What is the difference between a will and a living trust?
A will is a legal document in which you, as the testator, declare who will manage your estate after you die. Your estate can consist of expensive items such as a vacation home, but it also includes small items that may have sentimental value as well such as photographs or family heirlooms.
A living trust is a written document designating someone to be responsible for managing your property. It can provide you with the peace of mind that comes from knowing that your assets and your heirs will be protected in the event that you unexpectedly become unable to handle your own financial affairs. It is called a living trust because it is established while you're alive. It is a revocable trust because you can change or dissolve the trust at any time and for any reason. Typically a living trust becomes irrevocable when you die. A trust is often preferred by people who want privacy regarding their assets and also want to avoid probate.
What happens if I die without a will?
If you die without a valid will, you'll become what's called intestate, which usually means your estate will be settled based on the state laws regarding inheritance. This may be problematic for some, especially if you want to exclude certain people from your will, or you have specific wishes for personal property to go to certain people. If you die without a will, your estate will go through the probate process.
What is Probate?
Probate is the legal process of transferring the property of a deceased person to the rightful heirs. Probate is the procedure by which state courts validate a will's authenticity. This clears the way for the executor to collect and pay debts, pay taxes, sell property, distribute funds, and carry out other necessary tasks regarding your estate. The process can be slow and expensive, and probate fees range from approximately 3%-7% of the estate's assets. Property left in a living trust is exempt from probate.
How do I leave specific items to specific heirs?
If you have specific items of personal property that you wish to leave to specific people, ask your lawyer to identify those items in your will. Many times, these items include family heirlooms, artwork, coin collections, and various other things of sentimental value.
Where should I keep my estate planning documents?
A waterproof and fireproof safe in your house is a good option. You can also keep your documents in a safe deposit box at the bank, however your family may need to obtain a court order to gain access. The probate court usually requires your original will before it can process your estate, so it is important to keep it in a safe place. Your attorney should keep two signed copies of your estate planning documents at their office in the event that the original gets lost or destroyed.
What are common reasons to change my will?
When you get married, your new spouse doesn't automatically become your primary heir. In many states they only inherit one half of your estate when you die so you need to identify in your will if you want to leave all your property to your spouse. When you become a parent you need to identify in your will how your children will be cared for and who will be their guardian if you die when they are still minors. When you approach middle age and your assets are growing, tax planning becomes more important. When you get divorced you will need a new will and trust. When you remarry, you may want to provide for your new spouse and also still make certain any children from your prior marriage are taken care of. When you move to another state you want to have your estate plan viewed in light of that state's laws. When your spouse dies, you will need a new will and living trust to accurately reflect your wishes moving forward.
What if I am not married but want property to pass to my significant other?
You need to identify this personal in your will if you want them to inherit a certain piece of property. Property jointly owned with a right of survivorship automatically passes to the other owner when one owner dies. You do not have to be married to have this type of ownership between two people.
How do i minimize estate tax?
This is tricky and depends on the federal and state estate tax laws if applicable at the time of death. There are marital deduction amounts that can be applied at the death of the first spouse, as well as exemptions that are applied at the death of the surviving spouse. If your estate tax is likely to approach the taxable level, one way to reduce the estate-tax hit is to give away assets before you die. You currently can give up to $13,000 a year to as many recipients as you wish without incurring what is called a gift tax. For married couples, the amount is $26,000 per recipient.
What is a durable power of attorney and healthcare directive?
A durable power of attorney is a document that identifies someone to manage your financial affairs if you become unable or incompetent to do so. An advance healthcare directive is a document that identifies who will make healthcare and end of life decisions for you if you become unable or incompetent to do so.
When is the right time to create my estate plan?
There is not a "right" time to create your estate plan. Many people wait until they are in their 50's or 60's to have these documents prepared, however this is often too late for some people. You never know when something may happen to you and it is important to have your estate plan in place at an early age. Speak with your attorney today about your current situation and determine what estate plan documents are necessary for you to have today.
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