FAQ Probate Wills and Trusts
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In estate planning, preparation is wisdom along with legal guidance to make the best of your estate planning.
Q: What is estate planning?
A: Estate Planning is one of the most important steps any person can take to make sure that their final property and healthcare wishes are honored, and that loved ones are provided for in their absence. Though often overlooked or put off in favor of more immediate concerns, a comprehensive estate plan can resolve a number of legal questions that arise whenever anyone dies: What is the state of their financial affairs? What real and personal property do they own? Who gets what? Does a personal guardian need to be appointed to care for minor children? How much tax will need to be paid in order to transfer property ownership? What funeral arrangements are appropriate?
Q: What is an "estate"?
A: Your "estate" consists of all property owned by you at the time of your death, including: Real estate, bank accounts, stocks, and other securities, life insurance policies, personal property such as automobiles, jewelry and artwork. Certain jointly owned assets may not be part of your estate.
Q: How can an estate plan benefit you and your family?
A: Regardless of your age, or the size and complexity of your estate plan can accomplish the following: Identify the family members and other loved ones that your wish to receive your property after your death. Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as possible. Minimize the amount of taxes that will need to be paid in order for your property to pass to others after your death. Avoid the time and costs associated with the probate process by utilizing estate planning devices like living trusts and "payable on death" bank accounts. Dictate the kinds of life prolonging medical care you wish to receive should you be unable to make your wishes known when the time comes. Set forth the kind of funeral arrangements you would like, and how related expenses are to be paid.
Q: What is a will?
A: A will is written legal document with instructions for distributing an individual's assets after his or her death. A will must be formally executed as required by state law to be legally valid and enforceable.
Q: How can a person change his or her will?
A: A will is typically valid and effective until it is revoked, destroyed, or invalidate by writing a new will. Alterations to an existing will, such as crossing out language or adding a new provision, do not usually meet the legal requirements for executing a valid will and do not affect the terms of an existing will; however, changes or additions to an existing well can be made by codicil. A codicil is a document executed in compliance with applicable state law that modifies an existing will or codicil.
Q: What is a trust?
A: A trust is a legal entity created to hold assets for the benefit of another person or entity. There are many types of trusts that can be used to achieve a person's or entity's estate planning objectives.
Q: What is a living trust?
A: A living trust, also called an inter vivios trust, is a trust which becomes effective during the lifetime of the person who created the trust. during the lifetime of the person who created the trust. The person who created the living trust, called the creator, may change the terms of the living trust during his or her lifetime. Because a living trust typically contains instructions for managing trust assets during the creator's lifetime as well as instructions for distributing trust assets upon the creator's incapacity or after his or her death, a living trust usually eliminates the need for conservatorship or probate proceedings.
Q: What is probate?
A: Probate, also called proof of will, is the procedure by which a will's validity is proven to the satisfaction of the court. If the validity of a will is proven to the satisfaction of the court, the will's validity can not subsequently be challenged on the grounds of fraud, testamentary capacity, or under duress; however, the probate of a will does not affect an interested party's rights to question the construction of the will, the legal effects of the will's provisions, or the validity of the will's provisions.
Q: What property is included in an individual's probate estate?
A: An individual's probate estate (sometimes called probate property) includes only property subject to estate administration. In general, property owned by an individual at the time of his or her death or acquired by his or her estate after his or her death which passes to his or her heirs either by will or, in the absence of a will, by intestacy is included in an individual's probate estate. Examples of probate property are houses, cars, furniture, stocks, bonds, and bank accounts. Examples of property not typically included and individual's probate estate are life insurance policies, survivor annuities, and other so-called "will substitutes".
Q: What is the unified credit?
A: The unified estate and gift tax credit, sometimes called the unified credit or applicable exclusion credit, is the amount of an individual's estate that is exempt from federal estate taxes. Under current law, the rate of tax and the exempt amount of an individual's lifetime transfers (gifts) and gross estate at death are determined by the same schedule. The unified credit is applied to lifetime gifts and then to the gross estate at death.
Q: What is a conservatorship?
A: A conservatorship is a court procedure to take care of you or your estate in the event you become incapacitated. If you become incapacitated, another person can usually step in and make decisions if his or her mane is listed on your assets. The need for a conservatorship can often be eliminated with a durable power of attorney, a healthcare power of attorney, or both. These documents can also avoid costly and time-consuming court procedures to establish a conservatorship.
Q: What is an asset protection trust?
A: An asset protection trust, sometimes called a self-settled trust, is a trust created by a person for his or her own benefit and usually for the purpose of protecting his or her assets from creditors. The laws governing asset protection trusts vary by state, and some states have enacted statutes providing that "a trust created by a person for his own benefit shall be void as against his creditors." Restatement 2d Trusts 156, Illustration b.
Q: What is an irrevocable trust?
A: An irrevocable trust is a trust in which the creator transfers assets to a trust with no power to alter, amend, or revoke the terms of the trust at a later date. Unless the creator retains certain powers or benefits, income generated by the trust and distributed to a trust beneficiary is taxed to the beneficiary; all other trust income (undistributed or accumulated income is taxed to the trust's fiduciary.
Q: Does a joint bank account avoid probate?
A: A jointly owned bank account is not a recommended way to pass assets to loved ones after death for most clients. Joint accounts are often referred to as a poor man's will" due to the assumption that all of the money in a joint account will "automatically" pass to the joint owner(s) upon the death of one of the joint owner(s). This assumption is not accurate and often leads to litigation between loved ones that could have been avoided with assistance of a legal professional.
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