Estate Planning Frequently Asked Questions (FAQs)
Below are a few of the questions asked most by our clients. Contact us for help on these and other legal matters.
What is proper estate planning?
There are many ways to define estate planning. We believe that estate planning is much more than the documents that facilitate your plan or determining who gets your assets when you are gone. We believe it includes the following concepts:
- Controlling my property while I am alive and well
- Planning for me and my loved ones if I become disabled
- Give what I have to whom I chose, when I chose, and in the manner I chose
- Assuring that my wisdom is transferred along with my wealth
- Controlling costs
Your family, goals and circumstances will help determine the best method of planning your estate. No two situations are alike. As a result, a proper estate plan must be tailored to your particular circumstances. For a free initial consultation to help you develop your estate plan, contact us today.
Do I Need a Will or Estate Plan?
Many people incorrectly assume that their property will somehow be distributed according to their wishes. Others assume that their possessions are not valuable or complex enough to require solid planning. However, every person needs and deserves an estate plan that captures their goals and specific ideas for the distribution of their assets at their death. Remember, if you do no have a Utah Will, Utah law will dictate how your assets will be distributed. Only through careful preparation and the help of a skilled estate planning attorney can you truly ensure that the plans you have for your own property and heirs will actually be carried out if you are disabled or pass away.
What is a Will?
A will is a fairly simple legal document that only becomes effective when you die. It designates a person, called a Personal Representative or Executor, to carry out your instructions in the Will at your death. It names the relatives, friends, or charities who you want to receive your assets and any rules for distribution of those assets to children or others.
A will can also name a guardian to take care of your minor children. It also can give directions regarding the burial or cremation of your remains and detail instructions about a memorial service. A will requires formalities in its creation and modification to be valid. Mistakes in the fromalities are easy to make and can invalidate it, so it is recommended that you consult a competent estate planning attorney.
All Wills must be probated. Probate is the legal process (litigation) to validate the Will and transfer the estate’s assets. Probate in Utah can be formal (requires court oversight) or informal. If the Will requires formal probate or if disgrunteled relatives contest the Will or the appointment of the personal representative, formal Probate will be required. Formal probate involves going to court and getting a judge’s permission to distribute assets under the will. In some circumstances, the probate process can be lengthy and expensive. Probate will take months, if not years, to complete.
A successful will-based estate plan requires careful planning with an experienced attorney to minimize the risks associated with probate.
What is a Trust?
A trust is a legal agreement that holds property in the name of a trustee on behalf of the beneficiaries. The trust can contain myriad of terms and conditions that control how the trust property is maintained and distributed.
There are many types of trusts. The most common is a Revocable Living Trust (“RLT”), which is created during your lifetime. With an RLT, you retain control of trust property and you reserve the right to change or revoke the trust while you are alive and competent. Assets that are transferred into the trust, are not probated. Instead, the assets are controlled by the trustee or successor trustee according to the terms and conditions of the trust.
Trusts also make it possible for you to plan for mental disability. It is possible, with careful planning with a skilled estate planning attorney, to determine in advance who will take control of your assets for you and any dependents if you become disable. You may even control how your mental disability is determined. That level of control is not possible will a Will-based estate plan.
Unlike a Will, an RLT is a private document and usually only the trust beneficiaries may read it. A well-drafted trust that is fully funded with your assets will normally avoid probate. Because of the ability to control the trust assets and avoid the costs, delay, and publicity of Probate, trusts are an exceptional estate planning tool.
What are the pitfalls of Joint Tenancy?
Sometimes people try to do estate planning by transferring their assets such as a house, bank account or brokerage account to a relative or friend by placing that person on the title to their home or bank account as a “joint tenant.” This can lead to serious unintended consequences such as immediate gift tax consequences. Furture unitended consequences may be lurking as well such as the asset being subject to the joint tenant’s creditors and adverse capital gains tax. A joint tenant could actually force a sale of your asset or totally deplete the asset for their own benefit.
Can I avoid unnecessary taxation of my estate?
Yes, with proper advance planning! However, without a good estate plan, your estate could be subject to heavy income tax and/or estate (death) taxes when you die. For instance, post-death distribution of retirement accounts such as 401(k)’s and IRA’s must follow complicated rules to take advantage of the best tax-deferral options. Additionally, if your assets are large enough, your loved ones could have to pay up to 55% of their inheritance subject to estate tax to the IRS at your death if you do not start planning now. Using an attorney with expertise in this area can be critical.
Do I need a trust?
There is no right or wrong answer necessarily. Whether a trust is appropriate in your circumstances depends upon a number of factors. Many people believe that whether you need a trust depends upon the size of your estate. In our experience, the size of your estate is a factor to consider, but is not the only factor. Your goals and objectives are often times much more determinitive than the size of your estate. Trust are more expensive initially than a Will. Trusts, however, are usually less expensive to administer after your demise. A trust offers extensive planning options that are simply not available with a Will. If your goals include any of those planning option: disability planning, remarriage protections, creditor protections, etc., then a Will will be insufficient and a trust will be necessary.