Securing Your
Legacy
Do You Have a Will?
In reflecting over this past year's events, there were many wonderful moments that I shared with my family. Unfortunately, there were also a couple of "not so wonderful" moments too. It then occurred to me, especially after the "not so wonderful" moments that I did not have a Will in place incase anything should ever happen to me or my wife.
As a father of 2 small children, it is my responsibility to institute a Will to assure that they will be safe and well taken care of in case of a disaster. In consulting with other members of my family and friends, I realized that not having a Will has become common place.
However, the repercussions of not having a Will in place can be very catastrophic for those you love and care for. Especially if you have strong intentions for providing for those loved ones, once you can not. It is therefore to those of you that fall into this category of "have not" that I am writing this article.
I tried to cover all areas that I felt were necessary to define as well as areas of interest. As we look ahead in 2005, I urge you to please find the time to invest in a Will; for you and for your loved ones.
This article is dedicated to my friend, John "Jack" Dougherty, for his strength, perseverance and wonderful sense of humor.
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Wills and Trusts
Wills and Trusts are devices which you can use to provide for the distribution of your estate upon your death. Wills and Trusts are tools in a larger process of planning for the disposition and administration of an estate when the owner dies, known as Estate Planning. Estate planning includes drawing up a Will, setting up trusts, and minimizing estate taxes, perhaps by passing property to heirs before death.
For some reason, in today's society, there is an unfortunate, widespread misconception that Wills and Trusts are only topics of interest to the wealthy. In reality, an estate plan provides the legal mechanism for disposing of property upon death in a way that identifies your requests and the needs of your survivors, while at the same time diminishing taxes.
For many individuals, Wills and Trusts, can be used to plan for the management of affairs in the unfortunate case of issues regarding disability, and for the intensely personal medical alternative considerations as life nears its end. With this in mind and to many individual's surprise, Wills, Trusts and the topic of Estate Planning are therefore not just for the wealthy.
In order to decide whether a Will or a Trust is ideally suited for your needs relies on your situation. A living Trust is a popular alternative to the traditional Will, but you should weigh the advantages and disadvantages of each before deciding on one form or the other.
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Ok, So Let's
Begin
The simplest way to ensure that your funds, property and personal effects will be distributed after your death according to your wishes is to prepare a Will. A Will is a legal document designating the transfer of your property and assets after you die. Usually, Wills can be written by any person over the age of 18 who is mentally capable, commonly stated as "being of sound mind and memory." Other states may impose additional requirements.
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Everyone Should
Have a Will
Although Wills are simple to create, about half of all Americans die without one (or intestate). Without a Will to indicate your wishes, the court steps in and distributes your property according to the laws of your state. Wills are not just for the rich; the amount of property you have is irrelevant.
A Will ensures that what assets you do have will be given to family members or other beneficiaries you designate. If you have no apparent heirs and die without a Will, it's even possible the state may claim your estate.
Having a Will is especially important if you have young children because it gives you the opportunity to designate a guardian for them in the event of your death. Without a Will, the court will appoint a guardian for your children!
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Basic Elements of
a Will
The basic elements generally in a Will include:
- Your name and place of residence
- A brief description of your assets
- Names of spouse, children and other beneficiaries, such as charities or friends
- Alternate beneficiaries, in the event a beneficiary dies before you do
- Specific gifts, such as an auto or residence
- Establishment of trusts, if desired
- Cancellation of debts owed to you, if desired
- Name of an executor to manage the estate
- Name of a guardian for minor children
- Name of an alternative guardian, in the event y our first choice is unable or unwilling to act
- Your signature
- Witnesses' signatures
Two of the most important items included in your Will are naming a guardian for minor children and naming an executor
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Name a Guardian
In most cases, a surviving parent assumes the role of sole guardian. However, it's important to name a guardian for minor children in your Will in case neither you nor your spouse is able and willing to act. The guardian you choose should be over 18 and willing to assume the responsibility. Talk to the person ahead of time about what you are asking. You can name a couple as co-guardians, but that may not be advisable. It's always possible the guardians may choose to go their separate ways at some later date, and, if so, a custody battle could ensue. If you do not name a guardian to care for your children, a judge will appoint one, and it may not be someone you would have chosen.
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Name an Executor
An executor is the person who oversees the distribution of your assets in accordance with your Will. Most people choose their spouse, an adult child, a relative, a friend, a trust company or an attorney to fulfill this duty. You should expect your estate to pay an independent executor for this service.
If no executor is named in a Will, a probate judge will appoint one. Probate refers to the legal procedure for the orderly distribution of property in a person's estate. The executor files the Will in probate court, where a judge decides if the Will is valid. If it is found to be valid, assets are distributed according to the Will. If the Will is found to be invalid, assets are distributed in accordance with state laws.
Responsibilities usually undertaken by an executor include:
- Paying valid creditors
- Paying taxes
- Notifying Social Security and other agencies and companies of the death
- Canceling credit cards, magazine subscriptions, etc.
- Distributing assets according to the Will
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What is a Living Will?
A living Will is not a part of your Will. It is a separate document that lets your family members know what type of care you do or don't want to receive should you become terminally ill or permanently unconscious. It becomes effective only when you cannot express your wishes yourself.
If your state recognizes a power of attorney for health care, have one executed to authorize someone to act in accordance with your present intentions.
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What Transpires During the Execution Of Your Will?
A Will is the legal document that allows you to, upon your death; distribute your property to those you choose. A Will allows you to designate beneficiaries to receive specific items from your estate, and other beneficiaries to receive everything else.
For example, if you want your car, your house, or your antique stamp collection to be given to a specific individual or establishment, you appoint that person or organization as the beneficiary.
Another consideration includes, who's going to make sure that your antique stamp collection goes to the appropriate person? Well, this responsibility would fall to the executor of your Will (as I previously mentioned, the executor is the individual you authorize to accomplish your requests). A Will also allows parents of minor children the opportunity to nominate a guardian.
The court makes the final decision when appointing a guardian for your children after your death, but the court will usually accept your nomination. A guardian's legal responsibility is to provide for your child's physical welfare.
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What Transpires During the Execution Of Your Trust?
A trust that is created during the grantor's life time by the revocable (the grantor may make changes at any time prior to death) transfer of property to a trust, but retains the power to alter the trust. The trust assets avoid probate and publicity upon the death of the grantor.
All assets in the trust are treated as an incomplete gift and do not change the income, estate or gift tax status of the grantor.
Unlike a Will that is executed following a death, a living trust can actually start benefiting you while you are still alive. A living trust is a trust established during your life span. As mentioned previously, it is revocable, allowing you to formulate changes.
Essentially, you transfer all of your property into your living trust during your life span, and any omitted assets can be transferred into the trust at the time of death through the use of a simple process of merely pouring any assets not titled in your trust into your trust after death, a practice known as Pour-over Will. You should always make a Pour-over Will at the time that you establish your trust.
A living trust will be applied as the instrument to control your property before and after your death. In addition this tool will be used to provide how those assets, and the revenue earned by the trust, are disseminated after your death.
In the unfortunate event that you should become incapacitated or disabled, the trust will be in position to administer your monetary affairs, usually by a successor trustee, if you were serving as trustee.
A living trust is not subject to the official process of proving the validity of a Will, known as Probate, therefore, all provisions of the trust will remain private. Probate can also refer to the certificate, granted by the Family Division of the High Court of Justice, which states that the Will is authentic and valid, and that the executor of the Will has the right to administer it.
Another option to Living Trusts is what is known as, Joint living trusts. A Joint Living Trust simply combines the assets of a husband and wife into a single trust, governed by a single trust document. However, if estate tax minimization is important (for combined estates which will exceed $625,000), the joint living trust must be very carefully drafted with the help of an attorney in order to achieve the desired goals.
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What Are the Advantages of a Will?
- Although probate fees may be incurred at death, the cost of preparing a Will is substantially less than a living trust.
- The estate may not need to be probated when an estate consists entirely of joint accounts, payable-on-death accounts, and joint tenancy property.
- Probate should not be avoided in some estates. This is particularly true where disputes among heirs are likely or where claims or sizable lawsuits may be pending. Probate offers a statutory means to handle disputes among heirs and claims against an estate. These procedures are not available to the trustee of a living trust.
- Possible after-death income tax savings. If you are in a high income tax bracket and own assets that will continue to produce substantial income after death, probate may result in income tax savings because both the estate and any trust created in the Will are separate taxpayers and income can be split between them through proper planning.
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What Are the Advantages of a Living Trust?
- Lifetime management, including management during periods of incompetence, without court intervention.
- Privacy, as probate records are public.
- Probate is avoided and costs are generally lower after death. Routine probate-related legal serves are avoided. Depending upon the complexity of the estate and the organization and adequacy of your records, such fees can be substantial, especially if you own property in more than on state.
- Time savings, as probate can take a year or more. Most routine work in a living trust can be accomplished in a few weeks after death.
- Tax services generally are the same in both cases.
For comparative purposes, I have incorporated a brief chart listing out several differences between a Will and Living Trust. This chart is illustrated in the 'Lectric Law Library Stacks information board.
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