What is an estate?
An estate consists of everything that you own upon ones death. (real property, cash, belongings, life insurance, stuff, IRAs, 401ks, etc.)
Isn’t an estate plan only for the rich?
No. As a matter of fact often times people who don’t have a lot of money need an estate plan more than those who do have a lot of money, for the simple reason that not having an estate plan can cost your heirs a hefty amount. Having an estate plan in place is one of the most financially-sound decisions a person can make.
Can an estate plan help reduce taxes on my estate?
Yes. A good estate plan gives the maximum allowed by law to your beneficiaries and the minimum to the tax. Especially since the federal law passed at the end of 2010 modifies the estate, gift and generation-skipping transfer taxes (GST) including a 35% top rate and a $5 million (federal) and $2 million WA state exemption.
What happens if I die without an estate plan (will or trust)?
If you die intestate (without an estate plan), your state’s laws of descent and distribution will determine who receives your property by default. These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none, to other family members. A state’s plan often reflects the legislature’s guess as to how most people would dispose of their estates and builds in protections for certain beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A will allows you to alter the state’s default plan to suit your personal preferences.
What if I have a domestic partner?
It is just as important – if not more important – to have an estate plan if you have a domestic partner. There are ways to plan your estate as a member of the GLBT community that will give you almost all of the same rights as a married couple that aren’t afforded to you without a plan in place.
Living trusts are only for people with kids, right?
While it’s true that it’s very important to have an estate plan if you have children, thinking that not having children is a reason to forgo having an estate plan is incorrect. As a single person – or even a married couple without children – not having an estate plan can cause many problems for your surviving loved ones. Often times without an estate plan, there is confusion, ambiguity or even upset as to what your true wishes were. In addition, your named beneficiaries (even if not your children) will have to go through the time and expense of the probate process. We recommend that everyone has a living trust in place for the peace of mind it provides all parties involved.
When should I plan my estate?
It is best not to procrastinate. We suggest you begin your plan long before you will need it; you should create your estate plan, if at all possible, while you are still healthy. When you are healthy and strong, you can make better decisions. If you wait until you are under extreme stress because you are ill or have other problems, you may not make the best decisions. If you begin your plan now, you will be able to make simple changes to it as your assets increase and your circumstances change. Take the time now to set up your estate plan and you will have the peace of mind knowing you are covered.
How do I know if my will is valid?
The maker of the will, known as the testator, must be at least 18 years old and be of sound mind, or mentally competent to make a will. This test of testamentary capacity is met if the individual is able to understand the nature of the act of making a will, appreciates the extent of his or her estate, and knows the family members and others whose interests will be affected by the will.
Also, the will must be signed by the testator or by another person in the presence of the testator at the testator’s direction. It must also be signed by two witnesses at the same time who witness the testator’s signing or the testator’s acknowledgement of the signature.
A holographic will is a handwritten will that is not witnessed. Ideally, the will is also signed and dated by the testator.
What is an estate plan?
It is a planning procedure that determines how someone’s assets, also known as their estate, will be distributed after that person dies. It might be as simple as signing a will, or it might be more complicated with living trusts, charitable remainder trusts, life insurance trusts, and other methods of avoiding probate and reducing taxes after death.
What will happen to my assets if I die without a will or living trust?
Surprisingly, most people do not have any estate plan in place. They believe that when they die their estate will be distributed to their children and/or spouse in the manner that they would have desired. Unfortunately, for those who do not have an estate plan, Washington has its own process. The Washington statutes that govern your estate may leave your children, spouse, or domestic partner with much less or much more than you wish for them to receive.
In addition, a guardianship of the estate will generally have to be set up to control any amounts that are left directly to your children (even if one parent is still living).
The naming of a guardian of the estate (someone to safeguard the children’s property) by a court is a procedure that may delay the timely transfer of assets to your children. Maintaining a guardianship (for the estate) is generally an expensive procedure that requires continual filings with the court (eating away the children’s assets over time). Lastly, the costs of probating your estate may be much higher than you would have assumed. For example, attorney’s fees and executor’s fees, which are based on the value of the gross estate, are calculated by a state mandated formula.
Why should I have a lawyer do my estate plan when I can have a paralegal or a typing service do it cheaper?
The initial cost should not be the only consideration because a poorly prepared estate plan may eventually prove to be much more costly than a properly prepared estate plan. Problems with the estate plan may not become known until after the decedent has died. It may be too late then to correct the problems. This could mean extended and costly litigation.
It breaks state law for paralegals to give legal advice. Due to the complexity of a will or trust, questions are bound to arise about the meaning of various parts of the document. Non-lawyers who attempt to answer these questions are breaking the law.
Couldn’t I just buy estate-planning software and do it myself, kind of like a Turbo Tax for estate planning?
Many people start out with software and find that they are too complicated. Some times these people say that although you might learn something from the software, they had not learned enough to proceed and be sure they had created a good document. Many thought this might lead to lawsuits and higher taxes after they had died.
Why should I have an attorney work with me on an estate plan?
This question is similar to the one answered above. There are legalities in certain states that a downloadable form may not meet. Many online companies that sell these forms are not overseen by an attorney. When you meet with a qualified estate planner, you know that all items will be discussed, and you will receive documents that are specific to your needs.
Isn’t my estate too small to do a living trust?
NO! One of the main reasons to do a living trust is to avoid probate. Probate takes a considerable amount of time and can be very expensive. Probate fees are calculated on the “gross” amount of your estate. Therefore, if you own a home or other appreciable assets, you are most likely an excellent candidate to do a living trust. This is one of the biggest misconceptions about living trusts.
If I do a living trust, do I also need a will?
Yes, but not the typical “will” most commonly referred to. The type of will that accompanies the living trust is called a “pour-over will.” The pour-over will states that any assets you have not put into your living trust (“funding” the trust) will be distributed according to your instructions in your living trust. However, the downside is that those assets will have to pass through the probate court process, but at least they will go to your named beneficiaries in your living trust. This is the reason to still do a pour-over will in conjunction with your living trust.
Do I have to file a separate tax return for a living trust?
No, not while the trustor(s) are still alive. You continue to file your taxes as you always have prior to the creation of the trust with your social security number. Since a living trust is revocable, it does not need a separate tax identification number and it does not file a separate tax return of its own.