Kiplinger.com: Wills for the Young, Single or Broke
January 22, 2008 | Leave a Comment
Even if you aren’t rich and don’t have children or a spouse, you still need to spell out your wishes in case you die or can’t make medical decisions for yourself. Erin Burt of Kiplinger.com
Everyone needs a Plan regardless of how much (or how little) money you have, your marital status or family size, or how much (or how little) you own. Making a plan for your assets, debts and healthcare informs your family and friends of your wishes and minimizes their costs of carrying those wishes out.
Never too Young to start thinking about estate planning. You need plan for how your assets and debts will be handled after your death, a testamentary will, and a plan for how your healthcare should be handled, as well as management of assets and debts in case you should become ill or incapacitated, a living will.
A Will for the Living is necessary for the unexpected situations in life, from car accidents to medical consents. Have a detailed and specific plan for your healthcare and financial wishes prepared for a person that you trust. Saving everyone involved money, time, and heartache involved.
Your living plan should consist of three parts:
1. A durable power of attorney arranges for someone to handle financial matters on your behalf. You may choose to have an active financial power of attorney set up in case something happens to you or if you happen to be out of town. Or, you could stipulate that it only go into effect when a doctor certifies that you have become incapacitated. Without this legal form, your spouse, parents, siblings or live-in partner would have to petition a court for the right to handle things for you. All you need to do to set up a financial durable power of attorney is select a friend or family member you trust to act as your “agent” and complete a fill-in-the-blank form. You’ll then sign it in front of a notary public. Ferrell Law Firm can provide the necessary forms and serve as notary for a nominal fee.
2. A health-care proxy, or a durable power of attorney for health care, appoints a person to make medical decisions for you if you can’t do so yourself. This includes the power to consent to your doctor to give, withhold or stop any medical treatment, service or procedure, including life-sustaining procedures. Unmarried couples should also state that each partner be allowed to visit the other in the hospital in case there is a “family only” rule. Ferrell Law Firm can provide the necessary forms, serve as notary, and provide guidance for understanding advanced healthcare directives and selecting the right guardian.
3. A living will spells out the kinds of medical treatment you do and do not want if you are unable to speak for yourself. It generally applies only if a person is terminally ill and faces imminent death — or if he or she is in a persistent vegetative state. You should share your wishes with your doctor and the person you selected as your health care proxy. Although this can be a contentious issue, it’s much more likely that your wishes will be followed if you have a living will. Ferrell Law Firm can draft an appropriate living will, ensure that it is properly executed, and provide guidance for understanding advanced healthcare directives and selecting the right guardian.
A Will for End of Life is necessary because you never know when the unthinkinkable might happen. Even if you are young and healthy, creating this simple document can greatly assist your loved ones and carry out your wishes. Wihout a will, the state’s laws determine what happens to your assets and children.
A lot of married couples assume that in the event of one spouse’s death, the other will automatically inherit everything. Many young singles may think that mom, dad and their siblings will get everything if they die. Unmarried couples may assume that because they’ve been in a committed relationship for a long time, the court will give preference to their partner. And parents may think that because they have formally asked a friend or relative to care for their children in the event both parents die that they have sealed the deal. But unless all of these wishes are put into writing, they mean nothing.
If you are single, young, with no children, no more than $2 million in assets, and have no complicated wishes on how your assets should be handled, you will be fine with a simple will. However, you should consult with an attorney to competently assess your needs. Ferrell Law Firm offers a free consultation to help you determine your estate planning needs, additionally we provide lifetime 3 year review and update for all wills and estate plans that we draft.
Basically, your will should cover four main areas:
- What people or organizations will inherit your property.
- Who will serve as guardian to care for your minor children.
- Who will manage the property you leave to your minor children.
- Who will serve as executor — the person who will carry out the wishes in your will.
A member of a committed couple (married or unmarried) may choose to leave all their property to each other in case of death, or to their children, or to another party.
A single person may decide to leave everything to their parents, a sibling, a friend, a charity, or divide up their assets.
Don’t think you own anything of value? While some of your personal items be not be of much value, don’t forget that your car, bank accounts, retirement accounts and maybe even family heirlooms or inheritances are part of your estate. No matter how seemingly insignificant your possessions, it’s important to make the matter of settling your death as easy as possible on your family. A little planning now can lift a huge weight off their shoulders later.
And once you have drawn up a will, you should revisit it if your life situation changes. If you get married, divorced, have a child, your spouse dies, break up, or your assets grow to the point of falling subject to estate taxes ($2 million in 2006), you’ll need to take another look at your will. Ferrell Law Firm offers complete estate planning consultation, review and updating every 3 years for your lifetime on all plans that we draft. We can assist you in drafting Powers of Attorney, Simple Wills to more complex Trusts and Estate Plans.
CNN Money: A new baby? Write a will
January 16, 2008 | 1 Comment
A new baby? Write a will
First-time parents should name a guardian and make their wishes clear
You just returned home from the maternity ward with your first bundle of joy in your arms and the house is stocked with diapers and baby formula — now’s the time to sit down and draft a will.
While the thought of writing a will and beginning estate planning may not be exactly what you are thinking about whent you bring home baby, its is very important for you and your spouse prepare for your child’s well being in all possible ways. People today are living longer healthier lives, and are less likley to think about becoming ill or incapacitated. Young couples tend to put of writing wills and estate planning because they are already overhelmed by the role of being new parents.
Who will watch over Your Child?
If you pass away without a will - dying intestate - the state that you reside in will decide who takes care of your child. The child is placed in custody of the State immediately proceeding a court ruling of guardianship. When choosing a guardian, think not only about the quality of care provided for your child, but also guardian’s age, health and well-being. While you may emotionally want your parents to care for your child if something happens, your parents naturally may not outlive you or your child.
To get started finding a guardian for your baby, here are some questions to ask yourself from Nolo.com, a self-help law center and legal publishing company on the Web.
- Do you have confidence in the prospective guardian?
- Is your choice physically able to handle the job?
- Does he or she have the time?
- Does he or she have kids of an age close to that of your child?
- Can you provide enough assets to raise the child? If not, can your prospective guardian afford to raise the baby?
You want to consider selecting more than one guardian to serve specific roles in the care of your child. Assigning care and upbringing to one guardian and financial responsibility to another. It is your duty to your child to pick a suitable guardians that will provide necessary care and be able to work together.
Once you and your spouse have discussed and decided these issues together, you’ll be ready to meet with an estate planning attorney to draft all the necessary documents.
Drafting a will can be fairly simple, depending on the amount of assets you have and how you plan to divide your belongings among your heirs, said Mike Janko, executive director of the National Association of Financial and Estate Planning (NAFEP).
Typically, each spouse leaves all of his or her belongings to the other spouse in separate wills.
If you wish to leave valuable property or your investments to your child, you should consider setting up a living trust with your child as the named beneficary. The property in the living trust would be protected and preserved for your child. You may establish when or what an age the child may regain full control of that property, also you can stipulate how the child can spend the money.
Before you make you meet with your estate planning attorney, get out the calculator and figure out how much you and your spouse have. Estimate your assets by adding up the worth of your material property including your home, furniture and car, plus your savings and retirement accounts, then subtract your debt.
Discuss with your estate planning attorney appropriate planning levels to plan for your future wealth while staying within your current financial needs.
Where to go
If you are in the Memphis or North Mississippi area, please call us at 901-754-1340 or email to schedule an initial consultation and planning session. If not, check with the American Bar Association to find attorneys with expertise in probate and estate planning in your city.
Living Trusts vs. Wills - Part 5 (final)
December 17, 2007 | 1 Comment
It seems that a lot of you have enjoyed the series on living trusts vs. wills from viewing the amount of traffic that these posts have seen. I hope that all of my subscribers will enjoy the final post in this series. Soon I’ll have the entire list up on the resources page so that you can have everything in one place and be able to go there and download the full list in word format if you’d like.
I want to add that this list isn’t a conclusive list but just some things that you should keep in mind when doing your estate planning. As an estate planning lawyer I highly believe that living trusts are among the most efficient and best estate planning instruments available. However, they are right for everyone. When making important estate planning decisions that will effect your family for decades make sure to talk to your lawyer.
Okay, with that out of the way. Here is the conclusion to the list.
Living Trusts vs. Wills - Part 5 (final)
19. Is a living trust expensive?
Not when compared to all the costs of court interference at incapacity and death. How much you pay will depend on how complicated your plan is.
20. How long does it take to get a living trust?
It should only take a few weeks to prepare the legal documents after you make the basic decisions.
21. Should I have an attorney do my trust?
Yes, but you need the right attorney. A local attorney who has considerable experience in living trusts will be able to give you valuable guidance and peace of mind that your trust is prepared properly. In some states, qualified paralegals can now also prepare trust documents; however, they cannot give you legal advice.
22. If I have a living trust, do I still need a will?
Yes, you need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your trust. When you die, the will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your living trust plan.
23. Is a “living will” the same as a living trust?
No. A living trust is for financial affairs. A living will is for medical affairs; it lets others know how you feel about life support in terminal situations.
24. Are living trusts new?
No, they’ve been used successfully for hundreds of years.
25. Who should have a living trust?
Age, marital status and wealth don’t really matter. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. You may also want to encourage other family members to have one so you won’t have to deal with the courts at their incapacity or death.
26. Summary of Living Trust Benefits
- Avoids probate at death, including multiple probates if you own property in other states
- Prevents court control of assets at incapacity
- Brings all your assets together under one plan
- Provides maximum privacy
- Quicker distribution of assets to beneficiaries
- Assets can remain in trust until you want beneficiaries to inherit
- Can reduce or eliminate estate taxes
- Inexpensive, easy to set up and maintain
- Can be changed or cancelled at any time
- Difficult to contest
- Prevents court control of minors’ inheritances
- Can protect dependents with special needs
- Prevents unintentional disinheriting and other problems of joint ownership
- Professional management with corporate trustee
- Peace of mind
Power to You : Write Your Will!
December 10, 2007 | Leave a Comment
Death and taxes: how to prepare for one while reducing the other. A tounge-in-cheek approach.
Power of an Attorney
Even a signing mistake can weaken your will’s validity, and it only takes one greedy nephew to tie it up in court for months and lop off up to eight percent of your estate in legal fees. Skip the sites and get a flesh-and-blood attorney to draft you an airtight document.
Power of Planning
According to David T. Phillips, author of Estate Planning Made Easy, leaving everything to your spouse could mean losing 25 percent of a $4 million estate to taxes. Shelter half of that in a Bypass Trust instead: Wifey gets paid, the kiddies get their tax-exempt cash.
Power of Persuasion
Unless you want your trust-fund baby living as an “artist” in a $3 million loft purchased with your retirement, set some rules. Whether it’s graduating college, getting married, or turning 30, any milestone can determine when they receive your hard-earned dough.
Power of Protection
Real estate is a great investment…till taxes are due. To pay off death taxes imposed on your home or business, jack up your life insurance policy (otherwise you’ll lose the assets just to pay the IRS). Just $12,000 in payments can cover an estate-tax bill of $1 million!
Excerpted from http://www.maxim.com/WriteYourWill/articles/6699.aspx
Living Trusts vs. Wills, Part 4
December 7, 2007 | Leave a Comment
Continuing the Living Trusts Frequently Asked Questions theme.
13. If something happens to me, who has control?
If you and your spouse are co-trustees, either can act and have instant control if one becomes incapacitated or dies. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
14. What does a successor trustee do?
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you automatically resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done quickly and privately, according to instructions in your trust, without court interference.
15. Who can be successor trustees?
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should name more than one in case your first choice is unable to act.
16. Does my trust end when I die?
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the person or corporate trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, ex-spouses and future death taxes.
17. How can a living trust save on estate taxes?
If you die in 2007 or 2008 and the net value of your estate (assets minus debts) is more than $2 million, federal estate taxes must be paid on the excess at a rate of 45%. If you are married, your living trust can include a provision that will let you and your spouse leave up to $4 million estate tax-free to your loved ones, saving up to $900,000 in taxes.
18. Doesn’t a trust in a will do the same thing?
Not quite. A will can contain wording to create a testamentary trust to save estate taxes, care for minors, etc. But, because it’s part of your will, this trust cannot go into effect until after you die and the will is probated. So it does not avoid probate and provides no protection at incapacity.
Can I use a do-it-yourself will kit or trust kit?
November 26, 2007 | Leave a Comment
I get this question all the time by potential estate planning clients calling both my Germantown and Olive Branch offices. Here is the short answer, yes but beware. (As a side note I had a friend once who told me that he’s never heard a lawyer simply say yes before. I told him that’s because in law school virtually every exam answer starts with either “yes, but” or “no, but”. Unfortunately there is almost no straight answer for anything when it comes to legal issues.)
A well-tailored estate plan ordinarily has many more elements than can be successfully addressed in a do-it-yourself estate planning kit, will kit or trust kit. While a do-it-yourself will or trust should be valid in both Tennessee and Mississippi if it is propertly executed and witnessed, the likelihood of ending up with a proper will or trust is about the same as if you attempted to fly and land a 747 by just reading the flight manual. Heck, you might get away with it, but the affects if you don’t are catastrophic. There is simply no substitute for the experience of a professional estate planning lawyer.
One probelm with the use of these cheap (and I truly mean “cheap” here, with all the bad connotations that come with that word) estate planning kits is that people simply fill in the blanks and think that what they have done constitutes an estate plan. What many people don’t understand is that a poprer estate plan or trust must actually be funded. An estate plan is not complete simply because a piece of paper was signed. Assets must be transfered properly or else the plan is worthless. Also, all types of assets that the person owns or controls that pass to beneficiaries independently of a will, such as retirement plans and life insurance, must be considered. The beneficiary designation forms for these assets will not be found in a kit.
In my years of experience I’ve found that people who believe that they need a “simple” estate plan are often surprised to find that they have failed to consider critical points, such as the possibility of simultaneous deaths and the significant benefits that trusts offer.
A do-it-yourself kit may pass muster from a basic legal standpoint if executed properly, but its success should not be measured by whether the resulting documents are legal, but by whether one’s objectives are accomplished.
Living Trusts vs. Wills, Part 2
November 20, 2007 | Leave a Comment
I’m continuing the series on Living Trusts versus Wills that I started last week. These are more questions that our Memphis area law firm estate planning lawyers answere frequently for our estate planning clients.
I’d love to hear your specific questions or comments that about Mississippi Law or Tennessee Law. If there is a particular topic that you would like to see covered please contact us and we’d be happy to address it.
4. Is it true that joint ownership with rights of survivorship avoids probate?
Not always. Joint ownership can just postpones probate. With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate. But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the heirs.
Be on the lookout for other problems though. For example, when you add a co-owner, you lose some control. Your chances of being named in a lawsuit and of losing the asset to a creditor are dramatically increased, even if you have done nothing yourself. There could be gift and/or income tax problems. And since a will does not control most jointly owned assets, you could end up accidentally disinheriting your family.
With some assets, particularly real estate, all owners must sign legal documents to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner” — the court–even if the incapacitated owner is your spouse.
5. Why would the court get involved if someone is incapacitated?
If you can’t conduct normal business due to some type of mental or physical incapacity (Alzheimer’s, stroke, heart attack, etc.), only someone appointed by the court can sign for you - even if you have a will. (Remember, a will only becomes effective after you die.)
The court can be like a dreaded disease. Once it gets involved, it usually stays involved until you either recover or die. The court and it’s appointee, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming and difficult to end if you recover. Worse yet this process does not replace probate at death - by just having a will (or worse nothing at all) your family could have to go through the court system twice!
6. Does a durable power of attorney prevent the court’s involvement if you become incapacitated?
A durable power of attorney is a document that appoints someone and gives them the authority to manage your financial affairs if you are unable to do so. A major probelm here in Memphis and in Mississippi however that we lawyers come across is that many financial institutions will not honor one unless it is on their form. And, if accepted, it may work too well — giving someone a “blank check” to do whatever he/she wants with your assets. A durable power of attorney can be very effective when used with a living trust, but risky when used alone.
Celebrity Estate Planning Blowups
November 12, 2007 | 2 Comments
I received the following article courtesy of WealthCounsel. I’m including it here for all of my Tennessee and Mississippi Estate Planning clients who might find it interesting.
The Worst Estates of the Year
Life is short-sometimes tragically so-and an estate plan is never truly
finished. The year’s most notable estate blowups were all sadly avoidable, if
only they had left clear intentions for everyone on their list.
Anna Nicole Smith
A $500 million baby . . . maybe
Only 39 when she died in February of an accidental overdose, Anna Nicole
Smith had not updated her 2001 will that named her son, Daniel, who had died of
an accidental overdose several months earlier, as sole heir. Probate court
will most certainly award her modest assets of roughly $700,000 to her only
surviving child, daughter Dannielynn. As for her share of billionaire
ex-husband J. Howard Marshall II’s estate, the court will likely name her daughter
the rightful heir of close to $500 million.
But where that money ends up will depend on the man who controls it-either
Dannielynn’s biological father, Larry Birkhead, or her mother’s lawyer and
companion, Howard K. Stern, who is named as executor and is likely to be a
trustee. Dannielynn’s financial future would have been safer if her mother’s
will had spelled out full provisions for a trust, says James Ferrell, a
trusts-and-estates attorney in Memphis, Tennessee. Ferrell has handled many estate
disputes involving people who have omitted certain children from their
wills, but the Smith case is virtually unprecedented. In most states, if a
wealth holder wishes to prevent a biological child from inheriting assets, it
must be stated in the will. Otherwise laws of intestacy will assume the child
was omitted unintentionally.
Wills in Tennessee
November 8, 2007 | Leave a Comment
Courtesy of the Shelby County Tennnessee Probate Court, http://co4.shelbycountytn.gov/court_clerks/probate_court/wills.htm
What is a Will?
A will is a legal document by which you instruct what is to be done with your property after your death. It must be properly signed and properly witnessed. Any person who is of sound mind and is eighteen (18) years of age may make a will in Tennessee.
What Happens If You Do Not Have a Will?
If you die without executing a will, Tennessee law will govern how your property is distributed.
- If you are married and without children at your death, your estate will pass entirely to your surviving spouse.
- If you are married and have children, your estate will pass to your children and your surviving spouse.
- If you are unmarried but have children, your estate will pass entirely to your children.
- If you are unmarried and without children, your estate will pass to your parents if they survive you, otherwise to your brothers and sisters.
- Ultimately, if no family member is ascertained, the estate will pass to the State of Tennessee.
What Should Be Included In a Will?
Generally, your will should:
- appoint a Personal Representative (sometimes called an Executor or Executrix) to carry out the terms of your will and the laws that apply to all estates;
- provide for how you want your property to be distributed (include real estate, bank accounts, savings bonds, stock, furniture and personal items). You should consult an attorney about the advantages of setting up a trust to minimize taxes and control how and when your property is received by the beneficiary. Note: if you hold any property jointly with right of survivorship, the joint tenant will automatically assume your interest in the property, and therefore, the property should not be listed in your will as an asset of your estate;
- appoint a guardian for your minor or incompetent children to ensure their well-being;
- address any other personal concerns, such as funeral arrangements and the like.
Is a Handwritten Will Legal?
Yes. A handwritten will is legal in Tennessee, provided that the document is entirely in your own handwriting and is signed by you. This is known as a “Holographic Will.” Following your death, the authenticity of your handwriting must be proven by two (2) individuals.
A will is a very technical document. While a handwritten will may work well for you, there is a high likelihood that it may not work well for you. It is strongly recommended that such a document be prepared by an attorney who has experience in this area of law. If your will is invalidated at your death for whatever reason, Tennessee law will govern how your property is distributed as if you had died without a will.
How Do You Revoke Your Will?
Your will does not take effect until your death, therefore you may revoke it at any time. This may be accomplished by:
- physically destroying it;
- by signing a document expressly revoking your will; or
- by signing another will
If you get divorced after you sign your will, the will is automatically revoked as to any provision concerning your ex-spouse. If you marry and have children after signing your will, the entire will is automatically revoked. Therefore, it is important to remember that after these events occur, a new will must be drawn.
Other Related Considerations
Your may also want to consider consulting an attorney about devising a “Living Will” or a “Durable Power of Attorney for Health Care.”
A “Living Will” is a legal instrument that expresses your considered decision to refuse medical attention should you become terminally ill and unable to communicate your wishes.
A “Durable Power of Attorney for Health Care” allows you to appoint a person to make health care decisions for you should you be unable to do so for yourself.
Advance preparation of these instruments could spare you and your family considerable pain.
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Do You Really Need a Living Trust? (Step 1 - Part II)
November 7, 2007 | Leave a Comment
Now that we have a general idea of what a living trust is…do you really need one?
Many estate planning lawyers will tell you that essentially everyone would be better off with a trust instead of a will, but I disagree. You need to remember that there are some downsides to having a living trust. First, your legal fee will be higher. Even for simple trusts you’re probably looking at a four-figure fee instead of a three-figure fee for a will. Then there is some legwork involved in regards to “funding” the trust (or re-titling your assets), which is a step that you do not need to take with a will. This can be a significant time commitment if you have a bunch of accounts spread out among many different financial institutions.
So when is the higher cost and extra work warranted?
First, I would say that if you own real estate in another state (many of my clients have a condo in Florida or a cottage on the Cape) then the need for a living trust is nearly a given. The reason is that if you die without a trust then your family will have a “double probate” situation…a full-blown probate process in Connecticut and the other state. This is an administrative headache that you should try to avoid at all costs.
Second, if keeing your estate planning private is a priority then a living trust is the best way to go. Marilyn Monroe’s Will is all over the Internet for everyone to see because a will is a public document after you die. Literally, anyone can walk in off the street, go to the probate court and ask to see a copy of your will without giving a reason why. Trusts are private documents.
Finally, if you have a relatively small and straightforward estate then going through probate shouldn’t be a big deal, regardless of the bad press that the Connecticut probate court system has received over the last few years. If you have a large and complicated estate then you should at least consider setting up a living trust.
Please remember the following important facts about trusts: (1) even if you have a fully-funded trust, upon your death your successor trustee will still need to file a few documents with the probate court, including an estate tax return even if no tax is due, (2) a simple living trust, with no credit shelter planning, does not avoid estate tax, and (3) even if you have a trust the probate court will still be entitled to charge a probate fee based on your gross taxable estate, which most of my clients are unpleasantly surprised to hear. In other words, living trusts do not avoid probate court fees.
Hopefully this post and the previous one has given you a better idea of what trusts are and how they work. But you should not determine whether you need one or not until you sit down and discuss them with an estate planning attorney.
