Frequently Asked Questions
Below you can find common questions and answers. If you do not see a response to your question below, please contact us.
What does probate mean?
Probate means that there is a court case that deals with:
• Transferring the property of someone who has died to the heirs or beneficiaries;
• Deciding if a will is valid; and
• Taking care of the financial responsibilities of the person who died.
In a probate case, an executor (if there is a will) or an administrator (if there is no will) is appointed by the court as personal representative to collect the assets, pay the debts and expenses, and then distribute the remainder of the estate to the beneficiaries (those who have the legal right to inherit), all under the supervision of the court. The entire case can take between 9 months to 1 ½ years, maybe even longer.
How can you avoid probate?
A number of people use a revocable living trust to avoid probate. You must be sure that the trust has been fully funded which means to change the ownership or beneficiary to the trust. Other assets which can avoid probate are life insurance, retirement accounts, annuities and assets owned by joint tenants with right of survivorship.
Why do you want to avoid probate?
There are many reasons to avoid probate. Probate can include high fees and costs, significant delays in time, additional stress, and the probate process is public information. This means you will not be able to keep your family affairs and finances private. The public can access a list of all your assets, debts, beneficiaries, and how your assets were distributed.
What is living probate?
Living probate is the process when a probate judge appoints a conservator or guardian because a person is no longer competent. A person is usually no longer competent because of age, accident, or illness. This process can be avoided with the proper living trust planning and a proper power of attorney in place.
Estate planning is a process. It involves people — your family, other individuals and, in many cases, charitable organizations of your choice. It also involves your assets (your property) and the various forms of ownership and title that those assets may take. And it addresses your future needs in case you ever become unable to care for yourself. Through estate planning, you can determine:
- How and by whom your assets will be managed for your benefit during your life if you ever become unable to manage them yourself.
- When and under what circumstances it makes sense to distribute your assets during your lifetime.
- How and to whom your assets will be distributed after your death.
- How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself.
Many people mistakenly think that estate planning only involves the writing of a will. Estate planning, however, can also involve financial, tax, medical and business planning. A will is part of the planning process, but you will need other documents as well to fully address your estate planning needs.
As people, assets and laws change, it may be necessary to adjust your estate plan to reflect those changes.
Who should have an estate plan?
A lot of people think that estate planning is for the wealthy elite, those who have intricate plans for passing their assets to their heirs, or those who are terminally ill. This is not true. Every husband, wife, mother, father, grandparent, business owner, professional, or anyone else who has someone they care about should have an estate plan.
A revocable living trust is perhaps the most common type of trust.
Revocable trusts are fully revocable at the request of the trust maker. Therefore, assets that are funded (or transferred) to a revocable trust remain within the control of the trust maker. The trust maker can revoke the trust and have all assets returned. Revocable trusts are an excellent choice for probate avoidance, disability planning and privacy.
What are some of the benefits of a Revocable Living Trust?
Control your assets while you are alive
Have instructions in place in the event of disability
Maintain privacy while passing your property to your heirs
Simplify the administration of your estate as much as possible upon your death or
Avoid probate and guardianship
Keep your assets and private matters private
Control the efforts that can be used to save your life
Ensure that the person you select becomes the guardian of any minor children
Prevent mismanagement of your children’s or grandchildren’s inheritance
Structure an inheritance in such a way that it instills values and virtues
Reduce possible litigation by heirs that think they are entitled to more
Minimize income taxes
Avoid or minimize capital gains taxes on the sale of assets
Eliminate as much estate tax as possible
Estate Planning for Families with Young Children
Young families often do not think about estate planning because they are young and healthy. Many feel they would not be able to afford planning. It is important to remember that anyone can suddenly be taken by accident or illness. While young families do not expect to die, having a plan in place will help ease the loss for those left behind.
Estate planning will allow young families to have control over the following important items.
Naming an Administrator
An administrator is the person that will handle the financial affairs. This will include such things as identifying and paying bills, valuing and distributing assets, and hiring any necessary advisors or attorneys. This person should obviously be someone you can trust that will be able to take on these very important tasks.
Naming a Guardian for any Minor Children
Naming a guardian is easily the most important decision for a young family to make. If something were to happen to both parents, who would raise the children? If the parents do not name a guardian, the court will appoint someone. The court will name a guardian without knowing the wishes of the parents, and without knowing the children themselves or the other family members.
Providing Instructions for distributing your assets
Most couples intend for their assets to go to a surviving spouse if one of them passes away. If both parents pass away and they have young children, they would like their assets to be used to take care of the children. Some of the assets will be transferred automatically depending on how title is held and by beneficiary designations. Nonetheless, an estate plan is still important in case the other spouse becomes disabled or passes away.
Naming Someone to Manage Your Children’s Inheritance
Unless someone is named to manage the inheritance in the estate plan, the court will appoint someone to oversee the inheritance received by your children. The court will most likely appoint someone they are familiar with and that person will be a stranger to the family. This person will be paid for by the inheritance and the children will receive equal shares of the assets when they reach legal age. Parents generally prefer the children to receive their inheritance at an older age. Establishing a trust for the children’s inheritance allows the parents to accomplish this goal and they can select someone they know and trust to manage it.
Why a Power of Attorney is Important
Who will make decisions for you if you are not able to make them for yourself? Who will sign documents or make sure bills get paid?
Durable Power of Attorney
A carefully drafted durable power of attorney will allow you to name someone you trust to make decisions on your behalf should you become disabled and are no longer capable to make decisions for yourself. If you do not have a durable power of attorney and become mentally incapacitated, a judge in guardianship or conservatorship court would appoint a decision maker on your behalf.
Healthcare Power of Attorney
A healthcare power of attorney allows you to choose a friend or family member to make any necessary medical treatment decisions if you are unable to communicate your wishes. Like the durable power of attorney, a court will appoint a guardian or conservator of your person before any decisions can be made on your behalf. The Healthcare Power of Attorney saves you precious time as you are able to avoid the court process and allows you to choose the individual that will make some of the most important decisions on your behalf.
Health Care Directive
A living will or health care directive is used along with your health care power of attorney. The document directly notifies doctors that you do not wish to have any extraordinary medical measures taken that would cause pain or discomfort that would only prolong eventual death. This document can be delivered to your doctor by anyone if your agent is not available.
Does Everyone Need a Trust?
No. Not everyone needs a trust.
Generally, young married couples without significant assets (less than $150,000) and without children do not need a living trust so long as they intend to leave their assets to each other when the other spouse passes away first. If the young couple should pass away in a common accident, or shortly after each other, without a trust their estate(s) may be subject to probate.
For single persons who do not have significant assets (less than $150,000) and have very simple estate plans also do not need a living trust.
If a person believes that a court supervision over the administration of her estate would be beneficial, then she should not have a living trust.
Those who should have a living trust are generally married couples who have assets over $150,000 (particularly if she owns real estate) and minor children. Having a living trust in place in case of death or disability (incapacitation) will help one pass on property while avoiding costs and delays associated with probate. A living trust will help with the following 6 areas:
- Skip probate which will save your family time and money. The probate process can take 6 months to 2 years. Assets are usually frozen during this time which means that nothing can be sold or distributed without the court and/or executor approval.
- Quickly distribute your assets upon your death as generally no court action is involved.
- Possibly save on estate taxes. If you have substantial assets, a living trust can also reduce federal taxes. For married couples, a joint living trust can be very effective in reducing or avoiding estate taxes.
- Provide specific direction for family to follow upon your death and ensure that your family will be provided for quickly. A living trust can give you the peace of mind that your exact wishes will be followed upon your death; and that your assets are distributed accordingly and in a timely fashion. If you have minor children or grandchildren, a living trust gives you the ability to control the minors’ inheritances without the court intervening and the ability to keep assets in the trust until you the ages you wish your beneficiaries to inherit them.
- A living trust is not public record. This is unlike a will that is open to public view. Thus, all transactions involved with a living trust, including distributions, are both private before and after your death.
- Keep control of your affairs when you become incapacitated. In your estate plan, you have the ability to hand pick your successor trustee who will manage your finances and/or medical decisions upon becoming incapacitated.