Society of Certified Senior Advisors: estate planning

Showing posts with label estate planning. Show all posts

Tuesday, May 9, 2017

Probate and Estate Planning Considerations for Seniors

Although estate planning may seem confusing and daunting, not having your affairs in proper order can create issues for the loved ones you leave behind and mean your wishes aren’t carried out as you desired. If you don’t have an estate plan, you need to create one as soon as possible. If you already have an estate plan, be sure your plan is up to date and accurate. This is especially true for seniors, who are older in age.

Probate and Estate Planning

Probate is the legal process for transferring your assets to your heirs and is based on your state’s laws. Some estate plans are sufficient on their own and don’t require probate; however, each state sets limits for estates that can be transferred without going through probate. For some states, the limit is only a few thousand dollars, but other states have limits up to $200,000.

Probate is also utilized as a public notice of death. Creditors can file claims against an estate to be paid, and the remaining assets of the estate go to the heirs. If a will doesn’t exist to name heirs, the state will decide how to distribute the assets.

Avoiding Probate

There are ways to avoid probate. Some people wish to avoid probate because of the cost of legal fees, which can cost thousands of dollars and are usually paid from the estate. It’s also a long process, lasting between six and 12 months. Those who appreciate privacy may also wish to avoid probate, as the proceedings are public.

However, you usually need a lawyer to avoid probate, which is sometimes more costly than the legal fees associated with probate. Trying to avoid estate taxes is another invalid reason for avoiding probate because the estate and gift tax exemption is $5.49 million per individual in 2017. A positive attribute of probate is that it’s a final decision for how your estate will be distributed, so it cannot be challenged in the future.

If you decide you’d like your heirs to skip probate, you can have your assets put in a revocable living trust for your heirs. According to Bankrate, “A trust is a legal document that authorizes a trustee, who can be the grantor (or the creator of the trust), to hold title to and manage assets.” A revocable living trust allows you to change or cancel the trust at any time, as long as you’re alive. Also, since a living trust doesn’t go through probate, it’s more private.

Bank accounts for individuals have FDIC protection against losses for up to $250,000 per account, which may not be enough for some people. However, a living trust increases the protection amount. Each beneficiary named in a living trust adds an additional $250,000 in protection, and that maxes out at five beneficiaries, bringing your total to $1,250,000. For six or more beneficiaries, the rules get a little more complicated.

Downfalls to a Living Trust

Note that a living trust has disadvantages. If you have a simple trust, the costs may not be too bad and can be less expensive than a professional executor. On the flipside, a complicated estate can push the cost up to $10,000, which is substantially more than probate. You could complete a living trust online; however, trusts can get tricky, so it’s best to consult with a lawyer. Also, unlike probate, there’s no time limit on a legal challenge to a living trust.

Lastly, if you forget to transfer the title of your property to a trust before passing, then the portion of your trust that gives away your home or car is worthless. A quitclaim deed is a common way to transfer property from one individual to another when no money is involved. As the name entails, a quitclaim deed releases any ownership claims an individual may have in a piece of property. “Families often use quitclaim deeds to transfer a property between family members, such as from parents to a child,” says Realtor.com.

Be sure that you research and fully understand each part of estate planning, as well as living trusts and quitclaim deeds. Since each state’s laws can vary, know your specific state’s handling of estate planning, living trusts, and quitclaim deeds. Finally, you should speak to a qualified attorney for the most accurate and assured legal advice.

	- By Julie Morris
Ms. Morris is a life and career coach who strives to help others live the best lives that they can. She believes she can relate to clients who feel run over by life because of her own experiences. Ms. Morris spent years in an unfulfilling career in finance before deciding to help people in other ways.

Sources

“What Is a Quitclaim Deed?,” Realtor.com.

“California Quitclaim Deed Form,” DeedClaim LLC.

“6 surprising facts about a living revocable trust” Bankrate.

“Probate, Wills, Executors: Your Estate Planning Questions Answered,” Next Avenue.

Thursday, March 2, 2017

Executor of Will Can Be a Big Job

Executor of Will Responsibilities

Make sure you know all the duties so you feel confident taking on the responsibility.

When a person writes their will, they likely will choose an executor—someone they trust to carry out their wishes. Ideally, this is someone who can handle the responsibility of dealing with financial matters and legal issues. An executor must be scrupulous and diligent in carrying out their duties.

Executing a will can be a big job, depending on the size of the estate, and can take a year to make sure that you have performed all the duties. If you’ve been asked to be an executor, it’s important to understand what you’re getting into and know whether you have the time and commitment to do it.

Who Can Be an Executor?

Most people choose a spouse or child, although this can be a difficult situation if the spouse or child(ren) is too distraught to perform a duty that requires discipline and concentration.

Some people choose trusted friends or relatives, or a third party like a bank, trust company or professional who has experience dealing with estates. Two resources for finding a professional are the National Association of Estate Planners and Councils (naepc.org) and the National Academy of Elder Law Attorneys (naela.org). One downside of choosing a professional is the fees, which can be large. On the other hand, an institution provides expertise and will likely outlive any human executor. If you don’t name an executor, the court will appoint one.

You may appoint more than one executor. Many people choose both a professional and someone in the family who knows where to locate bank account numbers and necessary documents. The problem with appointing more than one person is possible conflicts between the executors when it comes to agreeing on decisions. For example, appointing all of one’s children as co-executors could be troublesome if they disagree about hiring a lawyer to help or what needs to be sold. If there are several beneficiaries who don’t get along, such as quarreling siblings, experts advise hiring a professional.

Executor Responsibilities

If you’ve been asked to be an executor, become acquainted with the required responsibilities. To save time and stress, you can use the estate’s assets to hire a lawyer who can do the legal work. Many experts advise this course of action because someone unfamiliar with the law can make mistakes. Errors can be costly because you may be held liable. An attorney in the right field (see sidebar) will be familiar with the probate court process and make sure everything is done correctly and on schedule. The disadvantage is that the lawyer’s costs reduce the amount of the beneficiaries’ inheritance.

Hiring a Lawyer

What lawyer should the executor hire to help with probate? It's critical to find a lawyer who's competent in estate law, preferably in the probate court that's handling your will. The executor may be tempted to use the deceased’s regular lawyer, or a friend or relative who is a lawyer. But if that lawyer primarily handles business transactions, say, or practices in another state, they may not be familiar enough with estate law in your area to handle the job efficiently.

American Bar Association

An executor’s duties include:

Get the will. The first step is to find the will and determine the contents. Hopefully the deceased will have told you where it is or the name of the lawyer who drafted it.

Go to court. You must file the will with probate court, although you don’t necessarily need to use probate court to settle the estate. That decision depends partly on state laws. Most states allow a certain amount of property—for example, $100,000 worth—to pass free of probate or through a simplified probate procedure. Many states require that within 10 to 30 days of receiving the will, you deposit the original will with the probate court in the county where the person lived.

Find beneficiaries. From the will, determine the beneficiaries and notify them.

Determine assets. Take an inventory of the deceased’s assets—whether real estate, securities or something else. To distribute the money to the beneficiaries, you may have to sell some of the assets, such as stocks, bonds or the deceased’s car. To pool the assets together, it’s a good idea to set up a bank account for the estate, from which you can distribute the assets.

Pay bills. From the estate’s assets, you will need to pay taxes, funeral costs, credit card bills, utility bills, mortgage payments, homeowner's insurance premiums and any other debt. Note that the executor is not personally liable for the deceased's debts. It’s important to keep a record of what you paid so that you can submit a full accounting to the court at the end of the process.

Notify all parties. You’ll need to formally end the deceased’s financial life. This includes notifying banks and government agencies—such as Medicare and the Social Security administration—of the death. Stop the deceased’s mail delivery and cancel any other contracts that may operate on a continuing basis, such as credit card or insurance payments.

File tax return. Cover the beginning of the tax year to the date the deceased died and include estate and income taxes. State and federal estate tax returns are required only for large estates.

Distribute assets. After paying all bills, pay the beneficiaries.

Go back to court. Once you have fulfilled your duties as executor, file a final report with the probate court, at which point the court will close the estate.