Most of us have probably had a sunburn. Those of us with easily-sunburned skin know the stinging pain that comes along with it. Though our beach day might have been fun, the aftermath was not quite so nice. However, sunburns aren’t the only thing that can cause a major sting. Think of probate court as the judicial equivalent of a sunburn: annoying, uncomfortable, and definitely not what you want to be dealing with. Here’s a brief overview of what probate is, how you get there, and how you can avoid it.
Probate court is a court that deals with the division of your assets and repayment of your debts after you die. It handles validation of a will, identifying and taking an inventory of the deceased person’s property, and dividing said property up according to state law (after debt repayment, of course). State by state, the process of probate court varies, but here are some elements of the process that you need to know, and they don’t vary a whole lot across-the-board.
First, you should know about the executor. This person can be named in your will. Or, a judge can appoint him or her if you die intestate or fail to name the person. The executor has a lot to handle. He or she validates your will, presents a judge with an inventory of property and debts, and gives a list of who should inherit the property and assets that you’ll have left after the debts are wiped out.
The executor notifies your creditors and family members of your death so that people can make requests. The executor has to decide what to do if you come up short. If you’ve granted cash gifts that you don’t have when you die, the executor might decide to sell some of your property in order to make ends meet. This is just one example of the way in which the executor will work with the court to settle up your property. This process usually takes a year or two, but it can take even more, depending on your circumstance and the court’s schedule. Overall, probate is a long, arduous ordeal.
How Do I Wind Up There?
If you die intestate (which means being deceased without a will), you’ll end up in probate. People might be under the impression that you can avoid probate if you have a last will and testament, but that actually isn’t true. The executor still has to go to court and validate the will. A will must be authenticated. Otherwise, it isn’t going to hold up in court. Lawyers will assist in the validation process, as it varies based on state law.
Having an estate plan that doesn’t address important documents recommended if you want to avoid probate is a way that you wind up there. Especially when it comes to the appointment of your executor, your family will not like the process at all. If the judge appoints someone you didn’t intend to manage your affairs, things will go likely downhill rapidly.
Yikes! How Can I Avoid That?
Avoiding probate court involves some legal footwork, such as establishing a living trust. This legal tool is a three-party fiduciary relationship that is effective immediately. You, the donor, give nominal title to the trustee, who then confers the title to your beneficiary when you designate them to do so (i.e. after you die, usually). Joint tenancy arrangements are also not subject to probate, depending on state law. Your estate planning attorney will help you work out ways to keep your family out of probate.
When it comes to this judicial sunburn, you want to take all the necessary precautions. Consider a living trust (as well as smart estate planning overall) your equivalent of SPF 50 sunscreen. Good estate planning and consulting with an estate planner will save your family time, energy, and stress. A sunburn might last just a week or so, but the sting of probate lasts way, way longer.
Everyone’s mom has, at some point or another, given them advice that has been extremely important, whether they realized that at the time or not. Moms really do give the best guidance, and they also are really great at making sure everyone is prepared, whether it’s making school lunches, helping get homework done, getting everyone on the bus in time, or doing one of the other million things that superwoman moms do. Not only do your mom’s lessons apply during your childhood, they are also relevant when it comes to your adult life.
There’s no better way to be prepared than to have an estate plan. The consequences if you don’t one will be far worse than they would be for forgetting your homework or missing the bus. Now that you’re an adult, being prepared takes on a whole new meaning, and planning your estate is something you should take very seriously.
What is Estate Planning?
Estate planning is pretty easy to understand as a concept. It involves creating a plan for what will happen to your assets after you pass on. You can have these assets transferred to loved ones, donated, or dispersed however you want. Here are some great ways you can use estate planning to help plan in advance for you and your loved ones’ future:
- Healthcare directives. If you’re ever in the hospital and are too incapacitated to tell the doctors what you want, you’ll need to make sure that you have a plan. Otherwise, you might not receive the medical care you desire. A healthcare directive is a series of instructions from you to the doctors, nurses, and hospital on how to take care of you in the event that you’re too sick to tell them yourself.
- Power of attorney. Your power of attorney also takes care of you when you are incapacitated or unable to make decisions for yourself. How it works is simple; you pick someone you trust and they will be in charge of your financial decisions if you cannot make them. By selecting the person yourself, you ensure that you won’t be giving financial information to someone who might misuse it.
- 529 Plans. If you have a loved one that will be getting ready to go to college, you should invest in a 529 plan. This plan allows you to set aside funds for the child’s college fund. These assets will be transferred at the time of your choosing.
- Living trust. This is a three-party relationship of a fiduciary nature. You, the donor, transfer nominal title to the transferee, who is the trustee. The trustee then, on your instruction, will transfer title to the beneficiary, who is the person you want to receive your assets in the end. A living trust goes into effect immediately and allows you to avoid probate court.
These tools are just some of the many that will help you be prepared in case you pass away. Your estate, if you don’t have a plan, will end up in the grasp of probate court, which is very costly.
Probate Court Explained
Probate court is what happens when you forget your homework, so to speak. In probate court, if you’re there, it is because you forgot to make an estate plan, or you don’t have the documents in the plan that would allow you get out of it. In probate, your assets are divided up by a judge who first eliminates debts and then divides what’s left evenly. It’s unlikely that your property and debts will be divided up the way you want them to be, and your family will not be happy with the increased cost and time that probate court takes.
Mother knows best, and you can take heed of her instructions even in your adult life by being prepared and consulting an estate planning attorney.
Pretty much everyone has heard, one way or another, about estate planning, even if they don’t call it that specific term. Whether it’s representation in popular culture (seeing a dramatic last will and testament on a TV show) or your relatives mentioning something about it at the dinner table, you’ve probably run into estate planning more than a few times. What people may not know is that this field is really broad. There are tons of different facets of estate planning, and that’s a good thing! If there weren’t, people wouldn’t get the results they wanted.
Here are some of the most commonly-forgot things about estate planning.
There are a LOT of Documents
As mentioned above, there are many different tools for an estate plan besides a will. For example, there are 529 plans, which allow you to set aside money for a kid’s college at a later date. There are also documents concerning your health, family, and financial care that come into effect while you’re living. Estate planning isn’t just a posthumous thing (though it’s definitely relevant). Here are two major documents that you’ll need while living.
Healthcare directive. You may or may not have specific concerns when it comes to your medical care and what you want done. A healthcare directive ensures that, if you are too incapacitated to tell the doctors and nurses what you want when you’re in the hospital, the directive will have your requests laid-out. It’s a way to plan ahead for every eventuality.
Power of attorney. A power of attorney helps manage your finances if you are, like with the healthcare directive, too sick or incapacitated to manage them yourself. This POA is someone you trust, who you know will do the right thing with your money.
Living Trusts Exist, Too
Living trusts are actually, in some ways, preferable to last wills and testaments because they go into effect immediately, and you can avoid probate court if you have one (which you cannot do if you just have a last will). A living trust has three parties: a trustee, a donor, and a beneficiary. You are the donor, and you grant nominal ownership of your assets to the trustee. At the time you specify (after death, for example), the trustee gives ownership to the beneficiary. You can bypass probate with this, allowing your beneficiary to get the assets immediately.
You Can Update at Any Time
Estate plans can (and should!) be updated at any time. Whether you’re updating your plan to reflect a change in your family or finances, you need to ensure that you move quickly on the updates, as you never know when your plan will need to go into effect.
It’s Really, Really Necessary
The last main point about estate planning is just how vital it is. You don’t want to be dragging your family through the time and expense of probate court, where a judge divides up your stuff without real regard to how you would have wanted it divided. Estate planning isn’t just good for your future—it’s good for your family’s.
And there you have it! These are just some of the many great aspects of estate planning. Set up a consultation today.
May the Fourth be with you! May 4th has quickly become a tradition for die-hard Star Wars fans across the globe, who come together to celebrate what they love most about the popular movies. However, Star Wars’ themes aren’t just relative to space alone. When it comes to your family, you’re going to want to prevent some battles of your own—albeit not the intergalactic kind.
Estate planning ensures that your assets and debts are assigned in a way that is best for your family. This will keep family harmony, and no one will have to go through probate court. Through estate planning, you will keep the peace in your family by avoiding probate court (which, for symbolic purposes, you can think of as the Death Star of the legal world). Probate court leads to nothing but trouble, and to avoid estate wars within your family, there are some things you must do.
Why is Probate Court So Bad?
Okay, so probate court might not be totally as serious as a planet-destroying star, but it definitely is not where you want your family to be. People who die intestate (meaning they die without a will) or people who die with a last will and testament have to go through probate court. During probate, your estate—assets and debts—are divvied out by a judge.
A family member is appointed to be the executor of your estate. Debts are paid off first; that is goal number one of probate court. Then, whatever’s left is divided among the eligible recipients. The process is long and drawn out, and there is not a great likelihood that you will see your assets go where you want them to. The debts also may be assigned in ways that greatly disadvantage those selected to pay them off. All in all, probate court is not the answer for your family.
How to Avoid It
A common misconception is that having a last will and testament will automatically get you out of probate court and tie up your affairs nicely. That’s not true, however. A last will still has to go through probate court, and it will still take a long time.
The alternative to that is a living trust. With a living trust, there are three parties: you, the trustee, and the beneficiary. You, as the donor, confer nominal ownership of assets to the trustee, who, at a date you give them, hands over your assets to your chosen beneficiary. This gets you out of probate court and puts your estate immediately into the hands of the people you want to get it. There is no middleman, and your beneficiary will be grateful to you for that.
Probate court serves its purpose, but it is not a place that families want to go. Between the time consuming court trips, the costs, and the overall drudgery of this legal process, planning your estate in order to avoid these problems is a far better alternative than risking “estate wars.”
Spring cleaning, in a way, is the final hurdle you have to get over before you can fully enjoy summer. Whether you’re excited or not, it’s here, and it doesn’t just apply to the nooks and crannies of your house. Estate planning is a way to ensure your assets are transferred and distributed the way you want. There are many different documents and tools you can use to safeguard your family after you pass on, but all of them have a similar characteristic: they need to be updated regularly to make sure they’re covering what you want them to cover.
In this article, we’ll discuss the various ways in which your estate plan can be updated. You should look at your plan to see if you need to make these changes. If so, consult your estate planner today.
New Season, New People
Families change, and your estate plan should reflect this. Perhaps new people have come into your life that you want to include in your plans. Or, conversely, maybe there have been changes in your family that require you to consider dropping people from your estate plans and substituting others in their place.
For example, let’s say you have a living trust. (For reference, a living trust is a three-party fiduciary relationship between you, the donor, a trustee, which is the person who takes nominal ownership of your assets, and the beneficiary, who gets the assets when you tell the trustee to transfer them). Your trustee is a relative, and your beneficiary is one of your children. Assume that your relative passes away before you. You then, at that point, need to ensure that you have a new trustee to take the person’s place. Or maybe your trustee is fine, and you want to add more beneficiaries.
These examples are just some of the many ways new circumstances can require new people. Don’t wait to add them in—the sooner the better.
New Season, New Documents
There is a wide range of documents that can go into your estate plan. Don’t settle for what you have now, as situations can arise that lend themselves to the opportunity to add new tools to the mix.
One of the best things about estate planning is the opportunity to adjust and individualize what you need. An example of such a change is your kids and college. There are tools in the estate plan toolkit that allow you to pass on college savings to help your kids pay for college, should they decide to go. Adjusting your estate plan to encompass new plans like this is easy and very valuable to your family.
Changes in the law can also mean opportunities to adjust your estate plan. Recently, the gift tax exemption has increased, along with the estate tax exemption. These two can be grouped together, which means you can lessen your tax burden through certain financial maneuvers (i.e. gifting more money now instead of waiting until you pass away).
As you can see, there are many reasons to update your estate plan this spring. Spring cleaning is here! Take advantage of it by making changes wherever you need to.
The Redcoats are coming! And they’re coming for all you own, too. That scary pronouncement refers to something called “probate court,” which may not sound intimidating on its face, but is actually quite scary in and of itself. Probate court and the IRS go hand in hand, and if you want to avoid your estate getting snatched up, you should consult an estate planner immediately.
In this article, we’ll tell you how to remain Redcoat-free through an estate plan that keeps your assets and your family out of probate court. First, though, you might be wondering: what’s so scary about probate?
Probate Court 101
If you die without giving instructions on how you want your assets distributed after your death, your estate will go to probate court. This court manages peoples’ debts and property after they pass away. The court is state, not federal, as the state is considered the system best in position to manage its own citizens’ affairs.
But in this case, is it? The evidence would say that the person in the best position to manage your affairs is you. Probate court has two goals: pay off your debts and distribute what’s left. After someone files a petition for probate, the probate court appoints an administrator or executor to execute the process. There are a lot of fees associated with this process, ranging from administrative to legal fees, and all of your business becomes public record. The distribution of your assets is not the only thing that the public gets to know: the nature and extent of your debts are also on the record. Your financial situation becomes common knowledge. The process can take six months if you’re lucky. Often, it can take more than a year.
And, of course, you can’t forget about the taxes.
When the IRS Comes to Visit
The IRS wants its cut. Taxes are nothing new any law-abiding citizen, but it’s a pretty common assumption that, if there is a tax loophole, you want to take advantage of it.
When you’re in probate court, the chance to avoid taxes goes out the window. There is a tax on the value of your probate estate. This is called an estate tax, though it is sometimes known as an inheritance tax. In some states, if your estate is over a certain value, that is when the tax is triggered.
Through financial planning, you can often lessen your tax burden to some degree. Gifting money, putting your assets in a trust, and taking advantage of exemptions are just some of the ways to avoid getting hit with a huge bill. If you just go straight to probate with no plan, however, your estate is going to be taxed as is, and your loved ones will merely get what’s left.
How to Avoid This
As mentioned above, placing your assets in a living trust is a very, very beneficial option if you want to stay out of probate. A common misconception is that a last will and testament will keep you out of court—it won’t. The will still must go to probate to be executed by the court. The process is still time-consuming and costly.
A living trust is a fiduciary relationship that puts your possessions in a trust. When you die, your assets are given by the trustee to your beneficiaries, who you designate. This tool allows you to avoid probate and your beneficiaries to receive their assets immediately. Consult an estate planner to discuss this option and many others that will protect your property.
Tax season, happily, is ending soon, and if you haven’t used your exemptions, you should probably do so now. Tax returns are due April 17, while filing began on January 29, which means that the American people have had four months to either procrastinate on their taxes (or get them done).
If you haven’t used your tax exemptions, do it now, particularly when it comes to the estate tax and gift tax. The estate and gift tax exemptions work together, so it makes sense, in this article, to talk about them together with estate planning in mind.
The Estate Tax Exemption
An estate tax is a tax levied on a deceased person’s estate based on the estate’s net value. On an estate, there are two types of taxes that you need to be aware of: one on the income generated from the estate’s assets and another on the transfer of assets to the beneficiaries of the estate.
The estate tax exemption has been raised to $11 million per individual, which equals $22 million for a married couple electing portability. Before 2018, the estate tax exemption was maybe half of what the individual person could get. So, if you fall within this exclusionary amount, you can dodge the estate tax altogether.
Similarly, the gift tax has undergone some changes in 2018.
The Gift Tax Exemption
The gift tax exemption (also known as the gift tax exclusion) has increased in 2018. Before 2018, the limit was $14,000. But now, in 2018, the limit is $15,000. For married couples who split their gifts, the limit ends up being $30,000.
This gift tax exemption is especially valuable for families who are gifting money to help pay for college education. There is a special type of plan for gift money that is used to pay for college: the § 529 plan. A 529 plan allows you to gift five times the gift tax exemption limit in a single year and still be covered by the exclusion. So, if you were to give a gift of $75,000, you would not be taxed on it because it would be considered five gifts of $15,000. Were the limit still $14,000, the 529 would exempt $5,000 less.
The gift tax and estate tax exemptions have both gone up, and the increase in these exemptions will benefit the savvy filer who knows how to use them.
How the Two Work Together
Known as the “unified tax,” the gift and estate tax are the same rate and applied in the same way. The gift tax occurs when you’re alive, and the estate tax comes when you are dead. You can gift during your lifetime in order to avoid paying estate taxes when you are deceased. If you give gifts throughout your life and meet the exemption, you can reduce the amount of taxes that you will have to pay on your estate.
The other benefit to this idea of “gifting while you live to save on taxes when you die” is that even if you are taxed on your gifts, you have the option of paying those, because you’ll be alive. The estate tax will just take out a chunk of what your beneficiary will inherit.
Use it or lose it! Tax season is coming to an end, and if you are able to claim either of these exemptions, you should.
Pretty much everyone has heard of Bitcoin, but, for the few who haven’t, Bitcoin is a digital currency that, in order to get, you have to “mine.” You mine Bitcoin by running software that finds the key to open the digital Bitcoin lockbox, so to speak. When your software finds the key, you get twenty-five Bitcoins. This unusual process isn’t the only way to get the coins, however; you can also trade them for fiat (domestic) currency.
Bitcoin is super volatile, but it can be very profitable given the right circumstances. Its price can soar or drop, making it one of the more exciting assets out there. If you’re a Bitcoin investor, first of all, congratulations on being brave. Second, if you consider Bitcoin a part of your assets that you want to hang on to, you can protect them through estate planning.
Bitcoin in Your Estate Plan?
You’ve mined your gold and now want to protect it. Luckily, estate planning is a field that has kept up with this technological advancement, and you are able to protect your Bitcoin the way you would any other, more conventional, asset.
People tend to talk about Bitcoin’s price, not about what you do with it after you die. You store Bitcoin on a computer, whether in cold vault storage, a digital wallet, USB port, or some other digital means. This makes it different than, say, real property, which is held in the corporeal world.
Bitcoin does differ when it comes to trading, as you’re not asked to name a beneficiary when you buy or sell through an exchange, a practice that is common when trading other assets. The anonymity of Bitcoin (no identification required to buy or sell) is another problem, as there’s no information attached to this form of property. Your Bitcoin is just floating around in the computer world, and it needs to be tethered down somehow.
To make sure you’ve got your gold protected, you need to update your documents to include your digital currency, what you want done with it after you die (buy, sell, keep, etc.), and how to access it. If you don’t, this property will end up in probate court, where a judge will distribute it.
Things to Consider
One of the most important things to consider is making sure that your beneficiaries have the ability to access your bitcoin. Give them the private key, password, and whatever else they need to get to your bitcoin. List the different digital holdings you have and how to electronically get to them. If you have your currency locked up and die without giving people instructions on accessing it, it will be gone forever.
Secondly, make sure your beneficiary understands how to manage Bitcoin. Bitcoin, as stated above, is volatile, with tons of swings in price. It’s not for the faint of heart. You can lose or gain a lot of money, depending on what the market decides to do (true, that’s common with many assets, but it’s more pronounced with Bitcoin). Ensure that your beneficiary knows how to handle this currency, and leave them detailed instructions.
Bitcoin is an exciting new currency, and, like any other asset, it needs to be protected and maintained via documents in your estate plan. Consult an attorney today to find out how to best manage your Bitcoin.
March Madness is upon us! This is the most exciting season for college basketball fans, and everyone is waiting with bated breath to see how their brackets will turn out (for some of us, our answer came disappointingly early).
March Madness involves picking the right people to carry out a common goal, and, in that sense, planning your estate can be viewed a lot like picking your bracket. You need to have the right people in the right positions to carry out the goal of distributing your assets fairly after you die.
The Different Spots to Fill
There are many different spots to fill when it comes to your estate plan. There are different documents, appointees, and other means by which you can control your asset distribution.
Here are a few of these positions that you need to consider filling.
- Beneficiaries are people you designate to receive your assets. You want your things to go to people you trust. Select beneficiaries who will be able to handle the assets you transfer to them. For example, the cryptocurrency Bitcoin has been making the headlines lately. It is a digital currency that is volatile, tradeable and an asset that only experienced people should handle. If you’re selecting a beneficiary to get your Bitcoin, you want to make sure that they are knowledgeable about the currency and able to handle it. Think this carefully about all your assets.
- If you create a living trust, you will have a trustor (you), trustee, and beneficiary. You, the trustor, transfer property to the trustee, who becomes the nominal owner until they grant the property to the beneficiary. They grant the property to the beneficiary at your instruction, whether it’s when the beneficiary reaches 18 or at some other point. Pick a trustee that you know will follow your instructions down to the letter.
- In an estate plan, you can also include instructions on who will be the guardian of your minor children. We don’t need to tell you how important it is to pick the right person—you already know. This is another reason why estate planning is so important. If you have kids, you need to make sure that you have peace of mind on what will happen to them if you die.
- Power of attorney. Your power of attorney makes financial decisions for you in the event you are too incapacitated to make them yourself. In your estate plan, you can choose who this important person will be. After you pick the person, you can work with them to ensure they know your wishes and how to carry them out if something happens.
- Healthcare directive. This isn’t necessarily a position so much as it is a set of instructions. A healthcare directive details what a hospital should do for your medical care if you’re too sick to voice your own wishes. This way, you get the care you desire when you need it most.
Much like your March Madness bracket, you need to make sure that the people you choose are able to make the cut. Pick individuals who are responsible and able to handle the duties you give them and follow your directions precisely.
You’ve probably, at some point or another, seen those ads that offer DIY-legal services. These ads claim that, by using their site, you’ll be able to create your own will in less time, with far less expense. Or perhaps you’ve decided to buy a book on estate planning and go for it yourself. While it’s true that you’ll create something, and you’ll probably do it cheaply, do-it-yourself estate planning is a move that will cost you more in the long run.
See, while self-produced legal services may seem tempting, they have a lot of negatives. You won’t get lucky and make the perfect estate plan—luck’s got nothing to do with it. You need a qualified estate planning attorney to get the job done right. In this article, we’ll talk about the dangers and downsides of DIY-estate planning.
Mistakes are Easy to Make and Hard to Fix
Lawyers go to law school for years. Estate planners train in the specific field of estate planning law, and even they check their documents over once, twice, three times or more before finalizing them. Typos, confusion with the legal terms, and problems with the signing are all major areas where DIY wills go wrong.
Requirements can seem nitpicky when it comes to estate planning, but these requirements serve an important state interest: preventing fraud. When it comes to witnesses, things get a little tricky. For example, some state laws dictate that a witness to the will cannot be a beneficiary of anything in it, while other laws require witnesses to all sign in one another’s presence. DIY will-making sites, which often service all 50 states with a boilerplate form, are unlikely to tell you that.
The problem isn’t the screw-up, it’s the fact that the error won’t be caught until after you’ve passed on. That’s when your document will have to go through court because it was handled improperly. The court process will be long and difficult, and it’s unlikely that your plan will be carried out the way you wanted it. And, again, this witnessing slipup is just one example of many pitfalls that accompany estate planning.
The “One-Size-Fits-All” Misconception
DIY services are often one-size-fits-all, meaning that they are not specific to your particular estate. Every estate is different, and attempting to standardize it all into a “one hour or less” planning session just isn’t realistic.
For example, you may want to pass on savings bonds to your beneficiaries, or some other similar asset. These assets, however, do not generally pass through a will or living trust. If you try to designate them through those documents, it will become very messy. Coordinating the different assets with the right documents is something an experienced lawyer will be able to do.
Also, DIY estate planners often leave too much up to their family, simply trusting that their family members will “do the right thing” and intuit what the writers mean in their self-made will. However, if family members always cooperated all the time, there would likely be no needed for estate planning altogether. You want to make sure you have, in clear, precise, correct terms what you want done after you die. That will shield against family fights or schisms that could lead to your will be interpreted in a way you did not intend.
Basically, while a DIY service might be cheaper, it actually costs you more in the long run, as slipups and errors, as well as problems coordinating the documents, can lead to major issues with executing your estate plan after you die. The best course of action is to schedule an estate planning consultation.