your property should be distributed after you pass away. Your will is submitted to court after your death and the court appoints someone to make sure what you want done is actually carried out. A will has no effect until after you pass away.
A “living” trust is different. It does take affect before you pass away. Trust documents create a legal entity into which you transfer your assets. After you pass away, the assets are then managed or distributed according to the directions given in the trust document.
A trust does not ordinarily need to be submitted to court. If you have a will, you do not necessarily need a trust. However, if you have a trust you still need a will.
There is a lot more to estate planning, including additional basic information that you should know.
An estate planning can easily get you started on creating an estate plan that meets your unique circumstances.
Reference: Cincinnati.com (Nov. 2, 2017) "Now is the time to consider the basics of estate planning."
Estate planning instruments, including trusts, can be used to avoid the probate process.
If some information you have seen or heard has led you to believe a will does not have to go through probate, you are just plain wrong, according to TC Palm in "Common misconceptions about wills and trusts."
Sometimes, misconceptions begin with TV shows or movies that are just that – TV shows and movies. They don’t have to present the law as it actually is.
Another way to come up with a misconception, is that in some states, if an estate is small enough, then it does not have to go through probate. Usually, these are very small estates with very few assets. It certainly isn’t the norm.
Someone with good intentions probably had a relative or friend who passed away with few assets and as a consequence, the will did not have to go through probate.
However, most wills do have to go through probate. They need to be submitted to the court and approved.
The probate court then oversees the administration of the estate as conducted by the executor or personal representative.
If you want your estate to avoid probate, what you need is not a will.
Instead you need to use other estate planning instruments, such as trusts.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and also conforms to the laws on wills and trusts in your state of residence.
Reference: TC Palm (Oct. 5, 2017) "Common misconceptions about wills and trusts."
Because of the history of trusts being quite large in the U.S., people think they are restricted to those with large amounts of money.
Trusts are not just beneficial to the super wealthy. They can be a good tool for everyone, according to the Times Herald-Record in "Trusts are no longer just for the wealthy."
There are all kinds of trusts available today. They can be created for many different purposes.
Trusts can be used to make inheritances in blended families less contentious. They can also be used to hold inheritances for minor children. Trusts can be as simple as being nothing more than a convenient way to avoid the potentially costly and time-consuming probate process.
Since trusts are so versatile, almost anyone can benefit from a trust.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may involve a trust as a valuable tool.
Reference: Times Herald-Record (Sep. 28, 2017) "Trusts are no longer just for the wealthy."
Can you just show a will to the holder of the assets and take possession? No, you need to head to court.
There are numerous misperceptions about how a will works. Attorneys often deal with people upset that it requires approval from a court before it is official, according to The Times Herald in "Wills won't work without probate."
A will is only a bunch of words on paper that have no real legal authority, until the will is filed with a probate court.
The court must then agree to accept the will as representing the valid wishes of the deceased.
Once that is done, the probate court appoints a personal representative for the estate.
That personal representative is then charged with carrying out the directives in the will, under the supervision of the court.
This can result in a long and often expensive process.
It depends on the size of the estate, the ability of the personal representative and whether there are any challenges to the estate.
An estate planning attorney can advise you on an estate plan that fits your unique circumstances and a trust may be the route to go.
Reference: The Times Herald (Sep. 22, 2017) "Wills won't work without probate."
Parents may become disappointed with a child and plan to leave them out of their estate plan. However, they may want to think again, considering the potential problems that can follow.
Sometimes the black sheep of the family can create sufficient problems that parents may consider cutting him or her from the estate plan. However, that can prove to be a bad idea, according to the Globe and Mail in "Think twice, wealthy family, before cutting the black sheep out of your will."
One big thing to consider is that a child who receives nothing, has no incentive to not cause problems.
A no-contest clause can prevent someone who does receive an inheritance from challenging an estate plan that they do not like, but it cannot prevent someone from doing so who is set to receive nothing or very little from an estate.
This can make cutting a child out of an estate plan a very expensive proposition. This is because the child has no reason to not launch legal fights.
A black sheep child can also be more easily controlled by using an estate plan to incentivize that child into desired behaviors.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances. It could include a trust that only distributes money for good behavior.
Reference: Globe and Mail (Sep. 19, 2017) "Think twice, wealthy family, before cutting the black sheep out of your will."
It is possible you may not be confident of the intentions of your in-laws.
There is often tension between in-laws. Someone in the U.K. recently expressed concern on how to protect a child’s inheritance from a bad son-in-law, according to the This Is Money advice column "I have a terminal illness and our son-in law is unreliable with money - how can we protect daughter's inheritance?"
The answer in the U.S. is the same as it is in the U.K.
In estate planning, this plays out with the parents being wary that their son-in-law or daughter-in-law will meddle in the inheritance of the parents’ own children and waste the inheritance.
Instead of leaving a child an inheritance outright through a will, a trust can be used to protect the assets from a wayward in-law.
With a trust, you can make sure the money is only used for things you would want.
If your child gets divorced, the trust can also protect the inheritance in the divorce.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which may include considerations for a son-in-law or daughter-in-law.
Reference: This Is Money (Sep. 8, 2017) "I have a terminal illness and our son-in law is unreliable with money - how can we protect daughter's inheritance?
No-contest clause makes people think twice before challenging will or trust.
A way around the problem of challenges to a will or trust, is to include a no-contest clause, according to Press Enterprise in "The Pros and cons of the no-contest clause."
A no-contest clause helps prevent these challenges. It simply states that anyone who challenges the will or trust will receive nothing from it.
As a result, the document will be effectively rewritten to disinherit the challenger.
This is an easy way to stop many people from challenging an estate plan.
They might not be happy with what they received, but they do not want to risk getting nothing.
Some criticize these clauses as deterring people from challenging an estate plan when they have good reason to, such as when there has been undue influence used by someone else to get more of the estate than he or she should.
However, most states will not enforce a no-contest clause, if the person challenging the will or trust has probable cause to do so.
An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and could include a no-contest clause.
Reference: Press Enterprise (Aug. 5, 2017) "The Pros and cons of the no-contest clause."