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Attribution to ABA
Guide to Wills and
Estates American Bar
Association
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What is Estate Planning?
Estate planning is one of the most important
steps any person can take to make sure that
their final property and health care wishes are
honored, and that loved ones are provided for in
their absence. Though often overlooked or put
off in favor of more immediate concerns, a
comprehensive estate plan can resolve a number
of legal questions that arise whenever anyone
dies: What is the state of their financial
affairs? What real and personal property do they
own? Who gets what? Does a personal guardian
need to be appointed to care for minor children?
How much tax will need to be paid in order to
transfer property ownership? What funeral
arrangements are appropriate?
What is an "Estate"?
Your "estate" consists of all property owned by
you at the time of your death, including:
Real estate
Bank accounts
Stocks and other securities,
Life insurance policies,
Personal property such as automobiles, jewelry,
and artwork.
How Can an Estate Plan Help?
Regardless of your age, or the size and
complexity of your estate, an estate plan can
accomplish the following:
Identify the family members and other loved ones
that you wish to receive your property after
your death.
Ensure that your property will be transferred to
those you have identified, as quickly and with
as few legal hurdles as possible.
Minimize the amount of taxes that will need to
be paid in order for your property to pass to
others after your death.
Avoid the time and costs associated with the
probate process by utilizing estate planning
devices like living trusts and "payable on
death" bank accounts.
Dictate the kinds of life-prolonging medical
care you wish to receive should you be unable to
make your wishes known when the time comes.
Set forth the kind of funeral arrangements you
would like, and how related expenses are to be
paid.
Understanding the estate plan options that are
right for you can be a complex undertaking. The
resources in FindLaw's Estate Planning Center
can help you identify your estate planning
needs, recognize potential solutions, and locate
an experienced Estate Planning attorney to help
you at every step of the estate planning
process.
Attribution to ABA
Guide to Wills and Estates American Bar
Association
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10 Things Estate Planning
Can Do for You
The first step in planning your estate is
identifying your major objectives. Here are some
typical objectives, preliminary suggestions on
meeting them, and the chapters in this book that
discuss these options in more detail.
1. Provide for your immediate family. Couples
want to provide enough money for the surviving
spouse. They often choose to provide this income
through life insurance, particularly for spouses
who don't work outside of the home. Couples with
children want to assure their education and
upbringing. If you have children under 18, both
you and your spouse should have a will
nominating personal guardians for the children,
in case you both should die before they grow up.
Otherwise, a court will decide without your
input where your kids will live and who will
make important decisions about their money,
education, and way of life. (See chapter 6.)
2. Provide for other relatives who need help and
guidance. Do you have family members whose lives
might become more difficult without you, such as
an elderly parent or disabled child, or a
grandchild whose education you want to assure?
You could establish a special trust fund for
family members who need support that you won't
be there to provide. (See chapter 4.)
3. Get your property to beneficiaries quickly.
You want your beneficiaries to receive promptly
the property you've left them. Options include
avoiding or greatly easing probate through
insurance paid directly to beneficiaries, joint
tenancy, a living trust or other means (chapters
2 and 5); using simplified or expedited probate
available in all states, though sometimes only
for very small estates or if all beneficiaries
agree (see chapter 11); and taking advantage of
laws in certain states that provide partial
payments to beneficiaries while a will is in
probate (chapter 11).
4. Plan for incapacity. During estate planning,
most people these days also plan for possible
mental or physical incapacity. This planning is
especially important for single people. Living
wills and durable health-care powers of attorney
enable you to decide in advance about life
support and pick someone to make decisions for
you about medical treatment (see chapter 12).
Florida and a number of other states now permit
you to designate a personal guardian. In
addition, disability insurance can protect you
and your family if you should become disabled
and unable to work.
5. Minimize
expenses. Everyone wants to keep the cost of
transferring property to beneficiaries as low as
possible, which leaves more money for the
beneficiaries. Good estate planning can reduce
these expenses significantly (see final sections
of this chapter and chapters 2, 3, 4, and 5).
6. Choose executors/trustees for your estate.
Choosing competent executors/trustees and giving
them the necessary authority will save money,
reduce the burden on your survivors, and
simplify administration of your estate. It also
will reduce a court's involvement and, in many
states, avoid paying for a bond. See chapters 3
and 10.
7. Ease the strain on your family. Many people
take a burden from their grieving survivors and
plan their funeral arrangements when planning
their estate (see chapter 11). Or you may simply
want to limit the expense of your burial or
designate its place. You also can provide for
your body to be cremated or given to medical
science after you die.
8. Help a favorite cause. Your estate plan can
help support religious, educational, and other
charitable causes, either during your lifetime
or upon your death, and at the same time take
advantage of tax laws designed to encourage
private philanthropy (see chapter 8).
9. Reduce taxes on your estate. Every dollar
your estate has to pay in estate or inheritance
taxes is a dollar that your beneficiaries won't
get. A good estate plan can give the maximum
allowed by law to your beneficiaries and the
minimum to the government. This becomes
especially important as your estate approaches
the magic number of $1 million, the level at
which the federal estate tax kicks in under
current law. Chapter 8 briefly discusses this
topic.
10. Make sure your business goes on smoothly. If
you have a small business, the operation might
be thrown into chaos upon your death. You can
provide for an orderly succession and
continuation of its affairs by spelling out what
will happen to your interest in the business.
See chapter 7.
Attribution to ABA
Guide to Wills and Estates American Bar
Association
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Understanding
Intestacy: If You Die Without an Estate Plan
When a person dies without having a valid will
in place, his or her property passes by what is
called "intestate succession" to heirs according
to state law. In other words, if you don't have
a will, the state will make one for you. All
fifty states have laws (or "statutes") of this
kind on the books.
The purpose of intestate succession statutes is
to distribute the decedent's wealth in a manner
that closely represents how the average person
would have designed his or her estate plan, had
that person had a will. However, this default
can differ dramatically from what the person
really would have wanted. Even where it is known
what the person intended, no exceptions are made
where no valid will exists. Nor are there any
exceptions made based on need or special
circumstances.
1990 UNIFORM PROBATE CODE
The 1990 Uniform Probate Code (the Code) serves
as the starting point for many states' laws.
Nevertheless, the laws of different states can
vary greatly from each other and from the Code
itself. However, the Code represents the best
reference for a general discussion.
Under the Code, close relatives take property
instead of distant relatives. The classes of
relatives whose members receive property under
the Code include the decedent's surviving
spouse, descendents (children, grandchildren,
etc.), parents, descendents of decedent's
parents (siblings, nieces and nephews),
grandparents, and descendents of grandparents
(aunts and uncles and cousins). Adopted
descendents are treated the same as biological
descendents. If none of the above-named classes
of relatives include any persons qualified to
take the estate, the property "escheats" (goes
by default) to the state.
Share Of Surviving Spouse
Under the Code, a surviving spouse is either
entitled to the entire estate (after expenses
and taxes of the decedent) or a substantial part
of it. For example:
The surviving spouse is entitled to the entire
net estate if the decedent is also survived by
children who are all children of the decedent
and the surviving spouse.
The surviving spouse is also entitled to the
entire net estate if the decedent is not
survived by descendents and parents.
If parents survive but no descendents survive, a
surviving spouse takes the first $200,000 of the
net estate plus three-fourths of anything
exceeding that amount.
If the decedent is survived by descendents who
are also the descendents of the surviving
spouse, and by descendents who are not
descendents of the surviving spouse, the
surviving spouse takes the first $150,00 of the
net estate plus one-half of anything exceeding
that amount.
If the decedent is not survived by any
descendents who are also descendent of the
surviving spouse but is survived by descendents
who are not descendents of the surviving spouse,
the surviving spouse takes the first $100,000 of
the net estate plus one-half of anything
exceeding that amount.
Share of
Descendents
Under the Code, if no spouse survives but
descendents of the decedent survive, the
descendents take the entire net estate by "right
of representation."
Share of Parents
Under the Code, if a decedent is not survived by
a spouse or descendents, the entire net estate
passes to the decedent's parents equally or, if
only one survives, to the survivor.
Share of Other Relatives
Under the Code, if a decedent is not survived by
a spouse, descendents, or parents, the entire
net estate passes to the decedent's parent's
descendents (siblings of the decedent). If there
are no siblings or descendents of siblings, the
net estate goes to the decedent's grandparents
or their descendents.
Net Estate
The "Net Estate" is the amount left for
distribution to heirs after all debts, family
protections, taxes, and administrative expenses
have been paid. "Family protections" include
homestead allowances, family allowances, and
exempt property allowances.
Attribution to ABA
Guide to Wills and Estates American Bar
Association
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Estate Planning
Information
In planning your estate, it's helpful to have as
much of the following information on hand as
possible.
The names, addresses, and birth dates of your
spouse, children, and other relatives whom you
might want to include in your will. List any
disabilities or other special needs they may
have.
The names, addresses, and phone numbers of
possible guardians (if you have young children)
and executors or trustees.
The amount and sources of your income, including
interest, dividends, and other household income,
such as your spouse's salary or income your
children bring home, if they live with you.
The amounts and sources of all your debts,
including mortgages, installment loans, leases,
and business debts.
The amounts and sources of any retirement
benefits, including IRAs, pensions, Keogh
accounts, government benefits, and profit
sharing plans.
The amounts, sources, and account numbers of
other financial assets, including bank accounts,
annuities, outstanding loans, etc.
A list of life insurance policies, including the
account balances, issuer, owner, beneficiaries,
and any amounts borrowed against the policies.
A list (with approximate values) of valuable
property you own, including real estate,
jewelry, furniture, jointly owned property (name
the co-owner), collections, heirlooms and other
assets. This list could be cross-referenced with
the names of the people you might want to leave
each item to.
Any documents that might affect your estate
plan, including prenuptial agreements, marriage
certificates, divorce decrees, recent tax
returns, existing wills and trusts, property
deeds, and so on.
Attribution to ABA Guide to Wills
and Estates American Bar Association
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Estate Planning
Checklist
The initial estate planning questionnaire is
presented in a narrative form. The detailed
explanations and the space provided for answers
are designed to garner more complete and helpful
information than would be afforded by merely
filling in blanks. Click
here to view form
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Estate Planning &
Probate Dictionary
Following is an explanation of commonly used
words and phrases related to estate planning and
probate.
AB Trust - A trust designed to make sure
the personal estate tax exemption of each spouse
(currently $1.5 million) is used to the fullest
extent possible, while allowing the surviving
spouse to have use of the assets of the deceased
spouse during the remainder of the surviving
spouse's lifetime.
Administrator - A court-appointed person
who manages the estate of a deceased person who
has died without a will.
Attorney-in-Fact - An individual
designated in a power of attorney to act as the
agent of the person who executed the document.
Basic Will - A will that distributes
everything to your spouse, if living, otherwise
to your children when they reach the age of
majority (18 years old).
Beneficiary - A person who receives
funds, property, or other benefits from a will,
contract, or insurance policy.
Durable Power of Attorney for Health Care
- A written document in which an individual
designates another person to make health care
and health-related decisions in the event that
the individual becomes incapacitated.
Durable Power of Attorney for Property -
A written document in which an individual
designates another person to make his or her
property and property-related decisions in the
event that the individual becomes incapacitated
and is unable to do so.
Estate - An individual's property and
assets -- including real estate, bank accounts,
life insurance policies, stocks, and personal
property such as automobiles and jewelry.
Estate Tax - A tax that is imposed at a
person's death, on the transfers of some types
of property from their estate to heirs and
beneficiaries.
Executor - A person named in a will who
is authorized to manage the estate of the
deceased person. The executor will collect the
property, pay off any debts, and distribute
property and assets according to the terms of
the will.
Fiduciary - A person or institution that
is legally responsible for the management,
investment, and distribution of funds; i.e. the
trustee identified in a trust.
Grantor - A person who transfers assets
to another, usually into a trust.
Guardian - An individual with the legal
authority to care for another, usually a minor
child.
Incapacity - A person's inability to act
on his or her own behalf, i.e. the "sound mind"
requirement for drafting a valid will. A court
makes a finding of incapacity.
Inter vivos trust - A trust that is
created during a person's lifetime, which holds
property for the benefit of another.
Intestate - A term used when a person
dies without a will.
Joint Tenancy With Right of Survivorship
- A title that is often placed on co-owned
property. At the death of one owner, the other
owner will be legally entitled to sole
possession of the property, regardless of what
provisions are made in a will. A husband and
wife often use this form of ownership.
Living Trust - A revocable trust
established during a grantor's lifetime that is
used for the placement of some or all of the
grantor's property. In a situation involving a
married couple, a basic living trust does not
effectively use the personal estate tax
exemption of either spouse (the amount of a
deceased person's estate that may pass to his or
her heirs without estate taxes, currently $1.5
million). Because of this deficiency of a basic
living trust, an AB Trust (discussed above) is
often recommended instead to married couples
with substantial assets.
Living Will - A binding legal document
that sets forth a person's wishes regarding the
use of life-sustaining treatment in the event
that he or she becomes terminally ill or
permanently unconscious.
Marital Deduction - A federal tax
deduction that allows one spouse to pass his or
her estate to the other spouse without having to
pay estate or gift taxes.
No Will - A decedent dies without a valid
will, so that his or her estate passes to heirs
based on the laws of descent and distribution of
his or her state.
Pour-Over Will - A will that distributes
everything to a trust.
Power of Appointment - A legal right
given to a person in order to allow him or her
to decide how to distribute a deceased person's
property. A "general" power of appointment
places no restrictions on the named person,
while a "limited" or "special" power of
appointment places restrictions on who may
receive distributions.
Power of Attorney - A written document
that gives one person the legal authority to act
on behalf of another person.
Probate - A process whereby a court
reviews a will to make sure that it is
authentic, and allows others to make legal
challenges to the will.
QTIP Trust - A trust designed to permit a
spouse to transfer assets to his/her trust while
still maintaining control over the ultimate
disposition of those assets at the spouse's
death. QTIP Trusts are particularly popular in
situations where a person is married for a
second time but has children from a first
marriage for whom he/she wants to reserve
assets.
State Death or Inheritance Taxes - Taxes
that may be imposed by the state where a
deceased person lived, or where his or her
property is located after death.
Trust - A written document providing that
property be held by one (the "trustee") for the
benefit of another (the "beneficiary"). A trust
may be created during the grantor's lifetime or
after his or her death.
Trustee - A person named in a trust
document who will manage property owned by the
trust, and distribute the trust income or
property according to the terms of the trust
document. A trustee may be an individual or a
business.
Will - A document that directs how
property shall be distributed upon a deceased
persons death.
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