Here are five steps you can take to make sure your estate plan reflects your current life and wishes.
Before you change any of your estate planning documents, you need to make sure you have the legal right to do so.
First, if you have a prenuptial or postnuptial agreement, make sure that it doesn’t prevent you from changing any aspects of your estate plan. Your agreement might also entitle your spouse to specific assets in the event of your death. Don’t make any changes to your estate plan that conflict with your prenuptial or postnuptial agreement.
Second, it’s common for the court to issue a temporary restraining order (TRO) in a divorce case. TROs can be used to prevent the spouses from making changes to their finances—including changes to beneficiary designations or revoking or changing a trust. In some states, a TRO is automatically issued when a divorce case is filed. In other states, a spouse has to request a TRO. If you violate a TRO or hide assets, the court can find you in contempt and issue sanctions against you, including fines, attorneys’ fees, and—in extreme cases—jail.
Start by revoking your old will (literally tearing it up is the best way) and making a new one. If you don't already have a will, now's the time to make one. It isn't difficult; you can make a simple will yourself, with a good software package or online resource, or you can hire a lawyer.
A will is used for:
All of these choices may be affected by divorce. Let's look at them one by one.
If you're like most people, if you made a will while you were married, you left everything to your spouse—probably not the result you want now. It's best to start fresh with a new will, naming new beneficiaries and alternate beneficiaries, who would inherit if your first choice didn't outlive you.
In most states, if you get divorced after making a will, any gifts that your will makes to your former spouse are automatically revoked. Usually, the rest of the will is not affected. For example, California law states that dissolution (divorce) or annulment of a marriage revokes any bequests (gifts) that your will made to your former spouse. (Cal. Prob. Code § 6122 (2024).)
But it's not a good idea to rely on state law. Not every state has a law like California's, and laws can change. Also, these laws generally don't take effect until you have a final decree of divorce—if you're still in the divorce process, gifts to your spouse are still valid.
In some states, gifts to relatives of your former spouse are also revoked by divorce. For example, Arizona law revokes gifts in a will made to anyone related to your former spouse by blood, adoption, or affinity (marriage). (Ariz. Rev. Stat. § 14-2804 (2024).) If your state has such a law and your will leaves property to your former spouse's child (your former stepchild), divorce would revoke the gift to the child.
Relying on state law also can create some uncertainty about what happens to the property you left to your former spouse, if state law revokes that provision of your will. The general rule is that the property passes as though your former spouse had died before you did.
So, if your will named an alternate (contingent) beneficiary for that gift, that beneficiary inherits. If you didn't name an alternate beneficiary, but did name a "residuary beneficiary," then that beneficiary inherits. If you don’t name a residuary or alternate beneficiary, the property passes under state law, as if there were no will, to your closest surviving relatives.
Those potential complications underscore the importance of making a new will. That way, it will be clear about who you want to inherit and who your alternates will be.
If you don't want your former spouse to inherit your property, you probably don't want your ex-spouse as your executor (the person in charge of your estate), either. But a court could appoint your ex-spouse who is named as executor in your will if you don’t make a new will.
In many states, divorce revokes the appointment of a former spouse to serve as executor of the will or trustee of a trust. The alternate executor, if you named one in your will, would serve instead. If you didn't name an alternate, the court will use state law to determine who will be executor. Still, don't count on state law—appoint a new executor and an alternate in your new will.
A key reason that many parents of young children make wills is to name a guardian to raise their children in the unlikely event both parents die. If you have kids under 18, that's probably one reason you want to make a will.
A court will appoint a guardian to care for a child only if both parents are deceased or unfit. (And courts find a parent unfit only if there is a serious and ongoing problem, such as a history of child abuse or addiction.) If you don't want your ex-spouse to raise your children because you don’t think your former spouse is a good parent, it's probably not something you can prevent.
In your will, however, you can name whomever you choose to serve as guardian, in case both you and the other parent aren't available. (It is, thankfully, rare for both parents to be unavailable.) If you feel strongly that the other parent shouldn't have custody of your children, write down your reasons in a letter and attach it to your will. It will at least give the judge something to consider.
Many married couples create trusts as part of their estate plans. These trusts sometimes are called “family trusts.” A family trust can be revocable or irrevocable.
The most common type of trust is a simple revocable living trust. A revocable trust can be used to give away your property when you die. You also can use a revocable trust to appoint a responsible adult as trustee to manage property that you want to leave to your children after you die.
Revocable living trusts tend to be more flexible than wills, and they have the benefit of avoiding probate. You also can revoke or change a revocable living trust while you're alive.
After they’re created, irrevocable trusts can't be revoked or changed—except in rare circumstances. People rarely use these trusts, and they are most common for extremely wealthy people who are trying to avoid estate taxes.
You and your spouse might have created a joint revocable living trust while you were married. As mentioned above, you may be prohibited from amending or revoking your trust while the divorce is pending if there’s a prenuptial agreement, postnuptial agreement, or TRO. But this doesn’t mean you’ll be stuck with the joint trust you made with your spouse. Living trusts often are dissolved during the divorce process. The spouses will decide how to separate the trust property in a settlement agreement, or a judge will determine how to divide the trust assets if the case goes to trial.
As a general rule, assets transferred to an irrevocable trust during your marriage aren’t marital or community property. Instead, the trust is the sole owner of the assets, so they aren’t subject to property division in a divorce.
As mentioned above, if you and your ex-spouse made a joint revocable living trust, most or all of the assets in the trust probably were divided in the divorce settlement—and the trust has already been revoked or dissolved.
If the trust wasn’t revoked or dissolved during the divorce, you should consider revoking it and creating a new one.
As important as your will is, it might not cover some of your most valuable assets. Many assets pass outside of a will, to beneficiaries named on paperwork provided by a bank or insurance company.
If the divorce is finalize—or you’re not prohibited from changing your beneficiary designations while the divorce is pending—be sure to update your beneficiary designations for:
To name a new person to inherit these assets, request new documents from your bank, brokerage company, or employer, and submit them as soon as possible.
Don't assume that state law (or even the terms of a divorce decree) will revoke any earlier designations you made naming your former spouse. Certain "qualified plans," such as 401(k)s, pensions, and employer-provided life insurance policies, are governed by a federal law called ERISA (the Employee Retirement Income Security Act). And ERISA says that a plan administrator must turn funds over to the beneficiary named in the plan documents—no matter what state law says. So, if your former spouse is still the named beneficiary, he or she will inherit unless you change the paperwork.
Powers of attorney (POA) are an important part of an estate plan. POAs give someone (called an “agent” or “attorney-in-fact”) authority to act for you if it's ever necessary. You should have two POAs: one for health care (medical decisions), and one for financial matters.
A financial POA gives your agent the authority to handle your finances. People most often use a financial POA to allow their agent to act for them if they are incapacitated. A POA that remains in effect when you’re incapacitated is called a “durable power of attorney.”
For example, your agent might use a durable financial POA to pay your medical bills, file your taxes, or sell your home. Because your agent will be handling your finances, you want to name an agent you can trust.
In many states, a divorce decree will terminate a POA that appoints a spouse as an agent. In states that don’t automatically terminate a POA after a divorce, you probably should consider revoking a financial POA that appointed your spouse as your agent. Whether you revoke a POA or state law terminates it, you can make a new financial POA that names a new agent.
Typically, there are two documents that let you control your medical care if you become incapacitated: a living will and a durable power of attorney for health care. Both of these documents might be called an “advance directive” or a “health care directive” in your state—or your state could have one document that includes both a living will and health care POA.
The living will is a written statement that explains to medical providers what type of care you want (or don't want) if you become incapacitated and are in an end-of-life situation. Divorce itself shouldn’t affect this document because it doesn’t give power to an agent to make decisions for you. But, if your wishes change at any point—including after a divorce, you always can make a new living will.
The health care POA is similar to a financial POA in that you appoint an agent to make decisions for you. A health care agent will have the authority to make decisions about your medical treatment if you are incapacitated. If you are conscious and able to communicate decisions, your agent won’t have the power to override your medical choices. And if you’ve prepared a living will, your agent won’t be able to make decisions that contradict your living will.
If you named your spouse as your health care agent, your state’s law might terminate the health care POA when your divorce is finalized. Otherwise, you can revoke your health care POA on your own. Either way, it’s a good idea to create a new health care POA that names a new agent.
]]>A Lady Bird deed is a deed that names a beneficiary (inheritor) to receive your home when you die, but allows you to retain a life estate in the deed, meaning the home is yours to use as you please during your lifetime. However, the Lady Bird deed differs from a basic life estate deed in one important way: When you make a Lady Bird deed, you keep the right to revoke or change the deed during your lifetime. For this reason, Lady Bird deeds are sometimes also called "enhanced life estate" deeds.
People who make Lady Bird deeds primarily use them to preserve financial eligibility for Medicaid while keeping assets in the family. If you use Medicaid to pay for medical or long-term care costs such as nursing homes, the state can recover those costs from your assets when you die—a process called "estate recovery." Lady Bird deeds are sometimes used to transfer a home to a loved one and protect it from the reach of the state. However, this works only in some states, and not all.
Lady Bird deeds are used in only a handful of states. Medicaid recovery rules vary by state, and Lady Bird deeds don't always work to protect your home from estate recovery. In some states, the outcome might be unclear. If you're interested in creating a Lady Bird deed and don't see your state on the list below, speak with a local estate planning attorney to find out more about whether Lady Bird deeds are used in your state.
Florida
Texas
Michigan
Vermont
West Virginia
Local custom can be important; in some places, for example, title companies may be reluctant to insure property transferred using a Lady Bird deed.
Even if you do see your state on this list, the extent to which Lady Bird deeds are used might still vary. For example, Lady Bird deeds are quite common in Florida and Texas, but might be less so in one of the other states.
With a standard life estate deed, you could name a beneficiary to inherit your property while you keep ownership of it for your lifetime, but only with significant restrictions. You wouldn’t have the right to sell or mortgage the property, and you might also be liable to the beneficiary you named if you greatly decreased the value of the property—for example, let a house fall into serious disrepair.
By contrast, an enhanced life estate deed (the Lady Bird deed) lets you:
To understand how Lady Bird deeds might protect your real estate from Medicaid recovery, it's necessary to first understand how Medicaid works.
Medicaid benefits are intended for people who can’t otherwise pay for their medical care. So, if you apply for benefits, you must typically show that you have very little in (1) income and (2) assets. (Note that California eliminated its asset limit starting in 2024.)
Some assets, however, aren’t counted for purposes of Medicaid eligibility. Typically, your primary residence isn’t counted when Medicaid adds up the value of your resources. It may be completely exempt, or exempt up to a certain value. For example, if your state exempts residences up to $750,000, then any value above that amount will be counted as a resource belonging to you.
When you apply for benefits, you must also disclose any assets you’ve given away in the previous few years, called the look-back period. Otherwise, people could simply give away their valuable assets to family members, claim poverty, and receive Medicaid benefits. If you’ve given away valuable property in recent years (usually five years), it may disqualify you from receiving benefits for a certain period of time.
Lady Bird deeds, however, are not considered a transfer that you have to disclose to Medicaid. That’s because you keep complete control over the property. So, if your state exempts the value of your residence when determining whether you qualify for Medicaid, your continuing ownership won’t make you ineligible for benefits.
There’s another Medicare-related reason to use a Lady Bird deed: It can help your family members after your death. If you receive Medicaid benefits during your life, then after your death, the state will try to recover the costs from the assets you leave behind. Federal law requires every state to have such a Medicaid estate recovery program.
Some states only go after property in your probate estate—that is, the property that goes through probate after your death. Others go after any property you leave, whether or not it goes through probate. For example, a state might make a claim on a payable-on-death bank account that goes (without probate) to your son at your death.
In other words, your family will get to inherit your property without repaying the government for the benefits you received if:
As discussed above, only a handful of states use Lady Bird deeds. Are there alternatives?
One significant alternative is the transfer-on-death deed. The transfer-on-death (or TOD) deed is often a simpler and more readily accepted way to avoid probate than a Lady Bird deed. In addition, the TOD deed is available in about 30 states.
However, if you're interested in the Medicaid-related benefits of a Lady Bird deed, you'll need to talk to a local lawyer to find out whether a transfer-on-death deed in your state can accomplish your Medicaid goals.
]]>In a will, you state who you want to inherit your property. You also can use a will to name a guardian to care for your young children in case something happens to you and the other parent.
If you hold your property in a living trust, it won't have to go through probate, a time-consuming and expensive process. Plus, a trust gives you more flexibility than a will—especially when deciding how your property should be distributed and managed after you die. Even if you have a trust, you should still consider having a will to handle property that you don’t place in the trust.
Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration ("living will") and a power of attorney for health care. A living will says what treatment you want to receive. A power of attorney for health care lets you name someone to make medical decisions for you if you can't. (In some states, these documents are combined into one, called an “advance health care directive.”)
With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact. Despite the name “attorney-in-fact,” this person doesn’t need to be an attorney.
You should name an adult to manage any money and property your minor children might inherit from you. This can be—but doesn’t have to be—the same person as the personal guardian you name in your will. If you have a living trust, your successor trustee—the person who manages the trust after you die—will manage any trust property you’ve left for your children.
Naming a beneficiary for bank accounts and retirement plans makes the account automatically "payable on death" to your beneficiary and allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.
If you have young children or own a house, or you might owe significant debts or estate tax when you die, life insurance might be a good idea.
The overwhelming majority of estates won't owe federal estate taxes. For deaths in 2024, the federal government will impose estate tax at your death only if your taxable estate is worth more than $13.61 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.
Rather than a funeral prepayment plan, which might be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.
Make your end-of-life wishes known regarding organ and body donation and disposition of your body—burial or cremation.
If you're the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.
Your attorney-in-fact and/or your executor (the person you choose in your will to administer your property after you die) might need access to the following documents:
Keeping your documents organized will be a great help to your survivors.
You can create a complete estate plan, quickly and easily, with WillMaker & Trust.
]]>For example, many states have statutory durable powers of attorney forms written into their laws. In these states, you ideally should be able to go into the statutes, copy the form, and complete it. As an example, see the Ohio statutory power of attorney at Ohio Rev. Code § 1337.60 (2024).
States might also provide more user-friendly versions of the form outside of the statutes (often on the state’s website)—for example, here is the Illinois statutory power of attorney for health care.
The easiest way to find a statutory form in your state is to do an internet search for the name of your state and the name of the form. For example, you could search for "California statutory will." If you get too many results from non-state sources, try limiting your search to just ".gov" sites.
The advantages of using statutory forms are that it’s free and that you’ll be certain that the form itself meets legal requirements.
However, the disadvantages of using statutory forms are numerous and more serious. Because legislatures design statutory forms for the masses, they are one-size-fits-all and rarely flexible enough to meet individualized needs.
In contrast, a lawyer usually can craft a document that takes your unique situation into account. Also, statutory forms might not come with instructions that explain how to correctly fill out and finalize the form, so you will probably need to educate yourself about how the form works, how to sign it, and other legal or practical issues.
While governments provide statutory forms for convenience and clarity, they are rarely mandatory. That is, in most cases, states also allow you to use non-statutory forms. So even though your state may provide a statutory will or power of attorney, a form drafted by an attorney or produced with form-making software will also be acceptable—provided that it adheres to the requirements for non-statutory versions of the form.
If you have any trouble, questions, or concerns about using a statutory form, see a lawyer for help.
]]>People with dementia eventually lose memory, cognitive ability, and language. If you are concerned that you or someone you love has dementia, it's very important to get legal documents in place before it’s too late. You can't make a legally valid will, power of attorney, or other legal document unless you are of sound mind—that is, you must understand your family circumstances; act of your own free will; and understand the consequences of your choices.
Here are the key documents to move forward with.
Having a financial durable power of attorney (DPOA) in place can be a huge help to you and your loved ones. This document lets you choose someone—who's often called your “attorney-in-fact” or your “agent”—to have control over your financial assets if it's ever necessary.
You can give your agent authority immediately. You also can create a type of DPOA called a “springing power of attorney” that gives your agent authority to act only when a doctor certifies that you’re mentally incapacitated.
Many people choose to make the DPOA effective immediately, trusting that the person they've chosen won't act unless it's necessary. If you want to use a springing power of attorney, be aware that they can have several drawbacks—including the potential that your agent won’t be able to act quickly when needed.
A DPOA is important if there’s a long period of incapacity, as there often is with dementia. (People with Alzheimer's disease live an average of four to eight years with the disease, according to the Alzheimer's Association.) For instance, your agent could pay bills for you from your checking account. Your agent also could use the DPOA to sell your assets to help pay for your expenses.
Without a DPOA, no one—not even your spouse, or the executor you've appointed in your will—would have authority to take care of all necessary financial tasks, such as paying bills, managing retirement accounts, or selling assets. However, your spouse would have authority over most accounts owned jointly with you—for instance, a joint checking account.
If you don’t have a DPOA and become incapacitated, your family members would have to go to court and ask that the court appoint a conservator or guardian to handle your money. Going forward, the conservator would be subject to court oversight. The whole process is expensive, intrusive, and time-consuming.
Your health care directives are the next most important documents to create when you're planning for the possibility of dementia. In these documents, you provide directions to your health care providers about your wishes for end-of-life care, and you name someone to carry out your wishes if you can't. These documents can give enormous relief to the family members who must make difficult decisions about your care when you are unable to do so. If they have clear direction from you, it will make their lives far easier at a difficult time.
There are two parts to a health care directive. They go by different names in different states, but their functions are the same:
A living will allows you to express your wishes for end-of-life care. Living wills typically cover pain relief and medical treatments such as surgery, resuscitation, ventilators, and feeding tubes. You can go into as much (or as little) detail as you wish. For example, you might simply say that you want everything necessary to relieve pain (palliative care or comfort care) but that in certain circumstances you don't want to receive extraordinary measures such as CPR.
With a health care power of attorney, you give someone you trust the authority to make medical decisions on your behalf if someday you no longer can. This person, called your proxy or agent, also will have access to your medical records. Your agent will be in charge of making sure the wishes set out in your living will are honored.
Once you've taken care of the documents that give someone authority to make decisions for you if you're ever incapacitated, the next step is to take care of leaving your assets to the people or organizations you want to inherit them.
It's a good idea for most people to have a simple will, which leaves your assets to the beneficiaries of your choice. In your will, you also name your executor (personal representative), the person who will carry out your wishes after your death.
It's easy to make a simple will; many people do it without hiring a lawyer. But some people—like people who have significant wealth or children with special needs—often need more complicated estate planning documents and might need help from an attorney.
For many people, significant assets pass not through a will, but under beneficiary designations you make in other documents. For example, if you enrolled in a retirement savings plan where you work or bought life insurance, you probably named a beneficiary on a form provided by the plan administrator or the insurance company.
It's also common to name payable-on-death (POD) beneficiaries for bank accounts, to register vehicles in transfer-on-death form (in states that allow this), or to name a beneficiary for a savings bond. It's a good idea to review those designations and think about any changes you might want to make. You can’t make these changes in your will; instead, ask the retirement plan administrator, bank, insurance company, or other institution for a new beneficiary form.
A revocable living trust, like a will, lets you leave your assets to whomever you choose. The advantage of a trust is that after your death, your beneficiaries don't have to conduct a probate court proceeding before wrapping up your affairs.
A trust can also help with planning for dementia, because your successor trustee (the person you name to take over the trust after your death) can take control of trust assets if you become incapacitated. The trustee's authority extends only to assets held in the name of the trust, however. So, it's a good idea to have a DPOA even if you have a trust because your trustee won't have authority to manage assets that aren't owned by the trust.
To make any of these documents, you can use Quicken WillMaker & Trust software, which lets you tailor documents to your situation and your state's laws. If you feel uncomfortable making your own documents, you can speak with an estate planning attorney who is licensed in your state.
If you or a loved one needs help with dementia, the federal government has a list of resources. There are also state and local agencies and nonprofit organizations like the Alzheimer's Association that can provide resources.
]]>Learn about finding a probate lawyer.
There are essentially two ways to get help from a lawyer when you’re an executor: You can turn a probate case over a lawyer, or you can take on primary responsibility for handling the probate yourself and consult a lawyer only when you have questions or need limited help.
The conventional way to handle a probate is to turn it over to a local lawyer who’s experienced with this area of the law. You can’t exactly sit back and relax—it’s still your responsibility to gather and safeguard assets, pay bills, and take inventory, just for starters. But you might feel better knowing that an expert is handling all the court-related tasks, which in a probate usually means preparing and filing paperwork. (Unless there’s a dispute, which is rare, there won’t be any adversarial proceedings in the courtroom.)
If you want a lawyer to take responsibility for shepherding the estate through probate, you can still do some work yourself. Especially if you’re paying by the hour, pitching in can help keep costs down.
Wrapping up an estate always involves sorting through the deceased person’s papers—lots of them—and making phone calls to various agencies and institutions. You can take on a lot of this work yourself; a lawyer isn't required. Talk to the lawyer and make sure you’re both clear about who is responsible for what tasks, so effort isn’t wasted and important tasks aren’t neglected. For example, make sure you know who is going to:
Learn more about an executor's duties.
If you’re willing to take primary responsibility for handling the probate yourself, you might find a lawyer who is open to giving you limited legal help (sometimes called “unbundled services”) instead of handling all aspects of the probate case. For example, you might hire a lawyer just to answer specific questions during the probate process.
The vast majority of probate cases are just paperwork. If no one is fighting over the estate, and especially if your court provides fill-in-the-blanks probate forms, as many do, you might be able to handle most of the probate yourself.
Be sure that both you and the lawyer are clear on what you’re each agreeing to handle, and put your agreement in writing.
It’s a good idea to be in touch regularly with beneficiaries; otherwise they might not understand what’s going on and how long the process takes. Sending periodic letters or emails is an easy way to keep folks up to date. You might ask the lawyer to look at your communications before you send them to make sure you’re getting everything right.
Whatever your arrangement with the lawyer, there are a few things you can do to make your working relationship productive.
Get the lawyer needed information. You’ll need to provide inventories and documents such as deeds, insurance policies, and tax returns. If you don’t, the case will be delayed.
Ask questions. Don’t be afraid to ask about anything you’re unsure of. But try to be efficient when you communicate. (If you’re being billed by the hour, this will save you money.) If you can, save up a few questions and ask them during one phone call or visit to the lawyer. But if you're ever unsure about taking a particular action that will affect the estate—for example, you want to give a needy beneficiary his inheritance months before the probate case will close—get legal advice before you act.
Keep on top of how the case is going. The beneficiaries will probably call you, not the lawyer, when they get impatient about collecting their inheritances, so you'll want to be able to explain what's happening with the case and when they can expect their money. The lawyer can give you a list of important dates—for example, the cutoff date for creditors to submit formal claims and the final probate court hearing date.
]]>Some parents have made large loans to their children, intending to forgive the repayments each year, in an amount equal to the annual gift tax exclusion amount. The IRS, skeptical of these arrangements to start with, makes it difficult for families to prove that they are bona fide loans, not gifts in disguise. But the bottom line seems to be that if you are meticulous about your paperwork, this strategy can be successful.
The IRS starts with the presumption that a transfer between family members is a gift. You can get around that presumption by showing that you really expected repayment and intended to enforce the debt. In making that determination, the IRS pays attention to whether or not:
In the case that established the above considerations, a woman had loaned $100,000 to each of her two sons. They signed promissory notes, and the loans were duly recorded in the books of the family's business, but there was no deadline for repayment.
One of the sons made a $15,000 repayment. But their mother never demanded any payments, and each year she sent a letter to the sons, stating that she had forgiven (canceled) some of the debt.
The IRS ruled, and the federal Tax Court agreed, that the loans had actually been gifts. The mother ended up owing gift tax on the whole amount, and she missed out on the years when she could have been (and thought she was) making tax-free annual gifts. (Elizabeth B. Miller, Tax Court Memo 1996-3.)
Don't try this yourself. If you want to set up an elaborate plan for forgiving debts, form is everything. See a lawyer who's experienced in setting up such deals so that they pass IRS scrutiny.
The IRS won't be fooled if you give property to one person but it's obvious that the intended recipient is someone else. For example, the IRS went after the estate of a man who had given annual gifts of stock to his son, daughter-in-law, and grandchildren, classifying each gift as exempt because of the annual gift tax exclusion. For 14 years, the daughter-in-law had faithfully transferred her stock to her husband on the same day she received it. The IRS ruled that the stock was really for the son, and that the gifts to him had exceeded the annual exclusion amount. (Estate of Joseph Cidulka, Tax Court Memo 1996-149.)
The gift tax problem doesn't affect the probate-avoidance aspect of the transaction—the stock was out of the man's estate. But shaving a little off your probate costs may be much more trouble than it's worth if it lands you in a skirmish with the IRS.
If you give it, give it. Don't try to hang onto any control over what you've given away, or you'll turn your gift into something else.
EXAMPLE: Carl deeds his house over to his son, Ishmael, but retains the right to receive rent from the property. The transaction is not a legal gift. When Carl dies, the house will still be part of his estate, which means it may be subject to estate tax.
Make a paper trail. If you think a gift might be questioned later, write up and sign a little statement that explains your intent to make a gift. It will be evidence that you meant to make a gift, if that's ever needed. Such a statement can't turn what is really a loan into a gift, and other evidence may contradict and finally outweigh it—but it can't hurt.
If you still own assets in the United States, one of the first things you'll want to consider using is a power of attorney to name an "attorney-in-fact." An attorney-in-fact (often called an "agent") is someone you empower to make financial decisions on your behalf while you are out of the country. Ideally, this person will be physically near your assets to help you manage them from abroad.
You should be careful about whom you choose to be your agent. Select someone you trust to manage your finances. Because a power of attorney gives your agent the authority to act in your place, a dishonest agent could use the power of attorney to steal from you.
You can give your agent the power to:
Your power of attorney document may include specific instructions to the person you choose for this role. For example, you could instruct your agent to provide you with a summary of your finances, prepare accountings for you, or check with you before making major decisions.
Your agent will be legally required to act according to your instructions and in your best interests. So, you will still control your finances, but you’ll do so through your agent.
The laws that regulate health care differ in every country, so to make sure you get the medical care you want, make health care directives in your home state and in your new country. In your health care directive, you can name an agent to make medical decisions on your behalf and you can also describe the kind of medical care that you want (or don’t want) if you can’t speak for yourself. You can usually get health care directives in a local medical facility, but if you can’t find one, contact a local attorney to draft these documents for you.
Wherever you can, name your agent as your emergency contact and put that person’s contact information in places where it would be found in an emergency: in your purse or wallet, on an emergency contact card, in your day planner, in your cellphone, and in other documents you carry with you or in your vehicle. If you have a primary health care provider, give that doctor the name and contact information for your emergency contact and a copy of your health care directive.
You might have strong feelings about where you would like to have your funeral and where you want to be buried. You might decide that your new country is your new home, or you might decide to return stateside.
Consider making these arrangements during your lifetime, rather than delegating the task to someone who might be in another country. You can either make arrangements—including plans for shipping your body to the United States if you desire—directly with the service providers or purchase an insurance policy for this specific purpose. Share this information with the executor of your will, who will likely carry out your final wishes after death.
Estate planning is often more complicated for expats who own property in more than one country.
The kind of will you need might depend on where your property is located. If you own property only in the United States, you can use a will designed for use in the United States. If you own property only in your new country, you need a will that is valid in that country. However, if you own property in more than one country, you might consider more sophisticated options like an international will or multiple wills. In that case, you will likely need the assistance of one or more attorneys.
An international will is designed to be used in multiple countries. Only countries and legal jurisdictions that have adopted the Washington Convention consider international wills legally valid. These include:
Determining whether a country accepts international wills can be confusing. Some countries signed the Washington Convention but technically don’t recognize international wills because they haven’t passed laws to formally accept them. The International Institute for the Unification of Private Law (UNIDROIT) has a helpful list and a map showing which countries have signed the Washington Convention or enacted laws to recognize international wills.
International law can be complicated, so it’s best to contact an attorney who is familiar with international wills before deciding to use one. Some estate planning lawyers in the United States are familiar with these wills, so you might be able to have a local attorney prepare this type of will without having to learn about the laws of your new country or dealing with language barriers.
A multi-jurisdiction will covers property in several different jurisdictions. This type of will must be carefully drafted so that the wording doesn’t cause problems in either country, so get help from an attorney who has experience drafting these kinds of wills for your countries. Sometimes an attorney in one country might work together with an attorney in another country to make sure the will properly addresses the laws and property in both countries.
A situs will works together with your primary will. Your primary will is based on the laws of the country where you live and it covers the property that you own there.
Your situs will covers the property you own in other countries or jurisdictions. This can be a useful strategy in case the country where some of your property is located doesn’t recognize your primary will.
Additionally, some countries will allow someone to be named an executor only if they are a resident of that country. So, you can name a local executor for your situs will if the executor of your primary will lives somewhere else. A situs will must comply with the requirements of that specific jurisdiction, so it’s important to have an attorney familiar with the laws of that country draft the will.
Even if you don’t need to worry about U.S. federal estate taxes (which affect only the very wealthy), you might be subject to estate tax in your new country. Some countries base estate taxes on your domicile (where you currently live) rather than your official country of residence. Get help from a financial adviser or tax specialist to learn about your potential tax liability. Also, ask your American attorney about whether you might still be subject to U.S. income and capital gains tax laws while living abroad.
Putting your property in a living trust might help minimize estate planning complications because property that passes through a trust doesn't have to go through probate. The probate process is often complicated, time-consuming, and expensive—even for people who don’t have property in multiple countries.
You can also use a living trust to provide clear instructions on what should happen to your property after you die or become incapacitated while you’re living abroad. Further, using a trust also might help you avoid some of the drawbacks of confronting the laws in your current country. For example, some countries have forced heirship laws that require you to split your estate by percentages between certain family members. If your trust owns your property (instead of you), you might be able to escape these laws.
Trust laws vary by country, and every trust document will be based on the laws of a specific country. For property you own in the United States, use a trust based on the laws of the state where that property is located. Talk to an attorney in your new country to create a valid trust there, or get help from an experienced international attorney to make an international trust that addresses property in more than one foreign jurisdiction.
If you live abroad, talk to a local attorney about your situation and to find out what kind of estate planning you might need. Depending on the property you own, you also might need to get advice from an attorney in the United States. These lawyers can help you determine which rules might apply to your situation and can help create a plan that works to protect you and your property.
]]>You can hire a lawyer to handle the whole probate case or just help you do it. (See "Working With a Probate Lawyer.") Either way, keep in mind that as executor you don’t pay the probate lawyer’s fee from your own pocket. You can use estate assets to pay the bill, before inheritors get anything.
Lawyers usually use one of three methods to charge for probate work: by the hour, a flat fee, or a percentage of the value of the estate assets. Your lawyer may let you pick how you pay—for example, $250 per hour or a $1,500 flat fee for handling a routine probate case.
Many probate lawyers bill clients by the hour. The hourly rate will depend on how much experience and training the lawyer has, where you live, and whether the lawyer practices in a big law firm or a small one. Small town rates may be as low as $150 to $200 per hour. In a larger city, a rate of less than $250 per hour would be unusual. Big firms generally charge higher rates than sole practitioners or small firms, unless a small firm is made up solely of hot-shot specialists.
A lawyer who does nothing but estate planning and probate will likely charge a higher hourly rate than a general practitioner. The advantage to you is that a specialist should be more efficient. Someone who has steered many probates through the local court has probably learned all the local rules and how to prepare and file documents the way the court likes them.
If your attorney employs less experienced lawyers (associates) and legal assistants (paralegals), their time should be billed at a lower hourly rate. In firms that do probate work, it’s common for legal assistants to draw up the routine paperwork.
Many lawyers bill in minimum increments of six minutes (one-tenth of an hour). So, if your lawyer (or a legal assistant) spends two minutes on a phone call on behalf of the estate, you’ll be billed for six minutes.
It’s also common for lawyers to charge their probate clients a flat fee. That way, they don’t have to keep down-to-the-minute records of how they spend their time. (Lawyers don’t like keeping track of their “billable hours” any more than clients like paying for all those six-minute intervals.) And because they have a good idea of how long an average probate will take, they can charge a fee that will be close to what they would get if they billed by the hour.
If you’re billed this way, you don’t have to worry about running up the bill every time you want to ask a question of the lawyer. It can be a more relaxed experience.
If you agree to pay a flat fee for legal work, make sure you understand what it does and does not cover. For example, you may still have to pay separate court filing costs, fees to record documents, or appraiser’s fees.
The worst way to pay a probate lawyer—from the estate’s point of view—is to pay a percentage of the value of the estate as the fee. This is customary only in a few states. And even in those states, lawyers are not required by law to collect a percentage fee. You can and should try to negotiate an hourly rate or flat fee with the lawyer. But many lawyers prefer the ”statutory fee” because it’s usually very high in relation to the amount of work they have to do.
State law allows lawyers to charge a set percentage fee in:
Arkansas |
Iowa |
California |
Missouri |
Florida |
Wyoming |
These fees are often high under the circumstances because they are calculated based on the gross value of the probate assets, not the net value. For example, if you’re handling an estate that includes a house worth $300,000, with $175,000 left on the mortgage, the lawyer’s fee would be based on $300,000—not the $125,000 of equity the estate actually owns. And the probate paperwork for a transferring a $1 million house is basically the same as it is for transferring a $150,000 house—so why should the fee be so different?
You can get an idea of how high these fees are by looking at California’s statutory fee schedule. For “ordinary” services, a lawyer can collect:
(Cal. Prob. Code § 10810 (2024).)
Using this system, probating a typical California estate with a gross value of $500,000 would cost $13,000 in legal fees—a very large amount given the amount of legal work involved. The estate would do much better if it paid the lawyer by the hour.
No matter what kind of fee arrangement you have, get the terms in writing. Some states require certain lawyer-client fee agreements to be in writing; whether or not that’s true where you live, it’s a good idea. As with most agreements, the most valuable part is not having all the terms on paper—it’s the discussion that leads to writing them down.
The agreement should cover:
Having a written fee agreement can help you dispute any questionable bills from your attorney. If you ever question your attorney’s fees, it’s important to dispute the fees with your attorney promptly. (See "Attorneys' Fees: The Basics" for more information about fee agreements.)
]]>This type of trust has many limitations. It doesn’t work for past creditors, for all assets, in every state, or in all circumstances. But if you have concerns about possible future liabilities and you have assets you want to protect, ask your lawyer whether a self-settled asset protection trust might work for you.
A self-settled asset protection trust is a complex trust used to shield assets from future creditors. This type of trust is also known as a “domestic asset protection trust.”
With a self-settled asset protection trust, a grantor—the person creating the trust—signs a trust document and permanently transfers assets into the trust. At that point the trust is irrevocable—the transfer to the trust is permanent and the terms of the trust cannot be changed by the grantor. This irrevocability—and the fact that the assets now belong to the trust rather than the grantor—is key to shielding the assets from creditors.
Unlike other states, Oklahoma doesn’t require a self-settled asset protection trust to be irrevocable to provide protection from creditors. (Okla. Stat. tit. 31 § 13 (2024).)
If the trust is created properly, neither creditors nor the grantor can reach or use trust property. However, the grantor might be able to receive discretionary payments of income and/or principal from the trust if such payments are approved by the trustee.
Traditionally, self-settled asset protection trusts were not allowed in most states, because of concern that people would create trusts to wrongfully avoid creditors. But in the last few years, many states have passed laws allowing some self-settled asset protection trusts to shield assets from future creditors.
The states that allow some form of self-settled asset protection trusts are:
Alaska |
Delaware |
Hawaii |
Michigan |
Mississippi |
Missouri |
Nevada |
New Hampshire |
Ohio |
Oklahoma |
Rhode Island |
South Dakota |
Tennessee |
Utah |
Virginia |
West Virginia |
Wyoming |
|
If you want to make a self-settled asset protection trust, you’ll need help from an attorney. This type of trust is very technical and the laws are state-specific. The attorney you work with should have experience writing self-settled asset protection trusts and should be licensed in a state where they are allowed. If the trust is not written properly, it might not protect your assets.
Here are five things you and your attorney will need to think about when creating a self-settled asset protection trust.
Using a self-settled asset protection trust allows you to protect your accumulated wealth from future creditors so that you can pass your property on to your loved ones after you die. If you do not expect any risk of creditors in your future, you might not need this type of trust. However certain circumstances put your wealth at risk. Here are three situations that might make you think about creating a self-settled asset protection trust.
A self-settled asset protection trust won’t protect your assets from every type of creditor. There are several factors at issue here, including the terms of the trust, what rights you have to access trust assets, and state law. For example:
Self-settled asset protection trusts aren’t the only way to protect assets against future creditors. Limited liability corporate structures, professional or umbrella insurance, and prenuptial agreements can also be effective in specific circumstances. When you’re talking to your lawyer, you might ask about these types of asset protection tools as well.
]]>As you read this article, use the links to learn more about these estate planning issues.
Most people use their estate plan to determine who will get their property when they die. Wills are the most popular estate planning tool for this because they tend to be more simple, less expensive, and more well known that other estate planning tools. You can also use a living trust to name beneficiaries for your property. The main benefit to using a living trust is that the property that passes through living trusts does not have to go through probate. However, most living trusts are more complicated and more expensive than most wills. Another increasingly popular way to pass property to beneficiaries without probate is to use transfer-on-death accounts, deeds, registrations, or deeds. If you don’t use your estate plan to determine what will happen to your property, it will be distributed through your state’s intestate succession laws.
For many years, average families used their estate plans to avoid or reduce estate and inheritance taxes – the taxes due on your estate when you die. However, federal estate tax is now levied on only very wealthy estates – estates worth over $13.61 million (for 2024). So most people with average-size estates do not need to worry about estate taxes. That said, a few states do levy estate and inheritance taxes on smaller estates, and if you live in one of those states and you have a substantial amount of property, you may want to use your estate plan to try to reduce or avoid these taxes.
You can use your estate plan to name a guardian to care for your young children if both you and your children’s other parent aren’t available. You can also name a property manager or custodian to look after your children’s property.
Probate is the court’s process of distributing your property after you die. For most estates, probate is unnecessarily expensive and time consuming, so many people use their estate plan to avoid probate.
You can also use your estate plan to make decisions about the health care you receive before you die. In a power of attorney for health care, you can name a person to make health care decisions on your behalf when you are no longer able to make them yourself. And you can use a living will to set out in detail what kind of health care you would like to receive – for example if you would like to receive all possible treatments under any condition, or if under certain conditions you would like to receive only limited treatments. These two documents are sometimes referred to together as a health care directive. Many states also authorize POLST forms, which allow you to set out your wishes for health care in an emergency.
You may also want to include directions for your final arrangements in your estate plan. These directions can include instructions about what should happen to your body after you die (burial, cremation, donation) and what types of ceremony or memorial you would like to have. In most states, you can appoint someone to make these decisions for you after you die and you can also leave detailed notes about exactly what your wishes are.
To get more free legal information about all of these estate planning topics – and more -- go to the Wills, Trusts & Probate section of Nolo.com. To read a bestselling book that details these issues, try Plan Your Estate by Denis Clifford (Nolo).
Many people can make all or nearly all aspects of their estate plan without a lawyer. Quicken WillMaker can help. It provides expert-made and time-tested forms and guidance to help you make a will, health care directive, final arrangements document, and much more.
If your situation isn't very straightforward, consider getting help from an experienced estate planning lawyer in your area. For instance, working with an attorney is a good idea if you have a very large or complicated estate, anticipate family squabbles, or have circumstances that require specific legal advice.
]]>When it comes to the basic estate planning steps that just about everyone should take, it doesn’t matter whether or not you or your spouse are citizens. Both of you should:
One threshold question you may have is simply whether you can leave property to someone who isn’t a U.S. citizen. The answer is yes; noncitizens can inherit property just as citizens can. So when you make your will or living trust, or name beneficiaries for your retirement accounts or life insurance policies, there is no problem with naming your noncitizen spouse.
Most people don’t need to worry about the federal gift and estate tax, which affects only very wealthy families. For deaths in 2024, only those who leave more than $13.61 million are potentially subject to the tax. Married couples can leave a total of twice that amount tax-free.
How it works. The tax is imposed on transfers of property both during life and at death. The tax rate is the same in both circumstances. Because the exemption amount is so high, very few families pay the tax. It isn’t collected until after someone’s death, when the value of all property that person gave away or left is totaled up.
Assets left to a surviving spouse are not subject to federal estate tax, no matter how much they are worth—IF the surviving spouse is a U.S. citizen. This rule is called the unlimited marital deduction. It is in addition to the individual exemption that everyone gets.
The marital deduction, however, does not apply when the spouse who inherits isn’t a U.S. citizen, even if the spouse is a permanent U.S. resident. The federal government doesn’t want someone who isn’t a citizen to inherit a large amount of money, pay no estate tax, and then leave the country to return to his or her native land.
Still, keep in mind you can leave assets worth up to the exempt amount (again, $13.61 million in 2024) to anyone, including your noncitizen spouse, without owing any federal estate tax. And if the noncitizen spouse dies first, assets left to the spouse who is a U.S. citizen do qualify for the unlimited marital deduction.
If your spouse is a citizen, any gifts you give to him or her during your life are free of federal gift tax. If your spouse is not a U.S. citizen, however, the special tax-free treatment for spouses is limited to $185,000 a year (in 2024). This amount is indexed for inflation. That’s in addition to the amount you can give away or leave to any recipient without owing federal gift/estate tax.
If you have so much money that you are worried about estate tax, there are two main strategies to consider.
If your spouse becomes a U.S. citizen by the time your estate’s federal estate tax return is due, he or she will qualify for the unlimited marital deduction. The return is generally due nine months after death, but the IRS may grant a six-month extension. Because it takes a long time to get citizenship—for most people, there is a waiting period before you can apply, and it takes at least several months after you apply—this isn’t an option for most people.
Your noncitizen spouse can inherit from you free of estate tax if you use a special trust, called a "qualified domestic trust" or QDOT. (Internal Revenue Code section 2056A.) You leave property to the trust, instead of directly to your spouse. Your spouse is the beneficiary of the trust; there can’t be any other beneficiaries while your spouse is alive. Your spouse receives income that the trust property generates; these amounts are not subject to estate tax.
If trust assets themselves (principal) are distributed to your spouse, however, the estate tax will probably have to be paid on that property. (There’s an exception when distributions are made because the spouse has an urgent, immediate need and no other resources.)
A QDOT must be established, and the property must be transferred to it, by the time the estate tax return of the deceased spouse is due. Usually, it’s set up while both spouses are alive, and comes into existence when the citizen spouse dies. The trustee—that is, the person or entity in charge of trust assets—must be a U.S. citizen or a U.S. corporation such as a bank or trust company.
If you are interested in a QDOT, read "QDOTs for Noncitizen Spouses" and talk to an experienced estate planning lawyer. To accomplish its purpose, the trust must comply with some complicated legal rules.
]]>Remote online notarization, sometimes also called online notarization or virtual notarization, refers to notarization that relies on online audio-visual communication. The notary public and the document signer are not physically present in the same room, but rather communicate on an audio-visual platform. More and more states are taking steps to accommodate RONs and to specify the requirements the parties must meet. In many states, the notary is required to have special training or licensing to perform a remote online notarization.
The vast majority of states have now enacted permanent laws that address remote online notarization. These states include:
Alabama
Alaska
Arizona
Arkansas
Colorado
Connecticut
Delaware
District of Columbia
Florida
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
When the COVID-19 pandemic began, with its stay-at-home orders and social distancing norms, nearly all of the states without existing RON laws issued emergency authorizations that allowed remote online notarization on a temporary basis. These temporary measures had expiration dates, though many were extended (several times), a few even into 2023. Many of these states then enacted permanent legislation when the temperature measures expired. If so, the state has been added to the list above.
The state laws (and executive orders) vary widely in what they allow. For example, although South Dakota has enacted a permanent RON law, the law is extremely limited in scope; it allows remote online notarization only of paper—not electronic—documents, and requires a notary to have personal knowledge of the signer’s identity. Several other states also allow only remote ink-signed notarizations (or RINs). Delaware’s (extended) temporary order allows only Delaware attorneys to perform RONs. The states also lay out different requirements for the RON process. In other words, when performing a remote online notarization, it’s necessary to follow the very specific guidelines set out by a particular state’s law.
Because estate planning documents trigger heightened concerns about fraud, undue influence, and mental capacity, some states’ remote online notarization statutes either explicitly exclude wills and trusts from documents that can be notarized remotely, or impose more exacting requirements for these documents. But several states have enacted permanent laws allowing electronic wills, and many more seem poised to follow suit in the near future. (To check your state, see What Is an Electronic Will?) Again, in this area the pandemic has acted as a catalyst for state legislatures to act.
The exact requirements vary by state, but notarizing your document online typically requires the following steps:
Some states further require that an audio-visual recording of the virtual signing be stored for a number of years, typically between five and 10 years.
Remote online notarizations are rapidly becoming more prevalent, especially given the large push, borne of necessity, during the COVID-19 pandemic. The changing field has raised concerns related to cybersecurity, encryption, and storage of sensitive electronic documents, as well as whether certain identity authentication methods—such as when a notary views a photo I.D. over a camera—are sufficient.
At the end of the day, remote online notarizations remain relatively new in many states, and some state statutes might still leave gaps or raise questions. Some attorneys are still wary of relying on remote notarizations of documents if a traditional notarization is available, or will recommend re-executing (notarizing and signing again) documents once an emergency has passed. But it’s clear that remote online notarizations are making major inroads and will eventually become more entrenched in our daily lives.
]]>Married couples can together leave up to twice the exemption, free of federal estate tax. Some states also impose their own state estate tax on smaller estates. See Estate and Gift Tax FAQ.) If you do think your estate might owe estate tax, one way to avoid or reduce the tax bill is to give away property during your life. And even if you aren't concerned about estate tax, gifts offer other benefits—you also get to see the recipients enjoy your gifts.
In 2024, you can make an unlimited number of $18,000 gifts of cash or other property, completely tax-free. To ensure these tax savings, you need to remember only that no individual recipient can receive more than $18,000 in a calendar year.
The $18,000 annual tax exemption rule (called the "annual exclusion") is pretty straightforward. For instance, if you give $20,000 to someone, $18,000 of it is exempt from gift tax, but you must file a gift tax return for the remaining $2,000.
The exclusion amount is indexed for inflation, typically rising every few years in $1,000 increments as the cost of living goes up.
Couples can combine their annual exclusions, meaning that they can give away $36,000 worth of property tax-free, per year, per recipient. In fact, even if only one spouse makes a gift, it's considered to have been made by both spouses if they both consent. (Internal Revenue Code § 2513.)
Example: Joe and Faye, a couple in their seventies, want to give their son and his wife money for a down payment on a house. Both Joe and Faye take advantage of their $18,000 exemptions to give a total of $36,000 to their son and another $36,000 to his wife, tax-free and without filing a gift tax return. As soon as the first of the year rolls around, they can give away another $72,000.
All gifts you make to your spouse are tax-free, as long as your spouse is a U.S. citizen. If your spouse isn't a citizen, the limit on tax-free gifts is $185,000 in 2024. (Internal Revenue Code § 2523(a).) However, there's seldom a reason to make large gifts to your spouse. If you each own about the same amount of property, you could worsen your tax situation by saddling your spouse with an estate that's so large it will be taxed at his or her death.
To make the most of the annual exemption, keep in mind that it is based on a calendar year. If you miss a year, you can't go back and claim that year's exemption amount. But if you spread a large gift over two or more years, you may escape gift tax complications. For instance, if you give your daughter $20,000 on December 17, $2,000 of it is taxable. You'll have to file a gift tax return for the $2,000 (by April 15 of the next year), and you'll use up $2,000 of the total amount you can give away or leave free from estate tax. But if you give your daughter $10,000 in December and wait to hand over the other $10,000 until January 1, both gifts are tax-free and do not require gift tax returns.
Not only gifts of cash can be spread over several years. You can give away some stocks now, some next year. You can even give real estate in pieces—physical pieces, if that's possible, or pieces (percentages) of ownership.
Example: Solomon and his wife Rhoda want to give their vacation cabin to their son Gerard. The cabin has a fair market value of $75,000, but their equity is only $40,000 because there is still $35,000 left on the mortgage. In November, Solomon and Rhoda sign a deed transferring the cabin to Rhoda and Gerard as joint tenants, meaning that Rhoda and Gerard each own a one-half interest in the property. (So Solomon essentially gave Gerard his $20,000 share of the equity in the cabin.) Gerard's gift from his parents is tax-free, because together they can give him up to $36,000 tax-free each calendar year.
The next calendar year, Rhoda gives her half-share, worth $20,000, to Gerard—again tax-free. Even though only Rhoda makes the gift, the IRS considers it, for tax purposes, to have come from both spouses.
Giving children valuable property before they are adults raises the important question of who will manage the property for the child. If you give a large gift to a child under 18, an adult must be responsible for the money.
Fortunately, it's easy to arrange for an adult to manage the property, by setting up either:
To learn more about leaving gifts through trusts and custodianships, see Leaving an Inheritance for Children.
To qualify for the annual exclusion from gift tax, a gift to a minor must satisfy these conditions:
An ambitious program of gift-giving is not for everyone. If parting with assets makes you feel vulnerable or fearful that you will someday be without money you need, don't do it. Or you may decide that your children or grandchildren are not ready yet to appreciate your generosity. But helping a 21-year-old get an education, or new parents buy a house, can give you great satisfaction.
One reason that planned gift-giving has gained in popularity is that people live so much longer than they used to. If you wait until you die to transfer your wealth, the recipients—for most people, their children—may be nearing old age themselves. Your financial help may be more useful when they are younger.
If you want to learn more about the gift tax and other estate planning strategies, read Plan Your Estate, by Denis Clifford (Nolo).
]]>Nothing can deplete your estate quite like requiring long-term care in a nursing home or similar facility. With the average cost of a private room in a nursing home over $100,000, it is important to have a plan in place in case you need this type of care. Long-term care insurance can provide for these costs so that the remainder of your estate can remain in place for your other needs or so that you can provide your loved ones with an inheritance. The younger you are when you purchase this insurance, the less expensive it is.
Many people with young children decide to purchase life insurance to replace their income if they have an untimely death. However, life insurance can also be an effective estate planning strategy later in life. Life insurance can provide beneficiaries with tax-free funds to help offset tax obligations related to inheriting other property. It can also provide replacement income for your spouse, your elderly parents or other individuals who still depend on you for financial support.
You can enlarge your estate plan by maximizing your retirement contributions for the next several years. One option to maximize your contributions is to convert your retirement plan assets to a Roth IRA. A traditional IRA is formed with pre-tax dollars. If you convert these funds to a Roth IRA, you will have to pay taxes on the amount converted. However, you may experience several benefits, including:
You can also increase the amount of contributions you make to your retirement account. Under tax laws (for 2024), you can contribute up to $7,000 yearly for a traditional or Roth IRA or up to $23,000 in a 401(k) account if you are younger than 50.
When you are 50 or older, you can contribute up to $7,000 in an IRA account, and you can also make catch-up contributions in the following plans:
With SIMPLE IRAs and SIMPLE 401(k)s, you can make catch-up contributions of up to $3,500 beyond the contribution limit.
Social Security benefits can provide some additional needed income during retirement. The amount of benefits you receive are based on your lifetime earnings (or your spouse’s earnings if you are claiming based on their record) and the age that you begin receiving benefits. Consider what the potential benefit amount is at different ages and compare this information to your financial situation to determine when the best time to take out benefits will be.
One way to reduce gift or estate tax is to make annual gifts to beneficiaries. This can provide many advantages, including providing gifts to people during your lifetime, reducing tax liability and avoiding fighting later if your beneficiaries don’t agree with how these things would have been left in your will. Under current tax laws, you can gift up to $18,000 per year per person without incurring gift tax liability.
You can also donate funds or other property to charity. More sophisticated options like a charitable remainder unitrust or annuity trust allow you to reduce capital gains taxes while also donating funds to charity.
A comprehensive estate plan should include provisions in case you become disabled. Several documents you should create include:
A power of attorney gives someone the right to act on your behalf regarding your financial affairs. If you get sick or hurt, your agent can step in and take care of your financial affairs. This designation allows you to give control of your money and property to someone you trust.
Without an advance health care directive or living will, your loved ones could wind up depleting your estate by insisting on extreme medical measures you would not have asked for if you were able. A living will puts your wishes regarding end-of-life care in writing.
A health care proxy can make medical decisions for you if you can’t make them for yourself.
You can prepare these forms with Nolo's Quicken Willmaker & Trust.
Sometimes leaving money or other property to a beneficiary in a will may not provide the type of structure you desire. When someone receives a gift through a will, the beneficiary gets to use the property as he or she sees fit. A trust allows you to designate a trustee to manage your property according to the instructions you leave. A trust allows you to instruct your trustee to pay for college education rather than leaving it to your 20-year-old son who might blow it. You can instruct your trustee to pay for your adult children’s medical needs or to provide disbursements when they are older, like 30 or 40. You can also instruct your trustee to pay for your medical expenses and insurance payments out of trust funds if you become disabled. Setting up a trust can allow you to avoid expensive legal interventions, such as probate and guardianship or conservatorship proceedings. Additionally, it can restrict disbursements so that your property is used only in the way you intended.
You can craft your own plain-English trust using Nolo's Quicken Willmaker & Trust.
]]>What happens to your debts and other financial obligations after you die depends on the types of debts and obligations you have, your state’s law about which debts are paid first, and how your assets are transferred at your death.
A few types of debt are canceled upon the death of the debtor, but most debts—as well as other financial obligations, like taxes—must be paid from the deceased person’s estate. What does this mean? Your family probably won't need to reach into their own pockets to pay your personal debts. However, your outstanding financial obligations will be paid from the assets you leave behind, and these payments could reduce or eliminate gifts you planned to leave to loved ones.
Here's a quick summary of what happens to common types of debts and obligations:
Think of your estate as a temporary account that holds your assets while your affairs are being settled. The person responsible for wrapping up your affairs (often the executor you named in your will) gathers your assets, pays your debts, and then distributes any remaining assets to your heirs or chosen beneficiaries.
Generally, your executor must pay debts and other financial obligations before distributing your assets. So, although your heirs or chosen beneficiaries are not personally responsible for paying your debts, the amount of money or property they receive may be affected by the amount of your debt. If necessary, their share will be reduced to pay the debts of your estate.
Example: When Bob died, he had $200,000 in assets and $50,000 of debt. He is survived by four adult children. Bob’s executor will pay the $50,000 in debt, and the money Bob’s children will receive is reduced. Instead of receiving $50,000 each, after the debt is paid, each child will receive $37,500.
If you’re worried about how your debts will affect what your beneficiaries receive, get help from a lawyer.
If your estate is insolvent—if it does not have enough funds to pay all of your debts and obligations—the executor must follow state law to figure out which debts to pay first.
For example, a common order of priority might look like this:
When estate assets have run out, leaving creditors at the bottom of the list without a source of funds, your family will not be responsible for your personal debt. The debts will simply go unpaid.
Keep in mind that each state has different rules about the order in which creditors get paid, so get help from an attorney to find out how your debts would be paid under your state’s laws.
Creditors may have an easier time getting to assets that go through probate, so you may be able to pass more of your assets to your beneficiaries by keeping your assets out of probate. For example, you can use beneficiary designations to name your loved ones (instead of naming your estate) to receive your IRAs, 401ks, pay-on-death bank accounts, or life insurance proceeds directly.
Example: When Cole died, he had $50,000 in credit card debt and a life insurance policy that paid $75,000 upon his death. If Cole names his estate as the beneficiary of the life insurance policy, the life insurance proceeds will be available for creditor’s claims. If he names his daughter Riley as the beneficiary of the life insurance, those funds will not be part of the probate estate, and instead, the insurance company will pay Riley directly as the named beneficiary and this will make a creditor’s claim more difficult.
One important exception here is that living trusts generally do not protect assets from your creditors. In fact, most revocable trusts (such as a simple living trust) instruct the trustee, the person responsible for managing the trust, to pay your debts at your death, or to coordinate payment of your debts with your executor. Further, some states require that a trustee file a “notice of trust” to make creditors aware of the trust and to give them a chance to assert a claim against the trust’s assets.
If you are worried about how your debt will affect your loved ones after you die, see a lawyer for help. A good estate planning attorney can help you:
You should also see a lawyer if you have significant shared debts, such as joint credit cards or cosigned loans. In this case, the co-debtor or co-signer may be personally liable for the debt after you pass away.
Of course, you can also make efforts on paying off debt during your lifetime to minimize its impact on your estate when you die. For more help, see our section on Debt Management.
]]>You do not have to use the attorney who drew up the deceased person’s will; the fact that the deceased person employed a particular lawyer doesn’t obligate you to hire the same person to represent the estate. If that lawyer still has the original signed will, he or she must turn it over to you, as executor.
It’s not usually difficult to get the name of a local lawyer or two who handles probates and estates. Probates are generally profitable for lawyers, so they’re happy to take on the work.
You can probably find some prospects online. Read their profiles, which will tell you about each lawyer’s experience and philosophy, to get an idea of what they would be like to work with and who might be a good fit. If you get lawyers’ names from the phone book or a listing, try to talk to people who know or have worked with the lawyer so you can find out at least a little about the lawyer before going further.
When you first sit down with a lawyer you’re thinking about hiring, make it clear up front that you plan to talk to several lawyers before you hire one for the estate work. Then try to ask some questions before you get into the details of a probate court proceeding. A lawyer who has handled a lot of probates may assume that you’re on board and quickly start asking you for documents and information.
Here are some questions you may want to ask:
If you’re handling an extremely large estate—worth millions—you may need to think about state or federal estate tax. And if state or federal estate tax returns must be filed, you really want to be sure you’re hiring someone with special expertise. Ask specific questions about these taxes, including:
Finding a local attorney who is experienced and competent when it comes to handling a probate court proceeding may not be the hardest part of finding the right lawyer. Most probate cases aren’t complicated; they require careful attention to detail, but you don’t need a courtroom star. Most probates consist almost entirely of routine paperwork. And if you are interviewing lawyers who were personally recommended to you by friends or other local professionals, they’re probably competent.
Having a successful working relationship with a lawyer, however, takes more than legal knowledge. So pay attention to how clearly the lawyer explains the process, how well the lawyer listens to your concerns, and how respectful the lawyer is. Make sure you’re signing up with someone who:
Finally, wait until you’ve talked to two or three candidates before you decide on one. Tell the lawyer that you’ll call back soon with your decision. Once you've decided on a lawyer, learn how to maintain a successful working relationship in Nolo's article, Working With a Probate Lawyer.
]]>To find out if you need a lawyer, answer a few questions in our quiz.
Below are some situations in which you should consider getting advice from an experienced estate planning attorney.
While most families won’t end up in court fighting over a will, some certainly do. If you’re worried about disputes—for example, you have children from a previous marriage who you expect will clash with your spouse—consider consulting a lawyer. An estate planning attorney can help you anticipate future problems, as well as identify and express your exact wishes for what you want to happen to your property.
Simply living abroad doesn’t automatically disqualify you from using U.S.-based online wills and estate planning software. If you’re temporarily working or studying abroad, or on active duty for the military, you probably still have ties to a U.S. state for estate planning purposes, and can make a will or living trust using a reputable DIY product that’s based on U.S. laws. But if you’ve permanently relocated to another country, you should use a lawyer well-versed in the laws of the country or region where you live.
If you’ve moved abroad but own property in the U.S., you can still use a DIY product or form to make a financial power of attorney (POA). This document names someone you trust to manage that U.S. property on your behalf.
If you want to create a health care directive (also known as a "living will" and "medical power of attorney"), you should use the forms that are familiar to the medical professionals where you’re currently living. This might mean consulting a lawyer in that country or using a standard form if one is available. Since a medical emergency can happen at any time, you want your health care directive to be legally valid immediately, in the country or region where you’re living right now.
If you live in the U.S. but own property abroad, you’ll also want to consult a lawyer familiar with the laws of the country where that property is located, in order to make plans for that property after your death.
Hardly anyone owns enough assets to trigger federal estate taxes when they die. Currently, for deaths in 2024, estates don’t need to pay federal estate tax unless there's more than $13.61million worth of property. This threshold amount is subject to change with the political climate, but even so, most people simply won’t need to worry about it.
About a quarter of the U.S. states do impose their own state estate tax. While most of these states impose estate tax at a lower threshold than the federal estate tax—so that it’s possible your estate will owe state estate tax but not federal estate tax—the tax rate for state estate tax is also lower.
If you own property valued in the millions and would like to explore ways to protect your assets from estate tax, consult an estate planning attorney who specializes in transferring wealth.
You should also talk to a lawyer if you have complex conditions or plans for the inheritance you leave.
Some people want to place conditions on gifts to their loved ones—for example, you want to leave money to a grandchild only if they graduate from college. While you might have good reasons for this restriction, conditional gifts can create confusion and lead to disputes over whether the condition has been fulfilled. We don’t recommend making conditional gifts in your will or living trust, but if your heart is set on it, find an attorney to help.
Perhaps you want to leave property to one person (such as your spouse) for use during their lifetime, but then have it pass to a different person (such as your child from a former marriage) upon the first person’s death. If you want to make an arrangement like this (called a “life estate”), you’ll need a lawyer to help you set it up.
If you want to leave money to a loved one who has significant debt or is irresponsible with money, you might be concerned about how that inheritance will be spent. One solution is a spendthrift trust, in which you name a trusted person or institution to dole out the money to your loved one a little at the time. Or you could earmark the money to pay certain types of expenses, such as rent, directly. The property in the trust is also protected from most creditors. If this sounds like something you want in your estate plan, find a good estate planning lawyer.
If your loved one has special needs or a disability, take care in how you leave money or property to them. If your loved one receives government benefits, an increase in their assets can easily jeopardize their eligibility.
If your loved one already has a special needs trust set up on their behalf, you can make a simple will that leaves money to that special needs trust. But if your loved one doesn’t have such an arrangement, see a lawyer, who can also help you fully explore your options for leaving gifts to someone with special needs.
If you haven’t yet made arrangements (for example, in an operating agreement or partnership agreement) for what will happen to your business if you become incapacitated or die, you should get a lawyer’s help to make a plan.
The exception is that if you own a simple sole proprietorship, you can usually use a reputable DIY product to leave your business interest to someone through your will or living trust. But if your business is particularly complex or is worth a substantial amount, you might still want to consult a lawyer.
If none of the above situations applies to you, you can likely use a DIY product to create your estate plan. For a self-help product that offers a complete set of estate planning documents (including a will, living trust, health care directive, financial power of attorney, transfer-on-death deed, and more), consider using Nolo’s Quicken WillMaker. WillMaker is easy to use and affordable, and has been a trusted solution for over 30 years. It's available both online and as desktop software.
You might be surprised to hear that you don’t need to hire a lawyer just to avoid probate. (See Why Avoid Probate?) You do, however, need a comprehensive DIY product that allows you to choose probate-avoidance strategies. A simple online will won't cut it when it comes to avoiding probate.
To keep your property out of probate after you die, you can make a living trust. Alternatively, a transfer-on-death deed (if your state allows transfer-on-death deeds) can also keep real estate, such as a home, out of probate. WillMaker allows you to make either document, and guides you step-by-step through the process.
]]>Having or adopting children is a very common reason to update a will; you want to make sure they’re provided for in the event of your death. If your children are minors, use a will to name a personal guardian to take care of your children if you die. (Living trusts cannot name personal guardians, so even if you have a trust, you’ll need to create or update a will for this purpose.)
If your children are minors, you’ll also need to name an adult to manage any money or other property they inherit. Ideally, this person would be the same person as the personal guardian, but it’s certainly possible to name a different adult for this task (perhaps someone more financially savvy). You can name someone to manage property in a few ways:
For more details on property guardianship, read Leaving an Inheritance for Children.
If you don’t name a personal guardian or property guardian, a court will appoint someone when it becomes necessary. Understandably, few people are comfortable with the idea of leaving these major decisions to a court, and the best way to prevent that result is to plan ahead. For more information on how, see Estate Planning When You Have Young Children.
If you got married since making your estate plan, you should make a new will or living trust that names your spouse and clearly dictates what you want your spouse to inherit. In most states, your surviving spouse has a right to claim one-third to one-half of your property, even if you didn’t leave anything to your spouse. In other states (known as community property states), your spouse will automatically own half of anything you earn during the marriage, unless you have a written agreement stating otherwise. (See A Spouse’s Right to Inherit and Marriage & Property Ownership to learn more about these state laws.) These laws can protect your spouse in the event that you die without explicitly leaving property to your spouse. However, state laws vary, and it’s always best to state your intentions as clearly as you can.
If you’ve named beneficiaries to inherit life insurance policies, bank accounts, and retirement accounts, consider whether you want to update these designations to include your spouse, typically by filling out new forms.
You should also look over your other estate planning documents, such as powers of attorney for financial or health matters. If you have named someone to act on your behalf in the event of your incapacitation, does it make sense to change this person to your spouse? If so, you’ll need to revoke these documents and create new ones.
If you have remarried, you’ll also probably want to take the steps discussed above to protect your new spouse. Your new estate plan must, however, be consistent with the property division agreements of your divorce decree. See below for more.
When people get divorced but don’t get around to changing their wills before they die, most states will automatically revoke anything left to their former spouses. However, some states will follow what the will says. To avoid unexpected results, the best course of action is to make a new will or trust.
You’ll also likely want to update your beneficiary designations on life insurance policies, bank accounts, and retirement accounts, as well as make new powers of attorney if you named your former spouse to act on your behalf, which is very common. In the case of retirement plans, it’s especially important to update your beneficiary designations. If your retirement plan is governed by the Employee Retirement Income Security Act (ERISA), a federal act—and all 401(k)s are —then state rules that automatically revoke gifts to ex-spouses will not apply. For more details, see Revising Your Estate Plan After Divorce.
As you revise your estate plan, be aware that you must comply with the terms of your divorce decree and marital settlement agreement, which usually spell out who owns what property. Your settlement agreement might also restrict you from making certain changes; for example, it might say that you must keep your ex-spouse as the beneficiary of your life insurance policy.
Because married couples often leave most or all of their property to each other, if you lost your spouse, you’ll likely want to create a new will or living trust and update your beneficiary designations. Also consider whether you’ll need to create new powers of attorney or health care directives; this is often necessary because it’s so common to name your spouse as the agent or attorney-in-fact who will act on your behalf in the event of your incapacitation.
If you inherited your spouse’s retirement account, you can decide whether to roll over the account into your own retirement account (and don’t forget to update the beneficiary of your account), or leave it in your spouse’s name. The latter option offers some flexibility if you’re under age 59½ (because you can take money out earlier). Learn more about how the SECURE Act and SECURE 2.0 Act have affected inherited retirement accounts.
If you bought a home or otherwise acquired real estate, make sure that this significant asset is accounted for in your estate plan. You might also want to take steps to keep your home out of probate (the court process that oversees the transfer of your property after you die), which can save your inheritors time and money. Here are a few ways to go about protecting your home from probate:
If you moved to another state, you might need to create new estate planning documents. Give special consideration to the following:
For more details, see Moving to a New State? Take a Look at Your Estate Plan.
If you’ve acquired substantial assets since you last visited your estate plan, reevaluate whether your current plan is still the best option for your circumstances. A will works well for many people, but it doesn’t keep your property out of probate, while a revocable living trust does. An estate planning lawyer can also help you create irrevocable trusts to reduce estate taxes.
If, conversely, you’ve acquired significant debts, you can consult an estate planning lawyer to learn about options for reducing the burden on your loved ones, or even keeping certain assets out of the reach of creditors. Read more about minimizing the effect of your debt on your beneficiaries.
And, finally, consider the needs of your named beneficiaries. If their financial situation has changed, you might want to increase (or decrease) the gifts you originally made to them.
If you anticipate a long-term illness, make doubly sure you have up-to-date power of attorneys (POAs). A POA allows you to designate a trusted person to make decisions and act on your behalf. You’ll need one for financial matters and a separate one for medical matters.
You should also create or update a living will (sometimes called a “declaration” or other state-specific term), which lays out your wishes for medical treatment and end-of-life care. (To confuse matters, in some states this document is combined with a medical POA; it’s often but not always called an “advance directive.”) This health care document will allow you to maintain some control—even in the event of incapacitation—by making your wishes known ahead of time. For more details, see Living Wills & Medical Powers of Attorney.
]]>If you are in a common law marriage, you and your partner can protect yourselves and your families from difficulty and confusion by laying out your wishes in your estate plan. If your estate plan is clear—about your health care wishes, who should make decisions on your behalf, and what should happen to your property—any confusion about your marital status will have less of an impact because the key legal issues will be addressed by your documents.
Common law marriage is a type of marriage that can be created when a couple lives together and represents themselves as a married couple. No ceremony or licensing is required to establish a common law marriage, although a couple may be able to officially record the existence of their marriage with a state or county court.
Only a few states still allow couples to create common law marriages. However, several additional states continue to recognize common law marriages that were created before a certain date. Some states recognize common law marriages established in other states even if the state doesn’t otherwise allow common law marriage. Each of these states sets out its own requirements for creating a common law marriage. Once established, couples in common law marriages have the same rights, benefits, and obligations as traditionally married people. And if they decide to break up, they must go through the standard divorce proceedings. Also, like traditional marriage, you cannot establish a common law marriage if you are already married to someone else.
If you are in a common law marriage and you don’t have an estate plan, it may be difficult for your partner to get the recognition needed to act as your spouse. Common law marriages are not the norm, and they are often misunderstood. It is quite possible that there could be confusion about your marital status—especially in a crisis or emergency situation. In these situations, a health care provider may listen to what your parent or sibling says since this type of relationship is easier to prove. Your spouse may file a legal case to try to get the control to make important decisions, but others may make these important decisions for you while the case is pending.
Clarity about your marital status is important because—in the absence of an estate plan—the law generally gives spouses the right to make health care decisions, have power over finances, make final arrangements for a deceased person’s body, and receive at least a large portion of their deceased spouse’s estate.
So if health care providers, financial institutions, or lawyers don’t recognize your partner as your spouse—and you don’t have an estate plan that clearly lays out your wishes—your partner may be left out of critical decisions about your health care, your finances, or the distribution of your property.
The risk to your partner will be even greater if your family members do not know about or do not approve of your marriage. They may try to make medical, legal, and financial decisions on your behalf without consulting your partner. Your family may even choose to keep your partner from visiting you in a hospital or other medical facility.
The best thing you can do to protect yourself, your partner, and your estate is to make a comprehensive estate plan that makes all of your emergency and end-of-life wishes clearly understood.
To avoid the problems discussed above, create a comprehensive estate plan. Consider making a will, a living trust, health care directives (including a living will and power of attorney for health care), and a durable financial power of attorney. Also, review your beneficiary designations to make sure they reflect your wishes.
The cornerstone of an estate plan is a last will and testament. Your will can indicate how you want your property to be distributed after you die, appoint an executor to wrap up your estate, and nominate guardians for of your minor children. To make a clear plain English will, try using Nolo's bestselling Quicken WillMaker & Trust.
A revocable living trust is another way to distribute your property after you die. Compared to a will, it’s usually more work to set up and manage. However, living trusts offer some significant advantages that wills cannot provide. For example, with a living trust, you can
Most people make living trusts to avoid probate. However, not everyone needs a living trust to avoid probate. For example, in most states, small estates do not need to go through probate. And there are many other ways to avoid probate—like beneficiary designations, transfer-on-death deeds, and some forms of coownership.
You can make a living trust with Nolo's Quicken WillMaker & Trust.
Use one or more healthcare directives to ensure that your partner has the information and power needed to honor your wishes for medical care if you can’t speak for yourself.
Use a living will (called a directive or declaration in some states) to state the type of medical treatment that you do or do not want. State laws inform what your living will can cover, but in most states, you can use your living will to decide:
You can also leave specific instructions for your healthcare providers and family that explain other wishes, like religious preferences or instructions for notifying family.
Clearly stating your health care wishes in a living will may prevent conflicts between your partner and your family during a stressful time.
In addition to your living will, it’s a good idea to also make a power of attorney for health care (sometimes called a medical power of attorney, health care proxy, or other similar name). In this document, you state who should make medical decisions on your behalf if you can’t make decisions for yourself. (The person you name won’t have this power if you can make those decisions for yourself.)
The person you name (called your agent, health care proxy , or surrogate) must follow the instructions you provided in your living will. But it’s a good idea to discuss your values and the type of medical care you want to receive so your agent feels confident about making decisions that you likely would make under the same circumstances. In some states, you can also give your agent the power to make decisions about what will happen to your body after you die.
When you name your partner as your health care proxy, medical providers are obligated to follow your partner’s instructions even if another close family member would have made a different decision.
Many states combine living wills and powers of attorney for healthcare into one document, often called an “advance directive.”
Finally, in addition to living wills and powers of attorney for health care, you might also consider making a POLST form or a DNR order. While not strictly estate planning forms, they are useful for instructing health care providers about your medical wishes in an emergency. You can get these forms from your doctor.
A durable power of attorney for finances lets you nominate an agent to take care of your financial affairs if you become unable to handle these responsibilities on your own. In the document, you can decide exactly how much power that person can have. For example, you can state that your agent should be able to pay your bills, maintain your insurance coverage, buy or sell real estate, or handle other financial responsibilities on your behalf. Or, you can give a broad power that allows your agent to handle all of your financial matters. You can also determine when your agent’s powers begin. They can begin immediately, or they can “spring” into effect only if you become incapacitated. The term “durable” means that the powers stay in effect even if you become incapacitated.
Some financial assets pass directly to beneficiaries, without going through a will or trust. For these types of financial accounts or policies, you use “beneficiary designations” to tell the company that manages the asset who should get it when you die.
These assets usually have beneficiary designations:
If you have any of these, you probably filled out the beneficiary designation when you set up the account or policy. Because circumstances (and relationships) change over time, it’s a good idea to regularly review your beneficiary designations to make sure they reflect your wishes.
If you are in a common law marriage, setting up an estate plan to clearly and legally state your wishes will go a long way in preventing legal and practical conflicts between your family and your spouse. Planning your estate also helps to ensure that the person making important decisions about you is the one you trust the most.
If you have a small or simple estate, you may be able to do much of your estate planning yourself. However, see an estate planning lawyer if you have a large estate or complicated assets or circumstances.
Also, get legal advice if you have any concerns or questions about the status of your common law marriage.
]]>Estate plannng lawyers don't all charge the same way. You may want to ask up front if you're more comfortable with one way or another.
It’s very common for a lawyer to charge a flat fee to write a will and other basic estate planning documents. The low end for a simple lawyer-drafted will is around $300. A price of closer to $1,000 is more common, and it’s not unusual to find a $1,200 price tag.
Lawyers like flat fees for several reasons. First, they can use forms that they’ve already written – most estate planning lawyers have a set of standard clauses that they have written for different situations, which they assemble into a will that fits a new client’s wishes. It won’t take a lawyer much time to put your document together, but with a flat fee the lawyer can charge for his or her expertise and experience. A flat fees means they don’t have to keep detailed records of how they spend their time, either.
Finally, some lawyers feel that a flat fee arrangement lets everyone relax and makes for a better attorney-client relationship. You won’t feel reluctant to call or email with a question, and the lawyer can take the time necessary to listen to your concerns and explain things to you without feeling like the meter is running.
That said, lawyers don’t charge all of their clients the same flat fee. You’ll have to talk to a lawyer to find out what the cost will be for you—don’t expect to find a list of prices on the lawyer’s website. A conscientious lawyer does this not to hide the ball, but because it’s impossible to know what you need without a conversation about your situation and wishes. A good lawyer will talk to you (on the phone or in person) before quoting you a price.
Some estate planning lawyers bill clients by the hour. The hourly rate will depend primarily on the lawyer’s experience and training, and where you live. In a small town, you might find someone who bills at $150/hour, but in a city, a rate of less than $200/hour would be unusual. Lawyers in big firms generally charge higher rates than sole practitioners or small firms, unless a small firm is made up of lawyers who specialize in sophisticated estate planning and tax matters. A lawyer who does nothing but estate planning will probably charge more than a general practitioner, but should also be more knowledgeable and efficient. (See details of hourly fees reported by estate planning attorneys around the country.)
If your attorney employs less experienced lawyers (associates) or legal assistants (paralegals), their time should be billed at a lower hourly rate.
Many lawyers keep track of their time in six-minute increments (one-tenth of an hour). That means that you’ll never be billed for less than six minutes’ of the lawyer’s time, even if the lawyer spends just two minutes on the phone with you.
Most people end up paying a lawyer for more than a simple will. Many lawyers correctly advise clients to make a few other estate planning documents in addition to a will, including:
This is good advice because every adult should have these durable powers of attorney. They give someone the power to act on your behalf (always in your best interests) if you should become incapacitated—for example, because of an accident or unexpected serious illness. These are not complicated documents, and many states have their own forms for the advance directive. But they’ll probably add a few hundred dollars to the bill. (See the results of this national survey on how much lawyers charge to prepare estate planning packages.)
A lawyer may also recommend a living trust, which will let your family avoid the expense and delay of probate court proceedings after your death. Not everyone needs a living trust, though. It depends on where you live (probate is more expensive in some states than others), how you own your assets (if you own everything jointly with your spouse, you may not need a trust now), and your age (younger people, generally, don’t need trusts).
Lawyers typically charge much more for a living trust than for a will, even though a simple living trust is a fairly standard document, like a will. It’s rare to see a price of less than $1200 or $1500 for a trust.
One caveat: After your will has been property signed and witnessed, you’re done. But after a living trust is drawn up and signed, you must change the title to assets that you want to leave through the trust. Make sure you know whether the lawyer’s fee includes doing this work (called funding the trust) or not; if not, you’re responsible for getting this crucial step done.
If you want to avoid legal fees or can't afford an attorney, Nolo's Quicken WillMaker & Trust allows you to create a customized and comprehensive estate plan for your entire family.
A will is a relatively simple document in which you state what should happen to your property after you die. You can also use your will to name guardians for your young children, name an executor, forgive debts, and designate how to pay your taxes. After your death, your executor pays any debts or taxes and sorts out who gets what based on the terms of your will. This court-supervised and highly-structured process is called “probate” and has a reputation for being drawn-out and expensive.
Like a will, a living trust is a document you can use to name beneficiaries for your property. Beyond that, however, the two documents are distinct. The main feature of a living trust is that it appoints a trustee to manage and distribute trust property after your death, and this takes the place of the executor working with the probate court.
So, property that passes through a living trust does not go through probate, which can save your loved ones time and money. Many people make living trusts specifically to avoid probate. On the downside, living trusts are generally more complicated and expensive to set up and maintain. You cannot use your living trust to name an executor or name guardians for young children, so even if you have a living trust, you still need a will to do those things. In fact, most people who make a living trust have a will as well.
Here is a quick comparison of what wills and living trusts can do. Read below for details about each characteristic.
Revocable Living Trusts |
Wills |
|
Name beneficiaries for property |
Yes |
Yes |
Leave property to young children |
Yes |
Maybe (see below) |
Revise your document |
Yes |
Yes |
Avoid probate |
Yes |
No |
Keep privacy after death |
Yes |
No |
Requires a notary public |
Yes |
No |
Requires transfer of property |
Yes |
No |
Protection from court challenges |
Yes |
No |
Avoid a conservatorship |
Yes |
No |
Name guardians for children |
No |
Yes |
Name property managers for children’s property |
No |
Yes |
Name an executor |
No |
Yes |
Instruct how taxes and debts should be paid |
No |
Yes |
Simple to make |
No |
Yes |
Requires witnesses |
No |
Yes |
Name beneficiaries for property. The main function of both wills and trusts is to name beneficiaries for your property. In a will, you simply describe the property and list who should get it. Using a trust, you must do that and also “transfer” the property into the trust. (See “Transfer of property into the trust,” below.)
Leave property to young children. Except for items of little value, children under 18 cannot legally own property. When you leave property to a minor, that property must be managed by an adult – at least until the child turns 18.
When leaving property to a minor using a living trust, the trustee manages the property until the child reaches an age determined by you.
When leaving property to a minor using a will, you should name an adult to manage the property. Or, use your will to set up a testamentary trust for young children or name a custodian under the Uniform Transfer to Minors Act. For more about these, read Leaving an Inheritance for Children, on Nolo.com. If you do not name an adult to manage property left to a minor through your will, the court will name someone to do it after your death.
Avoid probate. Property left through a living trust does not pass through probate. Property left through a will does go through probate.
Probate is the court system designed to wrap up a person’s affairs after their debts. Probate takes a long time, can be very expensive, and for most estates, isn’t necessary. Read more about avoiding probate in Why Avoid Probate? on Nolo.com.
Because all property passing through a living trust does not have to go through probate, it can be distributed to beneficiaries after the death of the grantor, without any fees or interference (or guidance) from the court For this reason, many people chose to create a living trust. Read more about How Living Trusts Avoid Probate on Nolo.com
But not everyone needs to avoid probate. If you don’t own much property, or if you have many debts, creating a trust may not be necessary. See, “Do I Need a Will or a Living Trust,” below.
Privacy after death. After death, a will becomes a public document. A living trust does not, so many people choose to use a living trust to keep their affairs private. Read more about this in Is a Living Trust Public? on Nolo.com.
Transfer of property into the trust. To leave property through a living trust, you must transfer the property into the trust. For many items, this is as easy as making a list of the property and attaching to the trust document. However, items with title documents, such as real estate, must be retitled so that the owner of the property is the trust. This is not usually complicated or particularly difficult, but it is an extra step that you must take. No transfer of property is required when using a will.
Protection from court challenges. Court challenges to wills and living trusts are rare. But if there is a lawsuit, it's generally considered more difficult to successfully attack a living trust than a will. Read more about this in Other Advantages of Living Trusts on Nolo.com.
Avoiding a conservatorship. In a living trust, you can name your spouse, partner, child, or other trusted person to have authority over trust property if you become incapacitated and unable to manage your own affairs. You cannot do this with a will, however you can also make a durable power of attorney to appoint someone to manage your finances. Read more about this in Other Advantages of Living Trusts on Nolo.com.
Guardians for children. In a will, you can name guardians to care for minor children. You cannot do this in a living trust. Read more about Guardianships for Your Children on Nolo.com.
Property managers for children’s property. In a will, you can name someone to manage any property left to or earned by your children. You cannot do this in a living trust.
Naming an executor. You can use your will to name an executor who will be in charge of wrapping up your estate after you die. That person will be responsible for communicating with the court, paying your bills, and, eventually, distributing any property that goes through probate. You can’t name an executor in a living trust. In your living trust, you name a successor trustee who will manage just the property left through the trust. Because most estates will need an executor to some extent, it makes sense to make a will and name an executor, even when you leave most of your property through a trust. In most cases, it also makes sense to name the same person for both jobs.
Learn more about an executor’s job in Nolo’s Executor FAQ.
Instructions for taxes and debts. In your will, you can leave instructions about how you want debts and taxes to be paid. For example, you can say that you want to pay the loan from your brother to be paid from your savings account. You can also use your will to forgive debts owed to you. You should not do these things with a living trust.
Ease of creating and revising the document. Wills are simple documents that require no particular language. Wills created by attorneys may be complex and nuanced, but the law does not require them to be. In some states, even handwritten wills are acceptable. To execute your will, you and two witnesses must sign it. Witnesses should be two people who will not receive anything under the will.
As with wills, there are no laws that require living trusts to be complicated. However, because living trust documents must cover the trustee’s duties, they tend to be more complex (and more expensive to make) than wills. Instead of witnesses, you must sign a living trust in front of a notary public. After you create the trust, you must take the additional step of transferring your property into it. See “Transfer of property into the trust,” above.
Both revocable living trusts and wills allow you to revise your document when your circumstances or wishes change. The decisions you make in these documents are not set in stone until you die.
(On the other hand, you cannot change an irrevocable trust after you finalize it. Wealthy people and institutions typically use irrevocable trusts to shelter money from taxes or creditors, and irrevocable trusts are much more complicated than the revocable type. See a lawyer if you want to make an irrevocable living trust.)
Reduce estate taxes. Neither wills nor can living trusts help you reduce estate tax, but most estates will not owe estate tax. Learn more about whether your estate might be liable for Estate Tax on Nolo.com.
Leave money to pets. Pets cannot own property, so you cannot leave money to your pets. You can use your will to leave your pets to a trusted caretaker, or you can create a pet trust. But if you try to leave your pet property, that property will end up in your residuary estate. Learn more about Strategies for Taking Care of Pets on Nolo.com.
Leave final wishes. Although it is permissible to leave funeral instructions and other final wishes in your will (never in a living trust), it’s better to leave them in a separate document. Read more in Nolo’s Final Wishes FAQ.
Leave passwords for online accounts. After you die, your executor will appreciate being able to access your online accounts, computers and other devices. However, do not leave this information in your will or living trust. Instead, create a separate document and keep it in a secure place with your other estate planning documents. Read more in Access to Online Accounts on Nolo.com.
Most people need a will, but not everyone needs a living trust. Whether or not you need a living trust depends on your age, how wealthy you are, and whether you’re married. Read more about Why You May Not Need a Living Trust.
Even if you decide that you need a living trust, you should also make a will to name an executor, name guardians for minor children, and take care of any property that doesn’t end up in your trust. Read more about why You Still Need a Will on Nolo.com.
If you don’t make a will or a living trust, your property will be distributed according to the laws of your state. Learn more about Intestate Succession on Nolo.com.
To create a Will, Living Trust, and more, see Nolo's Quicken WillMaker & Trust software.
]]>The article below discusses procedures in place during the early phases of the COVID-19 pandemic. Since then, many permanent remote online notarization procedures have been cemented, and electronic wills are also permanently available in a handful of states.
To have a document notarized, you must physically appear before the notary public. You don’t always have to sign the document in front of the notary, but at the very least the notary must see you as you prove and acknowledge that you are the signer. In these times, states are reconsidering what it means to “physically appear,” frequently allowing notaries to do their work online.
Even before the COVID-19 pandemic, some states passed laws and issued regulations allowing remote online notarization (RON) so that notaries could acknowledge documents without in-person meetings. Early adopters included Florida, Kentucky, Michigan, Minnesota, Montana, Nevada, Ohio, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin. During the coronavirus crisis, the vast majority of remaining states either temporarily authorized remote online notarization (but these emergency measures may have expired) or fast-tracked laws that permanently permit remote online notarization.
Check whether your state allows remote online notarization. For more information, you can also consult a local mortgage professional or estate planning lawyer or contact your secretary of state’s office, which is in charge of regulating notaries in most states.
If you must have a legal or financial document notarized and online notarization isn’t available to you, see the next section of this article.
If your document requires witnesses, most states require you to sign the document while the witnesses are watching. Then the witnesses must sign the documents themselves. Some states allow exceptions to this rule—giving you leeway to sign the documents now and have witnesses sign later—but be sure you are clear on your state’s law for the specific document you’re signing. (Remote witnessing of wills is not yet allowed except in a handful of states.)
If you and your witnesses must sign a legal document together—or if online notarization is not available to you—during a time when there are restrictions on being in the same room together, you may be able to find a creative solution. For example, in the first few months of the Covid-19 pandemic, some notaries met people in parking lots instead of in closed offices. The notary watched through a car windshield as people signed their documents. After this, they found a way to exchange the documents—perhaps by leaving them on the hood of the car to stay six feet away and afterward employing hand sanitizer.
It’s complicated, but you get the point. If you must finalize a legal document in person under restrictive circumstances, there are many ways to use windows, doors, and cell phones to minimize physical exposure. Think through your circumstances and surroundings to see if you can come up with an inventive solution that meets the requirements of the law and also keeps everyone safe.
]]>Locating a good lawyer who can efficiently help with your particular problem isn’t always easy. Don't expect to find a good lawyer by simply reading an advertisement or looking online for a lawyer nearby. There's not enough information in these sources to help you make a valid judgment.
Fortunately, you have other options. Here are a few helpful strategies.
A better approach is to talk to people in your community who have experienced the same problem you face—for example, if you have a claim of sexual harassment, speak to a women's group. Ask who their lawyers were and what they think of them. If you talk to half a dozen people who have had a similar legal problem, chances are you'll come away with several good leads.
But don't decide on a lawyer solely based on someone else's recommendation. Different people will have different responses to a lawyer's style and personality. Make your decision about hiring a lawyer after you've met the lawyer, discussed your case, and decided that you feel comfortable working together.
Also, it might be hard to find a lawyer with the expertise you need through a personal referral. For instance, if your friend had a great divorce lawyer, but you need incorporation advice, the referral won’t do you much good. However, don’t give up immediately. Consider calling the divorce lawyer, explaining that they came highly recommended, and asking if the office uses a particular business lawyer. You might find the perfect fit.
Many sites, including Nolo.com, offer a way to connect with local lawyers based on your location and the type of legal case you have. You answer a few questions about your case and provide your contact information. Then a lawyer specializing in the area you need contacts you directly.
Businesses that provide services to key players in the legal area you’re interested in might also be able to help you identify lawyers you should consider. For example, if you need small business law representation, speak to your accountant, insurance agent, or real estate broker. These professionals regularly make informed judgments about business lawyers because they come in contact with them frequently.
Lawyer referral services are another source of information. However, there is a wide variation in the quality of lawyer referral services, even though they are required to be approved by the state bar association. Some lawyer referral services carefully screen attorneys and list only those with particular qualifications and a certain amount of experience. In contrast, other services will list any attorney in good standing with the state bar who maintains liability insurance. Before choosing a lawyer referral service, ask about the qualifications for including an attorney and the screening process.
However, what you might not get from a lawyer referral service is an insight into the lawyer's philosophy. For instance, you won’t know the lawyer’s communication and litigation style.
Here are a few other sources you can turn to for possible candidates in your search for a lawyer:
Keep in mind that a "general practitioner" who practices in many legal areas might not know enough about the particular area of your concern to be effective. For example, of the almost one million lawyers in America today, probably fewer than 50,000 possess sufficient training and experience in small business law to be of real help to an aspiring entrepreneur.
It can pay to work with a lawyer who already knows the field, such as employment discrimination, zoning laws, software design, or restaurant licensing. That way, you can take advantage of the fact that the lawyer is already far up the learning curve. A specialist might charge a little more, but it is often money well spent.
When you get the names of several good prospects, the next step is to talk to each personally. If you outline your needs in advance, many lawyers will be willing to meet with you for a half-hour or so at no charge so that you can size them up and make an informed decision.
Pay particular attention to the personal chemistry between you and your lawyer. No matter how experienced and well-recommended a lawyer is, you might never achieve an ideal lawyer-client relationship if you feel uncomfortable with that person during your first meeting or two.
Trust your instincts and seek a lawyer whose personality is compatible with your own. Look also for experience, personal rapport, and accessibility.
You want a lawyer who will work hard on your behalf and follow through promptly on all assignments. Ask all prospective lawyers how to contact them and how long it will take them to return your communications.
Don't overlook this step even if the lawyer is easy to talk to and seems friendly. Busy lawyers often have systems in place to streamline workflow, and they’ll appreciate you adhering to them.
Unfortunately, the complaint logs of all lawyer regulatory groups indicate that many lawyers are terrible communicators, but to be fair, some clients’ expectations run too high. Although receiving a call within 24 hours is ideal, if you must wait several days before talking to your lawyer on the phone or getting an appointment, there’s usually no reason to be alarmed. Most lawyers must juggle office time with busy court calendars, and your patience will be appreciated.
However, anything longer than a few days is usually unwarranted. At a minimum, the office should contact you and explain the delay. Attorneys know that nothing is more aggravating to a client than to have weeks or even months go by without anything happening and that it could be damaging to your case. If your calls are unreturned, consider hiring a new lawyer before finding yourself in this situation.
]]>The answer depends on your situation. If you're like most people, you won't need a lawyer to make a will. With good do-it-yourself materials, it's not difficult to make a will that takes care of basic concerns, such as leaving a home, investments, a small business, and personal items to your loved ones. And if you have young children, you can use your will to name a guardian to take care of them, as well as someone to manage any property they inherit. A will can certainly be legal even if you don't use an attorney to make it.
You may be interested to know that when lawyers draft wills, they usually start with a standard form that contains the same types of clauses contained in most do-it-yourself wills. Most attorneys put their standard will form into a computer and have a secretary type in the client's name, the names of the people the client wants his or her property to go to, and other basic information—exactly what you can do for yourself when you make your own will with software.
Making a will rarely involves complicated legal rules. In most states, if you're married, your spouse has the right to claim a certain amount of your property after your death. If you leave your spouse at least half of your property, this won't be an issue.
You need to sign and acknowledge your will in front of two witnesses. But beyond these basic requirements, you may parcel out your property however you like, and you don't have to use fancy language to do it. In short, if you know what you own, whom you care about, and you take a little time to use self-help resources, you should be fine.
Make your will today with great ease and low cost using Nolo's Quicken WillMaker. Just answer questions about yourself and your property, and print. Your document will print out with detailed instructions on how to sign in front of witnesses to make your will legally binding. WillMaker also comes with dozens of other useful documents, such as powers of attorney, health care directives, living trusts, and transfer on death deeds.
Don't, however, rule out consulting a lawyer. In some situations a lawyer's services are warranted. And you don't necessarily have to turn over the whole project of making a will; you may just want to ask some questions and then finish making your own will.
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
D.C.
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Michigan
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Montana
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Ohio
Oklahoma
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Pennsylvania
Rhode Island
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Tennessee
Texas
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Vermont
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Wyoming
You may want to talk to a lawyer if:
Also, some people simply feel more comfortable having a lawyer review their will, even though their situation has no apparent legal complications.
For more, take our quiz on whether you need a lawyer to make a will.
]]>Here are some ideas and examples for writing an explanatory letter.
A formal introduction to the letter you leave can help make it clear that what you write is an expression of your sentiments and not intended as a will -- or an addition to or interpretation of your will.
After the introduction, you are free to express your sentiments, keeping in mind that your estate may be held liable for any false, derogatory statements you make about an individual or organization.
EXAMPLE:
To My Executor:
This letter expresses my feelings and reasons for certain decisions made in my will. It is not my will, nor do I intend it to be an interpretation of my will. My will, which I signed, dated and had witnessed on __________________, is the sole expression of my intentions concerning all my property and other matters covered in it.
Should anything I say in this letter conflict with, or seem to conflict with, any provision of my will, the will shall be followed.
I request that you give a copy of this letter to each person named in my will to take property, or act as a guardian or custodian, and to anyone else you determine should receive a copy.
In a will, it is a good idea to keep descriptions of property and beneficiaries short and succinct. But this may leave you unsatisfied. You may have thought hard and long about why you want a particular person to get particular property -- and feel frustrated that you are constrained in your will to listing your wishes in a few simple words. You can remedy that by explaining your feelings in a letter.
EXAMPLE 1:
The gift of my fishing boat to my friend Hank is in remembrance of the many companionable days we enjoyed fishing together on the lake. Hank, I hope you're out there for many more years.
EXAMPLE 2:
Julie, the reason I have given you the farm is that you love it as much as I do and I know you'll do your best to make sure it stays in the family. But please, if the time comes when personal or family concerns mean that it makes sense to sell it, do so with a light heart -- and knowing that it's just what I would have done.
Learn more about Your Family’s Right to Inherit.
You may also wish to explain your reasons for leaving more property to one person than another. While it is certainly your prerogative to make or not make bequests as you wish, you can also guess that in a number of family situations, unbalanced shares may cause hurt feelings or hostility after your death.
Ideally, you could call those involved together during your life, explaining to them why you plan to leave your property as you do. However, if you wish to keep your property plans private until after you die -- or would find such a meeting too painful or otherwise impossible -- you can attach a letter of explanation to your will.
EXAMPLE 1:
I love all my children equally. The reason I gave a smaller ownership share in the house to Tim than to my other children is that Tim received family funds to purchase his own home, so it is fair that my other two children receive more of my property now.
EXAMPLE 2:
I am giving the bulk of my property to my son Jason for one reason: Because of his health problems, he needs it more.
Ted and Ellen, I love you just as much, and I am extremely proud of the life choices you have made. But the truth is that you two can manage fine without a boost from me, and Jason cannot.
If you are leaving a shared gift that contains a number of specific items -- such as "my household furnishings" or "my art collection" -- you may have some thoughts on how you'd like your beneficiaries to divide up the property. Of course, you can use your will to control the size of the share that each beneficiary gets, but that that still leaves your survivors to figure out who gets which specific assets. For example, if you leave your entire estate to be shared equally by your three children, how should your executor decide who gets the house, who gets the bank accounts and who gets the cars?
You can use a letter to make suggestions to your executor about how you want your property divided. Your suggestions will not have any legal weight; your executor is required to follow the terms of your will, not the terms of your letter. However, your letter can give your executor valuable guidance about how to distribute property, within the terms of your will.
Even if you don't particularly care who gets which things, you may want to suggest a fair way of figuring it out, such as a lottery for the highly coveted items.
Whatever suggestions you give, be very careful not to contradict any of the gifts you make in your will.
EXAMPLE:
I have left my library equally to my grandchildren. I know each of them has enjoyed many of the books over the years and I want to make sure that each receives a few favorites. I suggest that you hold a drawing to determine the order in which each grandchild will choose a book, with each then taking a volume in turn until their favorites are spoken for. The rest of the library can be distributed -- taken or given away -- in whatever manner they choose.
Whatever your plans for leaving your property, you may wish to attach a letter to your will in which you clear your mind of some sentiments you formed during life. These may be positive -- thanking a loved one for kind acts. Or they may be negative -- explaining why you are leaving a person out of your will.
EXAMPLE 1:
The reason I left $10,000 to my physician Dr. Buski is not only that she treated me competently over the years, but that she was unfailingly gentle and attentive. I always appreciated that she made herself available -- day or night -- and took the time to explain my ailments and treatments to me.
EXAMPLE 2:
I am leaving nothing to my brother Malcolm. I wish him no ill will. But over the years, he has decided to isolate himself from me and the rest of the family and I don't feel I owe him anything.
In some situations, you may want to leave a note explaining your relationship situation. For example, if you have loved ones that don’t know about or approve of your partner, leaving a note that clearly describes the importance of your relationship can clear up any possible confusion. This letter won’t change how your property is distributed by your will, but it will make your intention clear. Be very careful not to contradict the decisions you made in your will or other estate planning documents.
EXAMPLE 1:
Although Sam and I never married, he is my life partner and best friend. For eight years we have shared every aspect of our lives together, I love him dearly, and our relationship has brought me immeasurable happiness. Mom and Dad, this is why I left him a portion of my retirement accounts. —I hope you understand. Also, it is my wish that you continue to treat Sam as family after I am gone. He is a good and caring person, and I think you will all find comfort in your shared grief.
EXAMPLE 2:
Cole Jones and I were legally married on March 12, 2015. I know that some members of my family do not understand or support my relationship with Cole. However, I hope that going forward everyone can come to accept them as my spouse and will understand why I left them my entire estate.
The best way to provide a home for your pet is to use your will to name a caretaker for your pet and leave some money to that person to cover the costs of your pet's care. If you like, you can use your explanatory letter to say why you chose a particular person to watch over your animals after your death.
EXAMPLE:
I have left my dog Cessna to my neighbor Belinda Mason because she has been a loving friend to him, taking care of him when I was on vacation or unwell. I know that Belinda and her three children will provide a caring and happy home for Cessna when I no longer can.
Learn more about Pets and Estate Planning.
Use Quicken Willmaker & Trust to use your will to leave your pet to a loving caretaker. With WillMaker, you can also make a healthcare directive, durable power of attorney for finances, final arrangements, and many other useful documents.
]]>The cost of your estate plan varies with which documents you need and with the complexity of each document. These documents are the estate planner’s tools. A good estate planning attorney will recommend a combination of those tools and help you prepare a strategy to make the tools work together.
Example 1: A young couple of average wealth with small children will need an estate plan that focuses on guardianship and maximizing financial security in the event the parents pass away at a young age. This plan requires straightforward documents like a will, appointment of guardianship, and perhaps a basic living trust.
Example 2: In contrast, a wealthy individual with children from multiple relationships will need a plan that focuses on wealth management and legacy planning with careful consideration of family dynamics. This plan requires more skill in both strategic planning and document drafting, potentially involving multiple types of trusts, powers of appointment, and powers of attorney.
Keep in mind that fees for estate planning are not just a function of the time your attorney spends drafting documents. Good estate planning attorneys use their skills, knowledge, and expertise to construct a holistic plan that will help you accomplish your unique estate planning goals. You will pay more for the work of a more experienced estate planning attorney who can provide a complex plan. If you do not need a complex plan, consider finding an attorney who focuses on plans for simpler estates.
Lawyers use different types of fees for different services, and the way you pay your attorney has a big impact on how much you will end up paying for your estate plan. Lawyers typically use one of three common rate structures –flat fees, the billable hour, or contingency fees.
Flat fees are used when your attorney can quickly assess your needs and know what type of estate plan you require. Your estate planning attorney can look at your financial status, family situation, and any special considerations and know what planning tools you will need. For these common cases, your attorney may offer a flat fee arrangement—that is, a firm price to complete all of your estate planning work. You may be asked to pay this amount, or part of this amount, before work begins.
A typical flat fee estate plan includes the most common estate planning tools such as:
While this a typical estate planning bundle, not all flat fee arrangements are identical. When agreeing to a flat fee, be sure you understand what documents and services are included in your estate plan.
For plans that don’t fit into one of those common flat fee categories, your estate planning attorney will likely charge an hourly rate for the time they spend thinking about, working on, and meeting with you about your case.
When charging an hourly fee, your attorney may ask you to provide a retainer before starting work on your case. A retainer is a prepayment of fees that the attorney will draw from as they work on your case. Retainer policies vary among attorneys and law firms. Your attorney may ask for a retainer of the entire expected cost of creating your estate plan. Or, your attorney may ask for just a portion of that amount (maybe one-half) and then bill you for the rest later.
Estate planning attorneys often use a billable hour if they anticipate your estate plan will require extra sophistication in planning or time coordinating with other professionals (for example, your financial planner). If your attorney cannot confidently predict the cost of your estate plan, they will charge an hourly rate that reflects their knowledge and expertise in the estate planning field.
Location also factors into your attorney’s hourly rate. Generally, attorneys in metropolitan areas charge higher hourly rates than attorneys in less populated areas. Hourly rates also vary from state to state.
Estate planning attorneys typically do not use contingency fees. Contingency fee arrangements work best in cases where your attorney is trying to win you money in a lawsuit or settlement. For example, you agree to pay the attorney a portion (typically one-third) of whatever the attorney can get for you. If you get $15,000 in a settlement negotiated by your attorney, you would pay $5,000.
Because estate planning isn’t adversarial – you’re not fighting another person – contingency fees don’t make sense. However, probate attorneys might use a form of contingency fee for helping you settle an estate.
No matter which type of fee arrangement your attorney uses, make sure you get it in writing! Your attorney should offer you an engagement letter that details:
This is the contract between you and your attorney. If your attorney does not provide an engagement letter like this, ask for one. You and your attorney should sign the agreement before work begins.
A final factor that contributes to the cost of your estate plan is who actually performs the work. This can vary depending upon the type of lawyer or law firm you hire. If you hire a solo attorney or a small firm, your attorney typically handles much of the work on your case and will charge you their hourly rate for all the work. If you hire an attorney from a larger law firm, your attorney will typically delegate some tasks to junior attorneys, paralegals, or other staff. This is particularly true if common, formulaic documents fit your estate plan’s needs.
This division of labor isn’t necessarily a bad thing for you. Junior attorneys, paralegals, and staff have hourly rates much lower than the experienced senior attorney who conducted your first meeting. Having staff complete tasks under the supervision of that senior attorney saves you money while also allowing you to take advantage of that senior attorney’s experience and knowledge.
Knowing what goes into the cost of an estate plan, the question remains “So, how much?” As the above paragraphs reflect, the costs can vary widely. Some attorneys may prepare a simple will or power of attorney for as little as $150 or $200. On average, experienced attorneys may charge $250 or $350 per hour to prepare more sophisticated estate plans. You could spend several thousand dollars to work with such an attorney.
As with many of things these days, do-it-yourself estate planning options are available as well. Nolo and other online legal companies offer software products such as WillMaker. For less than $100, this software will help you create your own essential estate planning documents.
]]>Like everything else connected with gift giving, the kind of property you choose to give away—for example, cash, stocks, or real estate—can have tax consequences for you and for the recipient.
You can give only what's yours. If you own property together with your spouse or someone else, you must both consent before you give it away. Especially in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), it can be difficult for married people to know who owns what.
Learn more about making gifts that won't trigger federal gift tax.
If you're trying to decide what you want to give away, look among your assets for property that you expect to go up in value. If you hold onto it until your death, your estate will be worth that much more, and probate fees (and estate taxes, if your estate is large enough) will be correspondingly higher.
When you give away property that's likely to appreciate, there's another benefit for the inheritor, as well: Someone who acquires an asset by inheritance gets a "stepped-up" tax basis for the asset. That can result in lower capital gains tax when the asset is eventually sold.
But when you give someone property during your lifetime, the recipient's tax basis—the amount from which taxable profit or loss is calculated if the property is ever sold—is the same as yours.
EXAMPLE: Years ago, Vinny paid $100,000 for a piece of land. That amount is his tax basis. Now he gives the land to his niece, Jackie; her tax basis is $100,000, too. If the land is actually worth $150,000 now, and Jackie turns around and sells it, she'll have to pay capital gains tax on her $50,000 gain.
If, on the other hand, you leave property at your death, a different rule applies. The recipient's tax basis is the fair market value of the property at the date of your death. In short, if the property has increased in value since you bought it, the recipient will get a higher basis—which translates into lower taxes down the line.
EXAMPLE: If Vinny's niece inherits the land from him, her tax basis will be the market value of the property at the time of his death—whether it's more or less than his basis. If the value is still $150,000 when Vinny dies, and Jackie sells the land for that amount, she'll have zero taxable gain. In other words, Vinny's gain is never taxed.
Obviously, how these rules should affect your actions depends on your particular situation. If you want to make a gift of appreciated property now and expect to live another 25 years, you won't want to postpone the transfer until your death just for some hypothetical income tax savings.
Even if you make taxable gifts now, and use up some of your personal estate tax exemption, it may be worth it. Remember that you don't have to actually pay federal gift and estate tax until you give away or leave more than the exemption amount, which for deaths in 2024 is $13.61 million per person, and $27.22 million for married couples.
Different rules apply to charities, however. It's often a good idea to give away appreciated property to charities—you don't have to pay tax on the gain, and you get an income tax deduction for the current fair market value of the property.
EXAMPLE: Helen wants to give a large donation to a local food bank. She has several options:
Unfortunately, for most people it’s a good idea to get a new set of documents that clearly meet your new state’s legal requirements. The good news is that you’ve already done the heavy lifting—you’ve decided which documents you want and the key things you want them to accomplish for your family. It shouldn’t be difficult to get new documents that reflect the wishes you’ve settled on.
In any case, if your estate planning documents are more than a few years old, or if you’ve had any major changes in your family (marriage, divorce, new children or grandchildren) or property since you signed them, it’s probably time for a review anyway.
If you prepared a will in your old state of residence and it was valid there, then it’s probably valid in your new state as well; most states have laws that explicitly say this. So far, so good.
Still, out-of-state wills pose a couple of possible problems—or at least reasons to think about writing a new will.
Marital property rules. If you’re married and move from a community property state to a common law state, or vice versa, the rules about what you and your spouse own can change. In community property states, spouses generally own together anything they require while they’re married. (There are a few exceptions to this rule, such as property that’s inherited by just one spouse.) In other states, each spouse generally owns whatever is in has in his or her name. If you move to a community property state, the state may treat all your property as if it had been acquired in the community property state—which may not be what you and your spouse want. It’s a good idea to make new wills.
Learn more about who owns what when you're married.
You can make your own will, quickly and easily, using Nolo's Quicken WillMaker.
Executors. Your executor (also called your personal representative) is the person you name in your will to wrap up your estate after your death—to collect your property, pay the bills and taxes, and distribute what’s left to the people named in the will. A few states restrict who can serve as your executor; for example, Florida requires your executor to be related by blood or marriage, or to be a Florida resident. If you’ve recently moved south and your will names a New Yorker as executor, the Florida probate court won’t allow that person to serve. Many other states allow out-of-state executors but impose additional requirements on them. For lots of reasons, it’s often best to have a local executor. So even though your will is still valid, you may want to make a new one, naming a different person as executor.
For advice on serving as an executor, see The Executor's Guide, by Mary Randolph.
A revocable living trust isn’t subject to the same kind of rules as a will; it should be valid in any state, no matter where you signed it. But take a look to be sure it’s up to date. If you acquire real estate in your new state, you’ll probably want to hold it in the trust, so that it doesn’t have to go through probate at your death.
You can also make a valid living trust with Nolo's Quicken WillMaker.
Some states explicitly accept advance directives (also called living wills) and healthcare powers of attorney that were signed in other states. Others don't have any laws on the subject, which means that healthcare providers in your new states might balk at out-of-state documents. But as a practical matter, no matter what state law says, your family is likelier to have an easier time getting the document accepted if it’s familiar to local medical providers.
Each state has its own forms, and they vary tremendously. Some states, for example, have a combined healthcare directive and power of attorney, so that in one document you both state your wishes for end-of-life care and name someone to carry out those wishes. In other states, the documents are separate. The terminology can be different as well; in some places, you appoint a healthcare “agent,” in others, a “proxy” to act on your behalf.
Get more information about advance directives and medical powers of attorney.
If you’ve named a payable-on-death beneficiary for an insurance policy, bank account, retirement plan account, or other asset, it should be valid no matter where you live. Your agreement is with the institution that controls the asset—the bank, insurance company, or retirement account custodian. Just make sure that the institution has up-to-date contact information for both you and the beneficiary you named.
]]>Family members may not find out about a fishy estate plan until after the person has died; the influencer obviously has a strong motivation to keep last-minute changes under the radar. But it may not be too late. Family members who suspect that a deceased person was taken advantage of (and didn't simply change their mind) can take their suspicions to probate court. If they succeed in proving undue influence, the probate judge could rule that the will, or other estate planning document, is invalid.
Someone who suspects undue influence must bring a will contest in probate court, after the will-maker’s death. This can be done whether or not there is a regular probate court proceeding to probate the will and distribute the estate assets. It’s up to the complaining family member to prove that the will was made under someone’s undue influence. To do that, generally the person must prove that:
If a busybody cousin of yours regularly calls your father to give him an earful about what lousy kids you and your siblings are, and how he ought to cut you out of his will, that may influence your father (even if you hope it doesn’t). But her attempts at meddling don’t rise to the level of undue influence. She’s just offering her unsolicited opinions, and if your dad is mentally and physically independent, he can follow or disregard them. It's his choice. He might be influenced, but not unduly influenced under the law.
Some influence is fine, anyway; the mere fact that someone was influenced by another isn’t enough to throw a will into question. In one case, for example, a daughter contested her father’s will because it left property to his friends instead of to her. She had been estranged from both her parents, and alleged that her mother had exerted undue influence over her father. Her evidence? Her mother had been responsible for arranging for new wills and had spoken to the couple’s lawyer about their terms, and her father did have some dementia. A judge, however, found no undue influence. (Paine v. Sullivan, 950 N.E.2d 874, Mass. App. 2011.)
Let’s go back to your dad and your nosy cousin. What if your father were physically frail and suffering from mental confusion, and your cousin moved into his house to take care of him? If she then tried to estrange him from other family members and convinced him to go to a lawyer (especially if she chose the lawyer) to draw up a radically different will, one that left you out and put her in your place, the situation would be very different.
That situation is closer to one in which a court did find that there had been undue influence and declared the will of an elderly woman, Maxine, invalid. Maxine’s last will, unlike earlier ones, left 35% of her estate to her friend Rose, who she also named as personal representative (executor). Maxine had suffered from Alzheimer’s disease, making her vulnerable. In court, witnesses testified that Rose had controlled Maxine’s visitors and tried to keep family members at a distance by telling them not to visit and preventing them from talking to nursing home staff. (In re Estate of Vestre, 799 N.W.2d 379, N. Dak. 2011.)
People who are in a position to control a vulnerable person’s living situation or finances are the ones who have the opportunity to exert undue influence over estate planning. For example, undue influence may be exerted by a lawyer, a caretaker, or family. The will-maker may be elderly and frail, and suffering from mild dementia, but that’s not always the case. Anyone who is physically or mentally ill can be susceptible to improper influence.
It can be difficult for family members to win an undue influence lawsuit, but it happens. Because the person who made the will cannot come to court and testify about his or her reasoning and motivations, the court must rely on other witnesses. People who knew the will-maker well—for example, doctors or other healthcare providers, family members, caregivers, and lawyers or other advisers—may all be called to testify about what they know about the relationship between the deceased person and the person who is being charged with exerting undue influence.
Learn more about will contests.
Discuss your plans with your family. To avoid a court battle after your death over undue influence, take the same steps you would take to avoid other disputes: Make sure your estate plan isn’t a surprise to your family members. If you’re leaving assets in a way that will confuse or disappoint relatives, explain it now. Also consider consulting an estate planning attorney if you anticipate conflict after your death.
Take special steps if you want to leave gifts to non-family caretakers. In addition, be careful when leaving gifts to caretakers who are not your family members. Some states have laws that aim to prevent caregivers from taking advantage of the people who depend on them. You can still leave gifts to caregivers who aren't related to you, but first you may need to have a lawyer sign a statement, verifying that you're acting freely and aren't being unduly influenced. If you don't, the gift could be void—meaning the intended recipient won't get it.
Act early if you're worried about a loved one. If you're worried about a vulnerable relative being taken advantage of, acting now to prevent abuse is vastly preferable to trying to fight it later with a lawsuit. In addition, you need to have the necessary mental capacity to make a will. An incompetent person can't make or change a will. If your family member clearly isn’t able to make rational decisions (including estate planning decisions), go to court to get a guardian or conservator appointed.
For more information and steps you can take, see Nolo's section on Avoiding Family Disputes.
]]>A “survivorship period” is a standard feature of many wills and trust documents. A survivorship clause states that beneficiaries named in the document cannot inherit unless they live for a specific amount of time after the will- or trust-maker dies. This time is called a survivorship period, and commonly ranges from about five to 60 days. For example, a will might state that “a beneficiary must survive me for 45 days to receive property under this will.”
It’s unusual to see a survivorship period longer than 60 days. If a survivorship period is more than 120 days, it could jeopardize the estate-tax-free transfer of assets from a deceased spouse to the survivor. Federal estate tax isn’t a concern for most people (more than 99.5% of estates don’t owe any tax), but even without the tax consequences, a long survivorship period isn’t necessary.
If the will itself doesn’t impose a survivorship requirement, state law may. (If the will does have a survivorship period, that’s the one that will apply.) In many states, all beneficiaries are subject to a five-day (120-hour) survivorship period. The law applies to beneficiaries who inherit under wills, trusts, or state law (in the absence of a will). It generally does not apply to people who inherit under beneficiary designations (for example, because they are named beneficiaries of insurance policies or pay-on-death bank accounts) or to surviving co-owners when property is held in joint tenancy, tenancy by the entirety, or in other ways that give surviving co-owners automatic ownership of a deceased co-owner’s share.
A survivorship requirement is in effect in most of the states that have adopted a set of laws called the Uniform Probate Code or the revised version of the Uniform Simultaneous Death Act.
You can make your own will, quickly and easily, using Nolo's Quicken WillMaker.
States With Automatic Survivorship Requirements
Alaska |
Kansas |
New Jersey |
Arizona |
Kentucky |
New Mexico |
Arkansas |
Maine |
North Dakota |
Colorado |
Massachusetts |
Ohio |
District of Columbia |
Michigan |
South Carolina |
Hawaii |
Minnesota |
South Dakota |
Idaho |
Montana |
Virginia |
Nebraska |
Utah |
Survivorship requirement are designed to come into play in case of the simultaneous (or near-simultaneous) death of a will-maker and a major beneficiary—for example, a husband and wife. Such occurrences are extremely rare in real life, but the possibility worries a lot of people when they sit down to write their wills. Here’s the worry: Your assets would pass under your beneficiary’s estate plan, not yours.
An example may make it clearer. Say that in her will, Sara leaves everything to her brother Tomas, and names her favorite charitable organization as the alternate beneficiary. So under normal circumstances, at Sara’s death, her assets would pass to her brother; if he were no longer alive at Sara’s death, her assets would go to the charity. But let’s say that Sara dies, and then Tomas dies 10 days later. Without a survivorship period, he would inherit everything. The assets would then pass under the terms of his will—perhaps to Sara’s no-good nephew—not to the charity that she named as alternate beneficiary. The family would also have the added financial burden of two probate proceedings (one for Sara’s estate, another for Tomas’s estate) before the assets could be transferred to their ultimate owner.
If, however, Sara’s will contained a 30-day survivorship period, then nothing would go to her brother. Instead, her assets would pass to the charity, as she intended. Her estate plan, not her brother’s, would determine where her assets ended up.
]]>There are lots of reasons to write a will, but worrying about the state snatching your family’s inheritance is not one of them. If you die without a valid will (the legal term for this is dying “intestate”), then state law kicks in. Every state has its own rules for who inherits what.
Generally, your spouse and children are first in line to inherit. The rules vary from state to state, however; in some states, a surviving spouse and minor children share the deceased parent’s assets. (And there’s a good reason to write a will: you don’t want your eight-year-old to inherit a quarter of your bank accounts, do you?)
So do assets ever go to the state? Yes, but only when no relatives can be found. As long as your personal representative (the person in charge of wrapping up your estate) can turn up your uncle’s long-lost grandchild, the state won’t get your money. The term for this is called “escheat,” and there’s a reason you’ve probably never heard that word—escheat is very rare.
Tip: Write your will! Even if the state won’t get your money, you still want to decide who does—so don’t leave that decision up to state law. Making a will is easy, and it doesn’t cost a lot.
Most estates don’t take years and years to resolve. Usually, the only delay is the period, mandated by state law, that gives creditors time to file claims. The length of the creditors’ claim window varies from state to state; it usually starts when notice of the probate proceeding is published in the local paper and runs from three or four months on the short end to a year on the long end.
After that waiting period is over, the estate can be closed as soon as the personal representative has gathered all the assets, paid debts and taxes. (In states with estate or inheritance tax, the estate may need to get a tax clearance letter from the state department of revenue.) As a practical matter, it usually takes a few more months to get everything in order. But most estates are finished within a year.
What makes some probate cases drag on for years, then? There are three main causes:
Family fights. If a family member challenges the will, or if siblings can’t agree about how to divide a parent’s assets, then a court may have to intervene to settle matters. That means acrimony, delay and expense.
A very large estate. If the estate is so big that it owes federal or state estate tax, things are more complicated. There’s no way the estate will be settled before the estate tax return is due, nine months after the death, and many estates receive a six-month extension for filing because the return is so complex. But, more than 99.5% of estates do NOT owe federal estate tax, and fewer than 20 states impose their own estate tax.
Ongoing income. Finally, there are the estates that we hear of in the news—those of celebrities such as Michael Jackson or Marilyn Monroe. These estates continue to receive income (millions of dollars’ worth, in some cases) for decades after the death.
Tip: Probate doesn’t usually drag on for years, but it does drag on. Check into easy ways to avoid probate, and you’ll save your family some headaches.
There are a lot of scary stories out there about how much probate costs. If you believe the worst of them, you might think that your family won’t get a thing once the lawyer fees and court costs are paid. Fortunately, that’s just not true.
First of all, many wonder, do all wills have to go through probate? While state laws require that wills be turned over to the executor or filed with the probate court, many estates end up not needing probate proceedings. Generally, only assets owned in the deceased person’s name alone must go through probate. And if the value of those “probate assets” is small enough, the family can take advantage of probate shortcuts, which are less expensive than regular probate.
But even if the estate requires formal probate, costs likely to be less than 5% of the value of the estate. In most states, it costs several hundred dollars to file a probate case, a few hundred more to publish required legal notices, and a couple of thousand dollars to hire an attorney to handle everything. Throw in a few hundred more for miscellaneous costs like appraisals and certified copies of court documents. That’s it.
There are, however, two important exceptions. In these situations, probate costs could rise dramatically:
High attorney-fee states. In a few states, most lawyers charge a percentage of the value of the estate as their fee, instead of charging a flat fee or hourly rate. California is one of those states. There, probating a $900,000 estate would result in an attorney fee of $21,000—which is likely to be much, much more than the work justifies. (And the fee is calculated on the gross value of the estate—so things like mortgages are NOT subtracted.)
Litigation over the estate. If someone contests the will or accuses the executor of misconduct, costs can soar. The estate will have to hire an attorney to defend it, and if the dispute goes all the way to trial, it will cost tens of thousands of dollars.
Tip: If you live in a state where attorneys can charge extra-high fees, make sure your executor knows that those fees aren’t mandatory. The executor should find a lawyer who will charge a reasonable flat fee or hourly rate.
Some couples decide not to leave each other a significant amount of assets. Especially if each one owns some assets independently, they may agree that each will leave most assets to children from a previous marriage, or to a charity. Many couples in second marriages, especially if they married later in life, are primarily concerned with providing for children from a previous relationship.
This can work just fine, as long as when the first spouse dies, the survivor is still happy with that arrangement. But if circumstances have changed, or the survivor simply changes his or her mind, trouble can arise. That’s because state law gives surviving spouses the right to refuse to take the assets left in the deceased spouse’s will, and instead choose to take what most states call the “elective share” of the estate. This is often called “taking against the will.”
State law may give the survivor one-third of the estate, or one-half of the estate, or a year’s support, or the right to live in the family home—it varies widely from state to state. In some states, the longer the couple were married, the bigger the share the survivor can claim.
Tip: If you and your spouse don’t want to leave property to each other in your wills, go to a lawyer and discuss your plans. You’ll want to sign waivers, giving up your right to take against the will.
Just because you were always the responsible one—or just bigger and able to push your little siblings around—doesn’t carry any weight when it comes to serving as the executor (personal representative) of a deceased parent’s estate.
If the deceased person named an executor in his or her will, the court will appoint that person unless there’s a very good reason not to. (Reasons include a felony conviction or a disability that makes it impossible to do the job.) If there isn’t a will, or the person named as executor in the will cannot or does not want to serve, then the court will appoint someone. But sibling order isn’t a factor courts take into account. Instead, the court looks to state law, which sets out a priority list for who the court should appoint. In most states, the surviving spouse (or registered domestic partner or civil union partner, in states with those options) is first in line. Then come adult children.
If more than one child wants to be executor, they can agree to act as co-executors, but that’s often a situation that can lead to family friction. It’s often better if siblings agree that one of them will serve as personal representative and keep the others well informed about the probate court proceeding.
Tip: If you think you should be the executor, talk to your parents about naming you in their wills. Or if you’re a parent making your will, name the child you think is most responsible and conscientious; don’t name all your kids unless you truly think it’s best for all of them to serve as co-executors. (See "Naming Your Executor.")
Have more questions on wills and probate? Consider talking to a probate attorney in your area.
]]>Few of us need to worry about leaving our kids so much that they could comfortably choose to do nothing. But many middle-class parents do worry that certain of their children (or grandchildren) might squander an inheritance on drugs or gambling, make bad financial decisions, or be manipulated by a spouse. Some decide to cut out these problem children entirely, fearing that an inheritance would only make things worse.
But there are many options that fall between the two extremes of simply leaving money with no strings attached and leaving nothing. If you are concerned that any inheritance you leave your adult offspring could be quickly wasted, here are some steps you can take.
Parents do have the option of leaving nothing to an adult child. (Younger children may be entitled to claim part of a parent’s estate if it appears that the parent simply overlooked them—for example, by not making a new will after the child’s birth. But the circumstances are limited and depend on state law.) Except in Louisiana, children have no right to a share of their parent’s estate if the parent deliberately left them nothing.
If you decide not to leave a child anything through your will, it’s best to make a statement to that effect in the will itself. You don’t have to explain your reasoning. Just name, in the will, each of your children and state that if you don’t provide for them in the will, it’s intentional.
If you don’t have confidence that your child will make good decisions about spending inherited money, you can put those decisions in the hands of someone else. One way to do this is by leaving the money in a trust, and appointing someone as trustee (the person who controls trust assets) you think will do a good job of doling out the money on behalf of, or to, the beneficiary.
But who will you pick as trustee? It’s not an easy job. The trustee will be responsible for investing trust assets, providing accountings, and making decisions about how to use the trust money for the benefit of your child. In the trust document, you can provide guidance about spending decisions. But it’s the trustee who will have to actually say yes or no to the child’s requests. It’s a lot to ask of a friend or relative, and especially difficult for any of the beneficiary’s siblings. You can hire a professional trustee (from the trust department of a bank, for example), but that has its own drawbacks: you’ll have to pay for the service, professionals are interested only in large trusts, and you’re delegating some very personal decisions to an institution.
The responsibility will likely last for years; how long is up to you. You can set an age at which the trust ends, and whatever money remains goes to the child outright. Or you can leave it up to the trustee; if he or she decides that your child no longer needs a money manager—for example, if the child has successfully battled addiction—the trustee could terminate the trust.
One fairly simple way to control the flow of money to a child is to set up a trust and direct that the money be given out in installments—for example, one-third at age 25, one-third at age 30, and the rest at age 35. Or payments could be made yearly—it’s up to you. The person you choose to serve as trustee will have to manage the money, but won’t have to constantly make decisions about how to spend it. Instead, the trustee will simply make the distributions called for in the trust document.
An alternative to a setting up a trust, which entails legal fees, is to buy an annuity. An annuity is a contract with an insurance company that obligates the company to make payments to a beneficiary. Annuities are often used to provide retirement income, but you can direct payments to a child as well. You can arrange for regular payments of a set amount for a certain period of time, or variable payments that depend on investment of the underlying premium.
“Incentive trusts” are designed to reward behavior you want and discourage what you consider destructive. You can concentrate on the good behavior, and arrange for payments to be triggered by going to college or earning money. Or you can focus on what you want to avoid, and make payments contingent on, for example, completing an alcohol rehab program or staying free from drugs.
For the trustee, overseeing a trust like this is more complicated than exercising his or her judgment and following general principles you’ve set down. The trustee may need to investigate behavior and challenge the beneficiary’s assertions—not a pleasant task.
For the very wealthy, a “dynasty” trust may be an option. If the pretentious name doesn’t put you off, you can set up a trust that’s essentially designed to last forever, or at least as long as the money holds out. Having the money in a trust can protect it from your descendants’ creditors, spouses, and bad judgment. It can also avoid some taxes.
Needless to say, these trusts are complex and must be prepared by a lawyer who has experience with trusts, investments, and estate tax rules.
]]>You may well decide, as you wind up an estate, that you want legal advice from an experienced lawyer who’s familiar with both state law and how the local probate court works. Not all executors, however, need to turn a probate court proceeding over to a lawyer or even hire a lawyer for limited advice. If the estate that you’re handling doesn’t contain unusual assets and isn’t too large, you might be able to get by just fine without a lawyer’s help.
To determine whether or not you may be able to go it alone, ask yourself the questions below. (If you don’t know the answers, ask a lawyer—before you agree to hire the lawyer to handle things for you.) The more questions you answer with a “yes,” the more likely it is that you can wrap up the estate without a professional at your side.
The answer to this question depends on how much (if any) probate-avoidance planning the deceased person did before death. Ideally, all assets can be transferred to their new owners without probate court. Some common examples of assets that don’t need to go through probate are:
If most or all assets can be transferred outside of probate, your task as an executor might be very simple and straightforward.
Learn more about probate avoidance.
It’s best if no probate at all is required, but if that isn’t an option, figure out whether the estate can use “small estate" procedures. All states offer some probate shortcuts if the estate is particularly "small" in size (meaning the total amount of property is under a certain value) or if the estate is particularly simple. These shortcuts might mean streamlined probate procedures (often called “summary probate”) or the option to use an entirely out-of-court process, like presenting a simple sworn statement (affidavit) to the person or institution holding the asset. Every state has its own rules on which estates can use these simpler procedures.
Note that in some states, even estates that are fairly large in size can use these simpler processes for "small" estates, since some states allow you to exclude certain types of property when calculating the size of the estate.
See “Avoiding Probate: The Small Estate.”
Will contests are rare, but if a family member is making noises about suing over the estate, talk to a lawyer immediately. Probate lawsuits tear families apart and can drain a lot of money from the estate in the process. A lawyer may be able to help you avoid a court battle.
If the state where the deceased person lived has adopted a set of model laws called the Uniform Probate Code, probate should be pretty straightforward. In UPC states, most probates are conducted with minimal court supervision. A few other states have simplified their procedures even without adopting the UPC.
To learn about probate in UPC and non-UPC states, and find out which group your state is in, see “How the Probate Process Works.”
If the estate includes only common assets, like a house, bank or brokerage accounts, vehicles, and household goods, it can be a fairly simple estate to settle. Things get much more complicated when an estate includes a business, commercial real estate, or any other asset that requires special ongoing handling. You’ll probably want to consult experts if you need to manage, appraise, or sell a business; these jobs aren’t for amateurs.
If there’s enough money to pay legitimate debts (for example, final income taxes, expenses of the last illness, and funeral costs), with some left over for beneficiaries under the will or state law, you won’t have to figure out which debts to pay. If, however, your initial investigation reveals that there may not be enough money in the estate to pay debts and taxes owed by the deceased person, don’t pay any bills before you get legal advice. State law gives some creditors priority over others.
Federal estate tax is currently so high that you probably don’t need to worry about that. There’s a greater chance (though still a small one) that the estate will owe a separate state estate tax to the state where the deceased person lived or owned real estate. Thirteen states impose their own estate taxes, and a few of them impose the tax on estates that are valued at $1 million or larger. You’ll almost certainly need expert legal and tax advice if the estate must file an estate tax return, either with the IRS or the state taxing authority.
For information about state taxes, including a list of the states that impose them, see “State Estate Taxes.”
If you do decide that you need the help of a probate attorney, learn how to find the right probate lawyer, and search for a probate lawyer.
]]>If you own an account in your own name, and don’t designate a payable-on-death beneficiary (see below), then the account will probably have to go through probate before the money can be transferred to the people who inherit it.
If, however, the total value of your probate assets is small enough to qualify as a “small estate” under your state’s law, then the people who inherit from you will have simpler, less expensive options. Depending on your state’s law, they may be able to use a simplified probate procedure or simply prepare an affidavit (sworn statement) stating that they are entitled to the money, and present that to the bank. Not all states offer both options. To see what processes are available where you live, see Probate Shortcuts in Your State.
Probably the simplest way to leave a bank account to someone is to name that person (or more than one) as the “payable-on-death” or POD beneficiary. You can do it by filling out and submitting a form that the bank supplies. The money does not have to go through probate after your death, so it can be quickly and easily transferred to POD beneficiary.
After your death (and not before), the beneficiary can claim the money by going to the bank with a death certificate and identification. Your beneficiary designation form will be on file at the bank, so the bank will know that it has legal authority to hand over the funds.
If you own an account jointly with someone else, then after one of you dies, in most cases the surviving co-owner will automatically become the account’s sole owner. The account will not need to go through probate before it can be transferred to the survivor.
Most bank accounts that are held in the names of two people carry with them what’s called the “right of survivorship.” This means that after one co-owner dies, the surviving owner automatically becomes the sole owner of all the funds. Sometimes it’s very clear that the account has the right of survivorship—for example, an account titled in the name of “Roger and Theresa Flannery, Joint Tenants WROS.” (The abbreviation stands for “with right of survivorship.”)
If your account registration document at the bank simply lists your names, and doesn’t mention joint tenancy or the right of survivorship, it might be a joint tenancy account, but it might not. If you’re in doubt, check with the bank and make sure the right of survivorship is spelled out if that’s what you want.
If you and your spouse open a joint bank account together, it’s very unlikely that anyone would argue that the two of you didn’t intend for the survivor to own the funds in the account. But if you have a solely owned account and add someone else as a co-owner, it may not be so clear what you want to happen to the funds in the account after your death.
Some people add another person’s name to an account just for convenience—for example, perhaps you want your grown daughter to be able to write checks on the account, to help you out when you’re busy, traveling, or not feeling well. Or you might want to give a family member easy access to the funds in an account after your death, with the understanding that the money will be used for your funeral expenses or some other purpose you’ve identified.
Legally, however, the person whose name you add to the account will become the outright owner of the funds after your death. Unless there’s something in writing, there’s no way to know or enforce the terms of any understanding the two of you reached about how the money would be used. The new owner is free to spend the money without any restrictions. If other relatives think you had something else in mind, they may be resentful or angry if the surviving owner uses the money for personal purposes instead of paying expenses or sharing the money with other family members.
If you want someone to have access to your funds only so they can use them on your behalf, there are better ways to do it. Consider giving a trusted person power of attorney (this gives them authority during your life), or leave a small bank account and instructions for its use after your death. Don’t make someone a co-owner on an existing account unless you want them to inherit the money without any strings attached.
If you’ve set up a living trust to avoid probate proceedings after your death, you can hold a bank account in the name of the trust. After your death, when the person you chose to be your successor trustee takes over, the funds will be transferred to the beneficiary you named in your trust document. No probate will be necessary.
To transfer the account to your trust, tell the bank what you want to do. It may have some forms for you to fill out. Then the bank should adjust its records, and your account statements will show that the account is held in trust. For example, instead of getting statements addressed to Luanne O’Hara, you’ll see statements to “Luanne O’Hara, trustee of the Luanne O’Hara Revocable Living Trust dated November 12, 2009.”
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