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Estate planning is necessary to protect your assets for your heirs and make sure your wishes are clear. Our experienced estate planning attorney will take you through the process with the proper tools to complete your objectives.
Among the services we provide are:
- A Will giving direction for the distribution of your assets after your death.
- Advanced Heath Care Directive or Living Will telling family and caregivers in how to administer your healthcare if you should become incapacitated.
- Health Care Power of Attorney that designates another party to make medical decisions on your behalf if you should become incapacitated.
- Financial Power of Attorney that designates another party to take care of your finances should you become unable to do so yourself.
- Nomination of a Guardian with directions for the legal guardianship of any minor children after your death.
- Irrevocable Trusts used to avoid probate and protect the value of your estate for your heirs or designated charitable organization.
- Living Trust to use during your lifetime, establish a secure and regular income for loved ones and enable you to manage your funds in a way that avoids the expenses of probate.
We make sure the appropriate provisions are included in these documents to meet your needs and provide for easy administration.
We welcome the opportunity to work with your other advisors to provide knowledge that complements their work.
The Estate Planning Process
Estate planning is arranging for the management and disposal of your assets while you are living and when you die. Your estate is the property you own. Dealing with it involves lifestyle, financial, tax, medical, asset protection, and business planning. Decisions need to be made and documented to insure that your needs and wishes are properly handled.
After an inventory and valuation of your assets you need to decide how:
- Your assets will be managed during your lifetime by you and by others if your unable to manage them yourself.
- Your assets will be distributed during your lifetime and after your death.
- Your personal care will be managed and how health care decisions will be made if your unable to care for yourself.
Without planning and documentation of that plan, a probate court judge will appoint someone to handle your assets and personal care, and distribute your assets to your heirs according to the rules of intestate succession.
All of your assets are included in your estate at "fair market value" less your debts. This includes assets held in your name alone or jointly with others, assets such as bank accounts, real estate, stocks and bonds, and furniture, cars and jewelry. It also includes life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance).
Regardless of the size of your estate you need to do some estate planning, even if it is only to designate someone to manage your assets and make health and personal care decisions for you if you become unable to it yourself. Small or large, you probably want to decide for yourself how and to whom your assets should be distributed after your death. With a large estate, you will likely wish to use various tools to maximize the amount of assets you pass to your beneficiaries.
How assets get transferred
A will is the traditional legal document which disposes of assest in your name when you die:
- It names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust;
- It nominates an executor who will be appointed and supervised by the probate court to manage your estate, pay your debts, expenses and taxes, and distribute your estate according to the instructions in your will;
- It nominates guardians for your minor children. Wills are subject to probate court and a judge will supervise the process of transferring your assets to the beneficiaries listed in your will.
Any assets that have designated beneficiaries normally go directly to those beneficiaries regardless of the will. This includes securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax-deferred retirement plans, trusts (revocable or otherwise), and some annuities. Depending on how they are titled, certain co-owned assets pass directly to the surviving co-owner regardless of any instructions in your will.
The basic starting point is a will, but, depending on your situation, you may need to add many other documents to a well thought-out and comprehensive plan to fully address your estate needs.
Typically, the executor named in your will would start the process after your death by filing a petition in court and seeking appointment. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process.
In such an instance, the court would appoint an administrator to handle your estate. Personal representative is another term used to describe the administrator or executor appointed to handle an estate.
Simpler procedures are available for transferring property to a spouse or for handling estates in which the total assets amount to less than $100,000. The probate process has advantages and disadvantages.
The probate court is accustomed to resolving disputes about the distribution of assets fairly quickly through a process with defined rules. In addition, the probate court reviews the personal representative’s handling of each estate, which can help protect the beneficiaries’ interests.
One disadvantage, however, is that probates are public. Your estate plan and the value of your assets will become a public record. Also, because lawyer’s fees and executor’s commissions are based on a statutory fee schedule, a probate may cost more than the management and distribution of a comparable estate under a living trust.
Time can be a factor as well. A probate proceeding generally takes longer than the administration of a living trust. Discuss such advantages and disadvantages with an estate planning lawyer before making any decisions.
The cost of estate planning
The attorney cost for estate planning varies as to the amount of planning and documentation necessary to meet your objectives. We generally work on a fixed fee for our estate planning services.
A living trust is a written legal document that partially substitutes for a will. With a living trust, your assets (your home, bank accounts and stocks, for example) are put into the trust, administered for your benefit during your lifetime, and then transferred to your beneficiaries when you die.
Most people name themselves as the trustee in charge of managing their trust's assets. This way, even though your assets have been put into the trust, you can remain in control of your assets during your lifetime. You can also name a successor trustee (a person or an institution) who will manage the trust's assets if you ever become unable or unwilling to do so yourself.
The living trust described in this pamphlet is a revocable living trust (sometimes referred to as a revocable inter vivos trust or a grantor trust). Such a trust may be amended or revoked at any time by the person or persons who created it (commonly known as the trustor(s), grantor(s) or settlor(s)) as long as he, she, or they are still competent.
Your living trust agreement:
Gives the trustee the legal right to manage and control the assets held in your trust.
Instructs the trustee to manage the trust's assets for your benefit during your lifetime.
Names the beneficiaries (persons or charitable organizations) who are to receive your trust's assets when you die.
Gives guidance and certain powers and authority to the trustee to manage and distribute your trust's assets. The trustee is a fiduciary, which means he or she holds a position of trust and confidence and is subject to strict responsibilities and very high standards. For example, the trustee cannot use your trust's assets for his or her own personal use or benefit without your explicit permission. Instead, the trustee must hold and use trust assets solely for the benefit of the trust's beneficiaries.
A living trust can be an important part-and in many cases, the most important part-of your estate plan. For more detailed information on estate planning, order a free copy of the State Bar pamphlet Do I Need Estate Planning? Simply e-mail your order to firstname.lastname@example.org. Or visit the bar's Web site -www.calbar.ca.gov-where you'll find the bar's consumer pamphlets, as well as information on ordering them. If you don't have access to the Internet, call 1-888-875-LAWS (5297) for information on ordering the pamphlets by mail.
2. What can a living trust do for me?
It can help ensure that your assets will be managed according to your wishes-even if you become unable to manage them yourself.
In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so. You can name a trustee to take over the trust's management for your benefit if you ever become unable or unwilling to manage it yourself. And at your death, the trustee-similar to the executor of a will-would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions. Unlike a will, however, this can all be done without court supervision or approval.
3. Should everyone have a living trust?
No. Young married couples without significant assets and without children, who intend to leave their assets to each other when the first one of them dies do not need a living trust and would not benefit from having a living trust. Other persons who do not have significant assets and have very simple estate plans also do not need a living trust. Finally, anyone who wants court supervision over the administration of his or her estate should not have a living trust. The greater the value of your assets (particularly if you own real estate), the greater the need for a living trust. And having a living trust could be important in the event of an accident or sudden illness.
4. How could a living trust be helpful if I become incapacitated?
If you are the trustee of your own living trust and you become incapacitated, your chosen successor trustee would manage the trust's assets for you. If your assets were not in a living trust, however, someone else would have to manage them. How this would be accomplished might depend on whether your assets were separate or community property.
If you are married or in a registered domestic partnership, assets acquired by either you or your spouse or domestic partner while married or in the partnership and while a resident of California are community property. (Note: In domestic partnerships, earned income is not treated as community property for income tax purposes.)
On the other hand, any property that you owned before your marriage or registration of your partnership, or that you received as a gift or inheritance during the marriage or partnership, would probably be your separate property.
In California, community property could be managed by your spouse or registered domestic partner if he or she is competent. If you own separate property (or are not married or in a registered domestic partnership) and you become incapacitated, such assets could be managed by an agent or attorney-in-fact under a power of attorney (See #12); without planning, however, your separate property assets would be subject to a probate court proceeding called a conservatorship.
During the conservatorship process, a judge could determine that you were unable to manage your own finances or to resist fraud or undue influence. The court would then appoint someone (a conservator) to manage your assets for you. And the conservator would report back to the court on a regular basis.
Your conservator might be someone whom you previously nominated. Or, if no one had been nominated, it might be your spouse, registered domestic partner or another family member. If none of those persons are available, then it might be the public guardian.
Conservatorship proceedings are designed to help protect you at a time when you are vulnerable or incapable of managing your assets. However, they are also public in nature and can be costly because of the substantial court intervention. In addition, conservatorship proceedings may be less flexible in managing real estate or other interests than a well-managed living trust.
5. How could a living trust be helpful at my death?
The assets held in your living trust could be managed by the trustee and distributed according to your directions without court supervision and involvement. This can save your heirs time and money. And because the trust would not be under the direct management of the probate court, your assets and their value (as well as your beneficiaries' identities) would not become a public record. Your heirs and beneficiaries would still have to be notified about the living trust and advised, among other things, of their right to obtain a copy of the trust.
If your assets (those in your name alone) are not in a living trust when you die, they would be subject to probate. Probate is a court-supervised process for transferring assets to the beneficiaries listed in one's will.
After your death, a petition would be filed with the court (usually by the person or institution named in your will as the executor). After notice is given, a hearing would be held. Then your will would be admitted to probate and an executor would be officially appointed. An inventory of your assets would be filed with the court and notice would be given to your creditors so they could file claims. The process would end once the court approved a final distribution of assets.
Probate can take more time to complete than the distribution of property held in a living trust. In addition, assets tied up in probate may not be as readily accessible to the beneficiaries as those held in a living trust. And the cost of a probate is often greater than the cost of managing and distributing comparable assets held in a living trust.
6. Who should be the trustee of my living trust?
Many people serve as trustees of their own living trusts until they become incompetent or die. Others decide they need assistance simply because they are too busy or too inexperienced or do not want to manage their day-to-day financial affairs.
Choosing the right trustee to act on your behalf is very important. Your trustee will have considerable authority and responsibility and will not be under direct court supervision.
You might choose a spouse, adult child, domestic partner, other relative, family friend, business associate, or professional fiduciary to be your trustee. The professional fiduciary could be a licensed, registered individual, or a bank or trust company licensed by the State of California. You may also name co-trustees.
Discuss your choice with an estate planning lawyer. There are many issues to consider. For example, would the appointment of one of your grown children cause a problem with his or her siblings? What conflicts of interest would be created if you name a spouse, child, business associate, or partner as your trustee? And will the person named as your successor trustee have the time, organizational ability and experience to do the job effectively?
7. How are my assets put into the living trust?
Once your trust has been signed, an important task remains. To avoid court-supervised conservatorship proceedings if you should become incapacitated, or the probate process at your death, your assets must be transferred to the trustee of your living trust. This is known as funding the trust.
Deeds to your real estate must be prepared and recorded. Bank accounts and stock and bond accounts or certificates must be transferred as well. These tasks are not necessarily expensive, but they are important and do require some paperwork.
A living trust can hold both separate and community property. This makes it convenient for spouses and registered domestic partners to plan for the management and ultimate distribution of their assets in one document. (Note: While registered domestic partners have many of the same rights as spouses, be aware that federal tax law does not provide the same tax benefits for domestic partners as it does for spouses.)
If you own real estate in another state, you might (depending on that state's law) transfer that asset to your trust as well to avoid probate in that other state. A lawyer from that state can help you prepare the deed and complete the transfer. If the real estate is located in California, a California lawyer should prepare the deed and advise you on transferring such property.
A lawyer can help you transfer other assets as well. For example, you should consider changing the beneficiary designations on life insurance to the trust. As for the beneficiary designations on a qualified plan (such as a 401(k) or an IRA), you should seek a qualified professional's advice because there are serious income tax issues.
8. What are the disadvantages of a living trust?
Because living trusts are not under direct court supervision, a trustee who does not act in your best interests may, in some cases, be able to take advantage of you. (In a probate, direct court supervision of an executor reduces this risk.)
In addition, the cost of preparing a living trust could, in some cases, be higher than the cost of preparing a will. However, it depends on the particular estate plan. The difference in cost may not be significant if the estate plan is complex.
Also, keep in mind that a living trust can create additional paperwork in some cases. For example, lenders may not be willing to lend to a trust and may require that real property be taken out of the trust (by a deed) before they will agree to a loan on that real property.
9. If I have a living trust, do I still need a will?
Yes. Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship. If you have a living trust, your will would typically contain a pour over provision. Such a provision simply states that all such assets should be transferred to the trustee of your living trust after your death. (This does not mean, however, that your beneficiaries can avoid going through probate for these assets.)
Your will can nominate guardians for your minor children as well. Any assets held in a trust for your children would still be managed by the trustee.
To find out more about wills, see the State Bar's consumer pamphlet entitled Do I Need a Will? For information on ordering a complimentary copy of this pamphlet or any other State Bar consumer education pamphlet, see the response to question #1.
10. Will a living trust help reduce the estate taxes?
No. While a living trust may contain provisions that can postpone, reduce or even eliminate estate taxes, similar provisions could be placed in a will to accomplish the same tax planning.
11. Will I have to file an income tax return for my living trust?
No, not during your lifetime. The taxpayer identification number for accounts held in the trust is your Social Security number, and all income and deductions related to the trust's assets are reportable on your individual income tax returns.
After your death, the income taxation of the living trust is similar to a probate.
12. What other estate planning documents should I have?
A durable power of attorney for property management could be helpful if you ever become incapacitated. It deals with assets that were not transferred to your living trust before you became incapacitated and any assets that you receive afterward. With this power of attorney, you appoint another individual (the attorney-in-fact) to make financial decisions on your behalf.
This power of attorney, however, cannot replace a living trust because, among other things, it expires when you die. It cannot provide instructions for the distribution of your assets after your death.
You might also consider setting up an advance health care directive / durable power of attorney for health care. This allows your attorney-in-fact to make health care decisions for you when you can no longer make them for yourself. In your advance health care directive, you may state your wishes regarding life-sustaining treatment, organ donation and funeral arrangements as well. A health care directive also allows an authorized agent to access your medical information, which could be important in light of strengthened federal privacy laws.
13. What other kinds of trusts are there?
Testamentary trusts and irrevocable trusts are two other types of trusts:
Testamentary trusts are trusts that are based on instructions in your will; such trusts are not established until after the probate process. They do not address the management of your assets during your lifetime. They can, however, provide for young children and others who would need someone to manage their assets after your death.
Irrevocable trusts are trusts that cannot be amended or revoked once they have been created. These are generally tax-sensitive documents. Some examples include irrevocable life insurance trusts, irrevocable trusts for children, and charitable trusts.
Do I Need A Will?
1. What Is a Will?
Your will is a legal document in which you give certain instructions to be carried out after your death. For example, you may direct the distribution of your assets (your money and property), and give your choice of guardians for your children. It becomes irrevocable when you die. In your will, you can name:
Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).
A guardian for your minor children. You may nominate a person to be responsible for your child's personal care if you and your spouse die before the child turns 18. You may also name a guardian-who may or may not be the same person-to be responsible for managing any assets given to the child, until he or she is 18 years old.
An executor. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then, with the court's approval, distribute your assets to your beneficiaries according to the instructions in your will. Your executor serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your executor carefully.
Keep in mind that a will is just part of the estate planning process. And whether your estate is large or small, you probably need an estate plan. For more information on estate planning, see the State Bar's pamphlet entitled Do I Need Estate Planning? To order a complimentary copy of this pamphlet, send an e-mail to email@example.com, or visit the bar's Web site www.calbar.ca.gov where you'll find the State Bar's consumer education pamphlets, as well as information on ordering them. Or, if you do not have access to the Internet, call 1-888-875-LAWS (5297) for more information on ordering these publications. The pamphlets can be ordered in bulk as well.
2. Does a Will Cover Everything I Own?
No. Generally speaking, your will affects only those assets that are titled in your name at your death. Those assets that are not affected by your will include:
Life insurance. The cash proceeds from an insurance policy on your life are paid to whomever you have designated as beneficiary of the policy in a form filed with the insurance company-no matter who the beneficiaries under your will may be.
Retirement plans. Assets held in retirement plans, such as a 401(k) or an IRA, are transferred to whomever you have named as beneficiary in the plan documents-no matter who the beneficiaries under your will may be.
Assets owned as a joint tenant with right of survivorship. Assets such as real estate, automobiles, bank accounts and stock accounts that are held in joint tenancy with right of survivorship will pass to the surviving joint tenant upon your death, and not in accordance with any directions in your will.
"Transfer on death" or "pay on death." Certain securities and brokerage accounts include a designation of one or more beneficiaries to receive the assets in that account when the account owner dies. The names of the beneficiaries are preceded by the words "transfer on death" or "TOD." Other assets, such as bank accounts and U.S. savings bonds, may be held in a similar form using the owner's name and the beneficiaries' names preceded by the words "paid on death" or "POD."
"Community property with right of survivorship." Married couples or registered domestic partners may hold title to their community property assets in their names as "community property with right of survivorship." Then, when the first spouse or domestic partner dies, the assets pass directly to the surviving spouse or partner without being affected by the will.
Living trusts. Generally, assets held in a revocable living trust are distributed according to the instructions in the trust regardless of the instructions in your will-with no need for court supervision. You can name yourself as the initial trustee of your living trust (most people do), and then name a successor trustee to manage the trust if you become unable to do so. With a living trust, your assets are managed for your benefit during your lifetime and then transferred to your beneficiaries when you die without court supervision. For more detailed information, see the State Bar pamphlet entitled Do I Need a Living Trust? (See #1 for information on ordering pamphlets.)
Your spouse's or domestic partner's half of community property. In California, any assets acquired by you and your spouse or registered domestic partner from earnings during your marriage or registered domestic partnership are community property. You and your spouse or registered domestic partner own equal shares of those assets. Your will, therefore, affects only your half of the community property. Assets that either of you owned before your marriage or registered domestic partnership, and gifts or inheritances acquired later, are usually separate property. Your will affects all of your separate property assets.
Even if your entire estate consists of assets held in joint tenancy, a life insurance policy and a retirement plan, there are still good reasons for making a will. For example, if the other joint tenant dies before you do, then the property held in joint tenancy will be in your name alone and subject to your will. If named beneficiaries die before you do, the assets subject to a beneficiary designation may be payable to your estate. If you receive an unexpected bonus, prize, refund or inheritance, it would be subject to your will. And if you have minor children, nominating a guardian for them in your will is very important.
3. What Happens If I Don't Have a Will?
If you die without a will (referred to as intestate), California law will determine the beneficiaries of your estate. Contrary to popular myth, if you die without a will, everything does not automatically go to the state. If you are married or have established a registered domestic partnership, your spouse or domestic partner will receive all of your community property assets. Your spouse or domestic partner also will receive part of your separate property assets, and the rest of your separate property assets will be distributed to your children or grandchildren, parents, sisters, brothers, nieces, nephews or other close relatives.
If you are not married or in a registered domestic partnership, your assets will be distributed to your children or grandchildren, if you have any-or to your parents, sisters, brothers, nieces, nephews or other relatives. If your spouse or domestic partner dies before you, his or her relatives may also be entitled to some or all of your estate. Friends, a non-registered domestic partner or your favorite charities will receive nothing if you die without a will. The State of California is the beneficiary of your estate if you die intestate and you (and your deceased spouse or domestic partner) have no living relatives.
4. Are There Various Kinds of Wills?
Yes. In California, you can make a will in one of three ways:
A handwritten or holographic will. This will must be completely in your own handwriting. You must date and sign the will. Your handwriting has to be legible, and the will must clearly state what you are leaving and to whom. A handwritten will does not have to be notarized or witnessed. However, any typed material in a handwritten will may invalidate the will. (A typed will must be signed by two witnesses.) It is a good idea to consult with a qualified lawyer to make sure your will conforms with California law and does not have any unintended consequences.
A statutory will. California law provides for a "fill-in-the-blanks" will form. (This form can be printed out from the State Bar Web site. Simply go to www.calbar.ca.gov and click on Public Services and Making a Simple Will.) This will form is designed for people with relatively small estates. If there is anything you do not understand or if you are making any provisions that are complicated or unusual, you should ask a qualified lawyer to advise you.
A will prepared by a lawyer. A qualified estate planning lawyer can make sure that your will conforms with California law. The lawyer can make suggestions and help you understand the many ways that assets can be transferred to or for the benefit of your beneficiaries. A lawyer can also help you develop a complete estate plan and offer alternative plans that may save taxes. This kind of planning can be extremely helpful and economical in the long run. Your lawyer will either personally supervise the signing of your will or will give you detailed instructions on the rules for its execution by you and two witnesses (who are not beneficiaries of your estate).
No matter what kind of will you use, the will should be solely yours and not a joint will with your spouse, registered domestic partner or anyone else.
Also, keep in mind that your will is not a living will. The term living will is used in many states to describe a legal document that states you do not want life-sustaining treatment if you become terminally ill or permanently unconscious. In California, advance health care directives and durable powers of attorney for health care decisions are used for that same purpose (see #10).
5. What If My Assets Pass To a Trust After My Death?
You may make a provision in your will for your assets to be distributed to a trust upon your death. When trusts are created under a will, they are known as testamentary trusts. With an appropriate beneficiary designation, testamentary trusts can even be beneficiaries of life insurance policies and retirement plans.
If you have a living trust, (that is, a trust established during your lifetime) then your will is often referred to as a pour over will. Such a will includes instructions to transfer all remaining assets (assets that were not transferred to your living trust during your lifetime) to the living trust at the time of your death.
For relatively small gifts to beneficiaries who are minors, you might also consider providing for transfers from your estate to a custodian under the California Uniform Transfers to Minors Act.
6. Can I Change or Revoke My Will?
Yes. You should review your will periodically. If it is not up to date when you die, your estate may not be distributed as you wish.
Your will can be changed through a codicil, a legal document that must be drafted and executed with the same procedure that applies to wills. A codicil is an amendment to your will. You must not change your will by simply crossing out words or sentences, or by making any notes or written corrections on it.
You may also establish a new will and, in doing so, revoke your old will. If you get married or divorced, or establish a registered domestic partnership or terminate one, you should seek the advice of a lawyer and make a new will. You should also review your will when there are any other major changes in your family (such as births and deaths), when the value of your assets significantly increases or decreases, and when it is no longer appropriate for your proposed guardian or executor or testamentary trustee to act in that capacity.
If you have moved to California from another state and have a will that is valid under the laws of that state, California will honor its validity. It is important for you to review your will with a qualified California lawyer, however, since California law will govern the probate of your will if you live here at your death. And if you move out of state, your California will should be reviewed by a lawyer there.
7. How Are The Provisions of A Will Carried Out?
They are carried out through a court-supervised process called probate. Typically, the executor named in your will starts the probate process after your death by filing a petition in court and seeking official appointment as executor. The executor then takes charge of your assets, pays your debts and, after receiving court approval, distributes the rest of your estate to your beneficiaries.
Simpler procedures are available for transferring assets to a spouse or registered domestic partner, or for handling estates with assets under $100,000.
The probate process has advantages and disadvantages. The probate court is accustomed to resolving disputes about the distribution of assets fairly quickly through a process with defined rules. In addition, the probate court reviews the executor's handling of each estate, which can help protect the beneficiaries' interests.
One disadvantage, however, is that probates are public. Your estate plan and the value of your assets will become a public record. Also, because lawyer's fees and executor's commissions are based on a statutory fee schedule, a probate may cost more than the management and distribution of a comparable estate under a living trust. Time can be a factor as well. A probate proceeding generally takes longer than the administration of a living trust. Discuss such advantages and disadvantages with an estate planning lawyer before making any decisions.
8. Who Should Know About My Will?
No one-other than you and the lawyer who wrote the will-needs to know the contents of your will. But your executor and other close friends or relatives should know where to find it. Your original will should be kept in a safe place such as your safe deposit box, your lawyer's safe, or a locked, fireproof box at your residence or office.
9. Will My Beneficiaries Have to Pay Estate Taxes?
Assets that are transferred to either your spouse (if he or she is a U.S. citizen) or to charitable organizations are not subject to estate taxes. Assets passing to other individuals or entities will be taxed if the net value of those assets is more than $2 million. That amount will increase to $3.5 million in 2009. Then, in 2010, the estate tax will disappear completely. In 2011, however, unless Congress changes the law, the exemption will revert back to $1 million. For estates that approach or exceed this value, significant estate taxes can be saved by proper estate planning. Usually, that planning must be done before your death and, for couples, before one of you dies. While estate planning generally focuses on estate taxes, planning must also take into consideration income, capital gains, gift, property and generation-skipping taxes as well. You should obtain qualified legal advice about taxes and current tax law during the estate planning process.
10. What Other Planning Should I Do?
Make a list of your assets and debts. This can be extremely helpful when you are no longer around to provide such information. Make sure that your executor or other family members know where to find the list. Include your bank accounts, safe deposit boxes, stocks and bonds, real estate, and other assets on the list. Also, list the names and addresses of anyone to whom you owe money.
Make and circulate a list of your professional advisors. Letting your family members and professional advisors know the other professionals who you work with can improve communications and encourage teamwork among your advisors, streamline tasks being done for you, and ensure that the proper people are contacted in the event of your death, sickness or incompetence.
Set up a durable power of attorney for asset management. In this document, you appoint another individual (the attorney-in-fact) to make property management decisions on your behalf if you ever become unable to do so. The attorney-in-fact would manage your assets and be required to act solely in your best interests.
Consider preparing an advance health care directive / durable power of attorney for health care. This document allows the person named as attorney-in-fact to make health care decisions for you when you can no longer make them for yourself. It may also contain your wishes concerning life-sustaining treatment, other health care issues, organ donation, burial instructions and your funeral.