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I. Wills

• If I set up a Living Trust, do I still need a Will?
  Yes. Your Will serves as a back-up for assets that you either don`t or are not able to transfer to your Living Trust. Any asset not transferred to the Trust will not pass under the terms of the Trust document. However, in your Will, you can include a clause that names someone to inherit assets that you haven`t left to anyone else.

  If you don`t have a Will, any asset that isn`t transferred by your Living Trust will go to your closest relatives in an order determined by state law. These laws may not distribute your assets in the way you would have chosen. The Will is how you can assure that your assets that are not covered under the Trust are distributed according to your wishes.

• What is a Will?
  A Will is a written instrument containing directions for how the property of the person making the Will (called the testator) shall be divided on his or her death. State law generally requires that the Will be signed by the testator and by at least two witnesses who have no interest in the property passing under it. The testator must state in the presence of the witnesses that the instrument is his or her Will. He or she must also be "competent" (not insane, senile or mentally disabled) and not acting under duress or under the controlling influence of any person. A signed instrument purporting to be someone`s Will is not officially recognized until the court having jurisdiction over the instrument declares it to be a valid Will after examining it and the circumstances surrounding its execution. The process by which a court determines whether a Will is valid is known as "probate".
• What is the difference between a Will and a Trust?
  A Will and a Trust serve different purposes. Most people don`t have either one. A Will and a Trust are similar in the effect that both let you designate exactly how you want your assets and other personal property to be distributed to your friends, family and other loved ones after you die. The difference between a Will and a trust is that a Will probates through probate court, but a trust doesn`t. A Trust is administered outside of the probate court after you die.

  People prepare a trust to avoid paying these probate taxes. Generally, you would not need to prepare a trust to avoid probating your Will if you net assets amount to less than $675,000. In this case, a Will would serve the same purpose as a trust because the federal tax laws do not tax a person`s asset for the first $675,000 after they die.

• Who can prepare a Will?
  Anyone of sound mind and body can prepare a Will. This generally means someone who is an adult—over the age of eighteen or the age of majority of the state where the peson resides—as well as someone who is not declared to be legally incompetent by a state or federal court. A minor cannot prepare a Will, nor can anyone who has a guardian appointed for them.
• What happens if a person dies without a Will?
  If a person dies without a Will, he/she will be considered to have died "intestate". In this case, property will be distributed by the states laws. Often, the surviving spouse will get half the estate and any children will inherit the other half. If a person dies without a Will and without any trace of any heirs, all property will "escheat" (be turned over) to the state.
• What happens if a person dies with a Will?
  In general, after the testator (the person with the Will) dies, the person named in the Will to carry out its terms (an "executor" or "personal representative") files the original Will and other legal papers in a probate court, which is usually located in the county where the testator lived. The executor signs a petition to the probate court describing the circumstances under which the testator executed the Will, naming his or her heirs (the persons who would receive the decedent`s estate), describing the property interests passing under the Will, the legacies received by the beneficiaries and asking the court to admit the Will to probate. Unless they specifically agree to waive notice, each of the heirs must receive formal legal notice that a document purporting to be the Will has been offered for probate. The family members are given an opportunity to appear in court to contest (object to the Will); if they do not contest the Will and the probate judge finds the Will in order, he/she generally admits it to probate and formally appoints the executor. After probate, it is usually difficult for family members to upset a Will. In most states, it is possible for very small estates to be distributed through "summary administration" or "small estates" procedures. These procedures are less formal than traditional process of probate.
• What is an executor?
  And executor is the person who makes a list of all the assets and debts of the estate and seeks to carry down the directives of the Will.
• Do executors get paid?
  Usually executors are paid according to state laws that provide for commissions depending on the size of the estate. However, they may be paid an amount based on the courts assessment of reasonable compensation. If a person expects their executor to serve without compensation that should be stated in the Will.
• What happens if a named executor is unable or unwilling to serve?
  If the named executor is either unwilling or unable to serve when the Will goes to probate, the court will appoint a new executor. Beneficiaries of the Will can file a petition with the court suggesting a particular person as their choice for executor.
• Should I prepare a short Will or a long one?
  A non-complicated (short) Will is used to give all assets equally to one or more heirs.

  A long Will provides much greater flexibility in how assets are divided, includes a disinheritance clause, and a Testamentary Trust provision (used to manage assets of minor beneficiaries so a guardianship does not have to be established). If you are a single person or one with uncomplicated asset dispursement issues, a short Will could possibly fulfill your needs. However, if you have many assets, are married, have children or have other more complicated asset dispursement issues, you may want to consider using the long Will instead. It may also be in your best interest to seek the advice of an estate planning attorney in your area.

• What are some of the various types of wills?
  There are various types of wills. An ambulatory will is a will that a person can change during that person`s lifetime. A double will is one in which two people join together, each leaving that person`s property and estate to the other person. The surviving person then owns both estates. This type of will is also sometimes called a "counter will," "joint and mutual will," or "reciprocal will." Holographic wills are ones that are entirely handwritten, dated and signed by the person whose will it is. A living will is one that authorizes the withholding or cessation of life-sustaining medical treatments from an individual, who has been too incapacitated due to a life threatening and debilitating illness to make that decision. A qualified attorney can help you decide which type of will is best for you.
• What is a "holographic Will"?
  A "holographic Will" is a Will written entirely in the handwriting of the Testator (person preparing the Will). A single piece of paper that says nothing more than "This is my last Will. I give everything I own at my death to XXXXX", that is dated and signed is considered to be a valid Will. However, if any part of this writing is not in Testator`s own handwriting, it is considered invalid. A holographic Will does not have to be witnessed. However, upon Probate of the holographic Will, the court will require a person familiar with the Testator`s signature to prove the genuineness of the Will.
• Who should make a Will?
  Each year a large number of people die without Wills leaving major decisions in the hands of the state. Every adult person should seriously think about making a Will. Wills are especially important for parents of children who are under eighteen, since they can name a guardian in a Will and make arrangements for the children`s financial support.
• What circumstances dictate the need for a Will?
  A person`s age, marital status, and financial holdings weigh heavily into the decision to draft a Will. In general, every adult should think about making a Will, and the need grows as your assets and family ties increase. Wills are especially crucial for parents with children who are minors (under 18 in most states), since you can name a guardian in a Will and make arrangements for financial support of children even past the age of 18.

  Couples also have each other to think about. If your spouse dies without a Will, state law might force you to split the assets of the estate (the deceased`s property) with your children, leaving you without enough assets to support yourself. Also, any property going to a minor child in such a situation would be subject to an expensive court-appointed guardianship, which could eat up any inheritance. In addition, in some states, if you were married and childless, your parents could split your property with your spouse.

• Do my children need a Will?
  No. Minors are not allowed to execute a Will. Young, childless adults with few assets may be able to hold property in joint names or to pass property automatically at death to named persons. But, it is still a good idea for the young, childless adult to draft a Will to assure that his/her needs are carried out as they desire with as few complications as possible.
• Who should witness the signing of my Will?
  You should sign your Will before at least two people who are not family members or people designated in you Will as beneficiaries. You also should sign your Will before a notary. This way it can be submitted to the probate court as a legally valid document after your death, and it will reduce the possibility of someone challenging the Will because it will be under the protection of the probate court.
• What should I do with my Will after I sign it?
  You will need to place the original Will in a safe place, and make several other copies to give to friends and/or family members for safekeeping in case the original gets lost. The important thing to remember is to keep at least one copy of your Will in a safe place your attorney and/or chosen executor can readily access, in case the original cannot be found. A good place to keep a Will is in a bank safe deposit box or at some other institution where there is less chance of your Will catching fire, being stolen or otherwise getting destroyed.
• Whom can I choose as the guardian of my minor children?
  You can designate anyone you wish to be a guardian for your minor children as long as the designated person is an adult and legally fit to be a guardian for minor children. The guardian does not necessarily have to be a family member. However, after you are gone this person will be legally responsible for your minor children until they reach the age of majority. The guardian can be a man or a woman, and you can designate more than one person (e.g., a married couple). Most importantly, you should feel comfortable putting your children in the guardian`s care should the need arise. You specify your guardian(s) in you Will, like you would specify your personal representative or executor. You can even choose the same person to be both th executor and the guardian of your children.
• Is it necessary for me to have the Executor of my Will bonded?
  The only time bonding your Executor is necessary is if you do not totally trust him/her with all of your assets. If you have the Executor bonded, it normally costs the estate about $200 to $400 in an estate of $200,000. Remember, it is the Executor`s duty to consolidate the Estate, which usually means liquidating your assets into cash and eventually distributing them to the beneficiaries. At some time, the Executor will have a substantial amount of cash available to him or her in the Estate bank account. Bonding is essentially an insurance policy for the protection of your beneficiaries because if the Executor steals from the Estate, the beneficiaries can require the bonding company to reimburse their losses.
• Can someone who is incapacitated write a Will?
  For a Will to be valid, the person writing it must be competent at least to the point of knowing who pays or her family is and what property he or she owns.
• When should you change your Will?
  You should always review and, where applicable, change your Will after any material change of circumstances relating to your family status (i.e., marriage, divorce, birth or adoption of a child, etc.). For example, most state`s laws presume that if your Will was prepared before you got married, that you simply forgot to include your spouse. If you die before changing your Will, your spouse would be awarded the share he/she would have received had you died intestate (without a Will) because by law your spouse is considered a "pre-termited heir". This could have a terrible and unexpected effect if, for example, you intended to leave your estate to a friend or relative who needed the monies or to your favorite charity because you and your spouse were already well off. If you die without changing your Will, your spouse would receive all of your property and the intended beneficiary none.
• Under what circumstances can an adopted child inherit from a parent when the parent left no will?
  Adopted children are considered children of their adopted parents for purposes of inheriting from an estate where there was no will. Adopted children can only inherit from the child`s natural parents` estate when the natural parent left no will, under the following circumstances: (1) The natural parent and adopted child lived together at any time as parent and child or the natural parent was married to or lived with the other natural parent and then died before the adopted child`s birth. (2) The adopted child was adopted by either of the natural parents` spouses or after either of the natural parents had died. For more information as to whether a particular adopted person can inherit from a parent who left no will, please contact an attorney.
• How can you change your Will?
  The following are valid ways you can change your Will:
  • Write a new Will. The law presumes that by writing a new Will, the Testator wants to revoke the previous Will. However, to be safe, most Wills include a phrase similar to "I revoke all previous Wills" just in case it is not already assumed by the state that the new Will supersedes the old one.
  • Write a Codicil. To be effective, a Codicil should make specific reference to the existing and still effective Will, and makes additions, deletions, or amendments. As with Wills, a Codicil can be holographic if written entirely in the Testator`s own handwriting, or it can be witnessed, in which case it must follow all formalities of a witnesses Will. A witnessed Will may also be amended by a holographic Codicil.
• Can I witness a Will if I am a beneficiary?
  No. Most, if not all states have laws that automatically "disinherit" any person named as a beneficiary in a Will if that same person is also a witness. The reason for this is that a witness may not be truthful in his or her statements regarding the execution of the Will if the witness is also a beneficiary (e.g., they may not be truthful about whether the Testator was of sound mind and body, etc.). In this light, be sure that if you are, or may be, a beneficiary under the Will, you do not witness it. Instead, have another person who definitely is not a beneficiary witness the Will or you will most likely be disinherited from the Will.
• Can spouses write a joint Will?
  Spouses can write a joint Will. However, it may not be the best option because of the limits it could put on the surviving spouse.
• Can I disinherit relatives I don`t like?
  Yes, you can disinherit anyone from your Will as long as the laws of the state in which you reside when you make your Will allow it. Normally, you can disinherit any distant relative, even children. However, some states dictate that a spouse cannot be completely disinherited. Because laws differ from state to state, it would probably be in your best interest to consult with an attorney on this matter.
• What are some of the basic requirements for a Will to be valid?
  A valid Will must be a written form. It must be signed that person making the Will. And it must be witnessed by two or three competent persons, unless it`s a holographic Will (written entirely in testator`s own handwriting).
• Does the Will have to be in a certain form?
  In general, the Will must be in writing and signed by the testator. Valid Wills have been executed on pieces of scrap paper. Meeting the signing and witnessing standards established by state law is more important than the appearance of a Will. A Will scribbled on a napkin can be admitted to probate as long as it contains all of the elements of a valid Will.
• What does it mean to "take against the Will"?
  A procedure under state law that gives a surviving spouse the right to demand a certain share (usually one-third to one-half) of the deceased spouse`s property. The surviving spouse can take that share instead of accepting whatever he or she inherited through the decedent`s Will. If the surviving spouse decides to take the statutory share, it`s called "Taking Against the Will." "Dower and Curtesy" is another name for this process.
• Is a lawyer necessary for drafting a Will?
  Wills made without lawyers can be legally sound if the proper procedures are followed. For people with relatively simple estates, self-help books and computer software may help. However, it would be in your best interest to consult with an attorney, to minimize possible complications.
• What is an ademption?
  The failure of a bequest of property in a Will. The gift fails (is "adeemed") because the person who made the Will no longer owns the property when he or she dies. Often this happens because the property has been sold, destroyed or given away to someone other than the beneficiary named in the Will. A bequest may also be adeemed when the Testator, while still living, gives the property to the intended beneficiary (called "ademption by satisfaction"). When a bequest is adeemed, the beneficiary named in the Will is out of luck; unless he/she has already received the property while the Testator was alive. However, beneficiaries may challenge an ademption in court, especially if the property was not clearly identified in the first place.
• Can anyone be named as a beneficiary?
  There are important restrictions on naming beneficiaries. In many states spouses have certain automatic rights which cannot be compromised in the Will.
• Can children inherit from a foster parent or stepparent who died without a will?
  A child can inherit from a foster parent or stepparent, who died without a will, even though the foster parent or stepparent did not adopt the child if the following criteria are met. (1) The relationship between the child and the stepparent or foster parent commenced when the child was still a minor and continued throughout their lifetimes. (2) The foster parent or stepparent would have adopted the child if there were not a legal barrier preventing the foster parent or stepparent to do so. For more information as to whether a particular child can inherit from a foster parent or stepparent, please contact an attorney.
• What is an alternate beneficiary?
  A person, organization or institution that receives property through a Will, Trust or Insurance Policy when the first named beneficiary is unable or refuses to take the property. In insurance law, the alternate beneficiary, usually the person who receives the insurance proceeds because the initial or primary beneficiary has died, is called the "secondary" or "contingent" beneficiary.
• Does filing for a divorce end a spouses right to a share of the estate?
  Simply filing for divorce or legal separation does not automatically disinherit a spouse. Most states given a spouse the right to your assets under elective share or community property laws. This makes it very difficult to prevent your spouse from claiming a share of your estate regardless of your Will. A final divorce decree does end spousal rights.
• What is an Augmented Estate?
  An augmented estate is property left by the decedent`s Will plus certain property transferred outside of the Will by gifts, joint tenancies, living trusts and other documents. The value of the augmented estate is calculated only if the surviving spouse declines whatever he or she was left by the Will and instead claims a share of the estate (taking against the Will). The amount of this "statutory share" depends on state law. A surviving spouse can generally claim one-third to one-half of the augmented estate.
• What is a Bequest?
  The legal term for any personal property, with the exception of real estate, left to a beneficiary in a Will.
• What happens to my Will after I die?
  After you die your Will is administered by the personal representative or executor whom you designated in your Will. Your personal representative will then retain an attorney for the purpose of filing your Will with the probate court. The attorney and clerk of the court will then proceed to close out your affairs by notifying all of you creditors and closing your various accounts. After all this is done, your assets will be transferred to your heirs according to your wishes.
• What is a codicil?
  A codicil is a document that is used to explain, change, add to, or take away from, the existing will. It is not meant to contain the entire will itself, nor is it meant to totally revoke a prior will. The codicil serves to make changes to the existing will without having to rewrite the will entirely.
• When should a will be changed?
  A person should change one`s will when one marries, becomes a parent, gets divorced, moves to another state (since one`s will must be probated in the state one lived in at the time of death), if either one`s or one`s beneficiaries` financial state has changed, and/ or if one`s spouse or beneficiary has died. For more information as to whether you should change your will, please contact an attorney.
• What is a Simultaneous Death and Common Disaster Provision?
  Simultaneous Death and Common Disaster Provision is a clause that is usually included in the wills of husbands and wives. The clause provides that when it is impossible to determine which spouse of a married couple died first (such as when they both died in a car accident) the husband is automatically considered to have died before his wife. Then any beneficiary who is mentioned in both their wills to inherit (such as their children) can inherit the estate. This clause not only helps lessen the amount of estate taxes; it also speeds up the transfer of probate assets and helps resolve the issue of how to dispose of nonprobate assets, such as proceeds from insurance policies. It also helps avoid delays and the extra costs of double administration. Please contact an attorney for more information.

I. Wills

• Are there provisions that cannot be put in one`s will?
  Generally speaking the courts will allow a provision in a will as long as that provision does not violate public policy. Therefore, it is likely a court will allow one to put a provision in a will that says that a beneficiary will not inherit from the estate if the beneficiary does not marry a Catholic person. This is because the public policy is that people should be allowed to get married and that condition would not prevent a Catholic person from not marrying at all. However, the courts would probably not allow provisions stating a beneficiary could not inherit from the estate unless the beneficiary divorces the beneficiary`s wife or if the beneficiary never marries, since this would be a violation of public policy. Also, a will maker cannot leave the estate directly to a pet. If one wants to leave one`s money to a pet, one must assign a trustee and then instruct the trustee to use the money for the pet`s care. For more information as to whether a certain provision you would like to be included in your will is contestable, please contact an attorney.

II. Living Wills

• What is a Living Will and how is it different from a Will?
  A Living Will, also known as a Physician`s Directive, is a separate document from a Will. A Living Will designates how you wish to be cared for regarding your medical care and treatment while you are still alive if you are unable to specify those wishes yourself. For example, you can designate whether you wish to be kept on life prolonging machines if there is no longer any hope that you will recover from an accident or long-term terminal medical condition.

  The difference between a Will and a Living Will is that the Living Will dictates how you will be cared for while you are still alive and a Will dictates funeral arrangements and how your assets will be divided after you pass away.

III. Power of Attorney

• What is a Power of Attorney?
  Powers of Attorney are governed by the law of "agency", a branch of common law concerned with the delegation of power from one person, generally called the "principal", to another, called an "attorney-at-fact" or "agent".

  When a person becomes incapacitated, the government or the court often steps in and appoints someone to represent and make legal decisions that the person would have to take. One of the wayss to avoid government or court intervention, and the appointment of a stranger to act as your guardian, is to use a Power of Attorney. A Power of Attorney is a written document stating that one person gives to another the full power and authority to represent him or her. It must be signed by both the attorney and the principal, witnessed by two people and notarized.

• What is a Durable Power of Attorney?
  A durable power of attorney is a form of agency. The person who gives the power is the principal, and the person who receives the power is the "attorney-in-fact" or "agent". "Durable" in this context means that the agent`s power will survive the principal`s incapacity or disability. As a result, a Durable Power of Attorney can be used as an alternative to guardianship in some states under certain circumstances, provided the principal executed the document before losing capacity. There are two types of Durable Power of Attorney: Financial Durable Power of Attorney and Healthcare Power of Attorney. The difference between the two is the authority granted to the agent, as described below:

  The Financial Durable Power of Attorney is also know as a General Durable Power of Attorney. The agent`s authority to act for the principal under a Financial Durable Power of Attorney is based on the powers that the principal gives to the agent. Whether broad, general powers or limited, the specific powers given to the agent are completely determined by the principal. Among other things, the principal may delegate to the agent in the Financial Durable Power of Attorney the authority to make deposits and withdrawals from his/her checking account, to file his/her tax returns, and to sell his/her home. However, there are a few powers that the principal may not delegate. For example, the agent cannot prepare a Will, vote, or seek a divorce on the principal`s behalf. If the agent has a financial interest in the subject matter of the power of attorney, the power is generally irrevocable. Most senior citizens who execute Durable Powers of Attorney are getting assistance with their day to day personal affairs and their agents do not have an ownership interest in the senior`s property which would preclude revocation. In addition, revocation can be by implication, in addition to, destruction of the document or express revocation by the principal.

  A Healthcare Power of Attorney specifically grants authority to the agent to make decisions about and relating to medical treatment. For example, the agent make consent to treatment, refuse to consent to treatment, or withdraw consent to treatment. In addition to these decisions directly about medical treatment, the agent may make all arrangements at any hospital or nursing care facility, employ or discharge care personnel, request, receive, and review any information about the personal affairs or physical or mental health of the principal.

  In preparing a Financial or Healthcare Durable Power of Attorney, the principal must sign the document in the presence of two qualified witnesses, and it must be notarized. As laws vary from state to state, it would be in your best interest to consult an Estate Planning attorney in your area if you want more information about Powers of Attorneys.

• What options do I have in assigning Power of Attorney?
  There are many ways to designate a decision-maker for you with a Power of Attorney document. You can assign a General Power of Attorney that covers all of your financial and personal decisions, or a Limited Power of Attorney that only covers decision-making in areas that you specify. You can make your Power of Attorney "Durable", which means that it stays in effect if you become incompetent. Or, a Power of Attorney can be "Springing", which means that it becomes effective only when you become incompetent. Another option is to delegate a Health Care Proxy or Durable Health Care Power of Attorney, a person designated to make health care decisions for you.
• What does a financial attorney-in-fact (agent) do?
  Many times, people will give an attorney-in-fact broad power over their finances. But you can give your attorney-in-fact as much or as little power as you wish. You may want to give your attorney-in-fact the authority to do some or all of the following:
  • use your assets to pay your everyday expenses and those of your family
  • buy, sell, maintain, pay taxes on and mortgage real estate and other property
  • collect benefits from Social Security, Medicare, other government programs or civil or military service
  • invest your money in stocks, bonds and mutual funds
  • handle transactions with banks and other financial institutions
  • buy and sell insurance policies and annuities for you
  • file and pay your taxes
  • operate your small business
  • claim property you inherit or are otherwise entitled to
  • hire someone to represent you in court, and
  • manage your retirement accounts.

  Whatever powers you give the attorney-in-fact, the attorney-in-fact must act in your best interests, keep accurate records, keep your property separate from his or hers and avoid conflicts of interest.

IV. Probate

• What is probate?
  Probate is a legal process during which the court oversees the distribution of assets that were left in a Will. This process can take a matter of months or even a number of years to be completed.
• Where does probate occur?
  Your Will is probated in the Court of the county and state in which you lived at the time of your death. If you own any property in another state, another probate proceeding will be started in that state and county.
• What assets are subject to probate administration?
  All assets owned by you in your own name, not in joint tenancy, in trust or with a beneficiary designation, are subject to probate administration when you die.
• How is the Will probated?
  The following is a VERY simplified outline the general probate process:
  1. The original of the Will is deposited with the Court (if any).
  2. The filing of the Petition for Probate first needs to be published in a local newspaper, before the Executor named in the Will (if one exists) or Administrator (if there is no Will) is appointed. Executors and Administrators are comonly referred to as "Personal Representatives", so from this point forward in our outline, we will refer to Will Executors and Administrators simply as "Personal Representatives".
  3. The Personal Representative then files a Petition for Probate of the Estate.
  4. Generally, for a period of four months from the date of publication of the Petition for Probate, creditors of the Estate can file claims against the Estate. This would include any prior creditors or judgment holders, debts resulting from last illness, funeral expenses, taxing authorities, etc.
  5. During this time period, the Personal Representative has to identify and collect assets of the Estate. To do this, the Personal Representative finds all bank and security accounts, debts owed to the Decedent, property owned by the Decedent, etc. The Personal Representative also has to maintain the assets in good condition, and to collect income for the Estate. This consists of maintaining insurance coverage, collecting rent, protecting assets from theft or damage, etc. The Personal Representative may also liquidate assets such as cars, real estate, etc.
  6. When the four month Claims period has expired, and when all assets have been collected, real property sold, and assuming no problems have presented themselves such as the Will being contested, the Personal Representative then files a petition with the probate court to allow a distribution of all remaining assets to the beneficiaries/heirs, and files a detailed accounting with the Court setting forth all monies received, monies disbursed, how assets were invested, and the proposed plan for distribution.
  7. If the Court approves the plan, the Personal Representative then divides the assets as instructed in the Will, or as required by statute if no Will exists.
  The minimum amount of time that the probate process can be completed is approximately six months, but it normally takes longer. Reasons for delays can include Will contests, property cannot be sold, one or more claimants not being notified in the original four-month Claim period so they end up having to be re-noticed, etc. This is among the reasons why it is important to have a good probate attorney, it reduces the chances of complications during the probate process.
• Is there any way to avoid probate?
  Yes, most states have a summary procedure whereby probate is avoided if the value of your assets is less than a certain value, or if the only heir or beneficiary is your spouse. For example, in California, if your assets amount to less than $100,000, probate can be avoided entirely. Property held in joint tenancy or with a beneficiary designation is not counted toward this $100,000. Also, no more than $10,000 of this $100,000 can be held in real estate. Otherwise, you will need to prepare a Trust in order for your assets to be distributed outside of probate court. It`s in your best interest to consult with an attorney to minimize the chance of legal complications in trying to avoid probate.

V. Trusts

• What is a Trust?
  A trust is a fictitious legal entity which owns assets for the benefit of a third person (beneficiary). The Grantor of the Trust is the person who set up and gave money to the Trust. The Trustee of the Trust is the person charged with keeping the assets safe, invested properly, and finally distributed to the Beneficiary at the proper time. The Grantor can pretty much decide how the money must be kept (in interest bearing accounts, in real estate, or only in government insured FDIC accounts, etc.), and when it may be distributed (when the beneficiary is 18 years old; or one half when the beneficiary turns 18 and the other one half when the beneficiary turns 21, etc.). The Grantor of the Trust can also be the Trustee of the Trust, if the Grantor decides to set the Trust up in such a manner (e.g., Grantor sets him/herself up to be the Trustee of a Trust for his/her child).
• What kinds of Trusts are available for me to set up?
  The following are some of the more common Trusts set up. Other Trusts are available. Consult an Estate Planning Attorney for more information.

  Living Trust	Prepared while the Testator is still alive.
  Spendthrift Trust	Protects the beneficiary of your Trust from creditors.
  Bypass Trust (also known as an "A-B" Trust)	Designed for married couples with a combined estate of over $675,000.
  Totten Trust	Best for amounts of $20,000 or less.
  Testamentary Trust	A provision in a long Will. This type of Trust can be irrevocable and can take on the same qualities as the Spendthrift, Bypass, and Totten Trusts.

• What is a Living Trust?
  A Living Trust is an effective way to provide lifetime and after-death property management and estate planning. When you set up a Living Trust, you are the "Grantor"; anyone you name within the Trust who will benefit from the assets in the Trust is a "beneficiary". In addition to being the Grantor, you can also serve as your own Trustee (Original Trustee). As the Original Trustee, you can transfer legal ownership of your property to the Trust. While this can save your estate from estate taxes when you die, it does not alleviate your income tax obligations.

  Within a Living Trust you must provide the name of a Successor Trustee who will take over the management of the Trust if you die or become incapacitated. You don`t have to go through the court to appoint a successor trustee. After your death, your Successor Trustee either terminates the Trust and distributes the assets to the beneficiaries you named in the Trust, or he/she continues to maintain the Trust on behalf of your beneficiaries, depending on the terms of the Trust.

• What is a Spendthrift Trust?
  A Spendthrift Trust helps to protect the beneficiary from creditors. Most of the assets in the Trust will pretty much be safe from banks or creditors. However, creditors can still collect any money paid directly to the beneficiary from the Trust. If you think that your beneficiary could have problems with creditors, you can give the Trustee broad control over the Trust. The Trustee may be instructed by the Trust to withhold income and/or principal from the beneficiary.

  For maximum effectiveness, a Spendthrift Trust should be irrevocable. It must also give the Trustee full discretion over the assets of the Trust, so the Trustee will have full power in deciding when and how much money should be given to your beneficiary.

• What is a Bypass Trust?
  A Bypass Trust, sometimes called a "Life Estate" or "A-B Trust", is a way for couples of combined estates of more than $675,000 to be exempt from estate tax if one or the other dies.

  A Bypass Trust is designed to let the $675,000 tax exemption be used by each spouse. Through a Bypass Trust, the surviving spouse can receive any portion of the decedent`s estate free of estate tax. The surviving spouse never legally "owns" the property within the Trust because it`s legally "owned" by the Trust. The spouse can use the assets and property within the estate with certain restrictions. However, when the surviving spouse dies, if the estate is worth more than $675,000, a significant amount of estate taxes will be due before the beneficiaries can receive their inheritance.

• What is a Totten Trust?
  Setting up a Totten Trust is as simple as going to a bank and opening an Trust account by yourself. A Totten Trust is best for amounts of about $20,000 or less. Larger amounts could present problems in payment of estate taxes at your death, since the assets in these accounts are added to your taxable estate. A Totten Trust can be paid out quickly after your death with a minimum of formalities. Because the money transfers directly, you don`t need to choose a third-party Trustee. As with any other Trust, you keep your assets out of probate. You can revoke a Totten Trust at any time during your life, and the beneficiary can`t withdraw the money from the Trust account until you die.
• What is a Testamentary Trust?
  Unlike a Living Trust (made while you are alive), a Testamentary Trust is established through your Will at your death to handle your minor children`s estate (financial affairs), should you die and there is no other living parent. This alleviates the necessity of having to set up a guardianship of the estate, with all of the concurrent court filings, accountings and supervision.

  The Executor is given full discretion to decide if the Trust is beneficial to the children, and the trust should be established. If you currently have minor children, or are considering having children, including this provision gives your Executor the greatest flexibility in handling your children`s estate if neither parent is alive while the children are still minors.

  Normally, the person or one of the people named as guardian of your minor children will also be named the Trustee of the Trust. However, in some situations it may be advantageous to have different people fulfill these roles. For example, the best person for the emotional and moral upbringing of your child may be your Aunt Mary, but Cousin Joe could be a better financial manager. So, it may be in your children`s best interest for you to choose Aunt Mary to be the guardian and Cousin Joe to be the Trustee of the Trust.

• What is the difference between a Revocable Trust and an Irrevocable Trust?
  A Revocable Trust is where the Grantor can change the terms of the Trust or even revoke the Trust altogether and take back all of the assets in the Trust. An Irrevocable Trust is where the terms of the Trust cannot be changed (i.e., the beneficiary cannot be changed), and that whatever assets are placed in that Trust cannot be withdrawn by the Grantor.
• What is an Abstract of Trust?
  A condensed version of a Living Trust document, which leaves out details of what is in the Trust and the identity of the beneficiaries. An Abstract of Trust is normally used to prove to a financial organization or other institution that you have established a valid Living Trust, without revealing specifics that you want to keep private. In some states, this document is called a "Certification of Trust."
• What is an Accumulation Trust?
  A trust in which the income is retained and not paid out to beneficiaries until certain conditions are met. For example, if you create a trust for your child`s benefit that stipulates that he/she will not have access to the assets until he/she turns 21 or graduates from college.
• When should I consider preparing a Revocable Living Trust instead of a Will?
  If you are a single person with an estate worth more than $675,000 or a married couple with an estate worth more than $135,000, you may be better off with a Revocable Living Trust for the following reasons:
  • You save a great deal of money. Probate costs and fees can get quite costly, leaving your heirs with much less of your estate than what you intend to give. In some states, probate fees are based on the appraised value of the Estate rather than the actual amount of equity in the estate. In other states, the probate fees are based on the amount of work reasonably performed by a probate attorney. With a trust, no executor is necessary because the same work done can be done by the Successor Trustee (normally a family member). Additionally, because the assets are owned by the Trust, they are not subject to probate administration, so you don`t have to pay the probate administration fees out of your estate.
  • Probate takes anywhere from six months to a year. With a trust, however, the transfer of assets can be completed in as little as a few days to a month.
  • Because court records, and all documents in the file are public record, the contents of the Will, the assets in the Estate, debts and claims against the Decedent, and who gets what can be viewed by anyone. With a trust only the Trustee and the Beneficiaries have access to this information.
  • Because children are not considered capable of handling their own financial affairs, state laws require that a guardianship for the benefit of the minors be established. A guardianship has at least two main disadvantages: 1) similar to a probate proceeding, most or all actions require court approval, there is need or extensive court supervision and corresponding attorney`s fees and costs; 2) a court will generally not allow investment of funds into anything but a FDIC protected type of investment (i.e., an insured bank account offering 2 - 3% return). Mutual funds or other investment options are generally off limits. With a trust, you can invest in high-yield options so your child could receive substantially more. Also, a trust allows such funds to be held by a Trustee and disbursed as needed by the minor for education or other demonstrable need, giving the Trustee much more control over how the funds are disbursed to the child.
  • If a decedent`s estate is worth more than $675,000, it is subject to estate taxes. So, if a decedent had $1,000,000 in assets, it would be subject to $153,000 in estate taxes. For a married couple, a properly drawn A/B Trust results in the first $1,200,000 of their assets being protected, instead of only $675,000. Thus, the $78,000 in Estate Taxes would not have to be paid and could instead go to the heirs.
  Because Revocable Living Trusts can be quite complicated, it is in your best interest to seek legal counsel to assure your plan goes as smoothly as possible.

VI. Guardianship

• What is a guardian?
  A guardian is a person who is designated to make legal, financial, and health care decisions for you if you become incapacitated or incompetent and can no longer make these decisions for yourself. A guardian can be any competent person, including a spouse, a friend, a relative, a non-profit agency, or a public or private corporation. If a person is considered incompetent and a relative, agency, or corporation cannot be found or considered as a guardian, then a public agent guardian will be appointed.

  In some states, guardianship is known as "custodianship", "conservatorship", or "curatorship". In each case the guardian may be called a "custodian", "conservator", or "curator". The person whom the guardian is appointed to is called the "ward."

  Guardians can be appointed to:

  • decide on the ward`s living arrangements
  • assure that good health care is provided to the ward
  • approve needed medical, legal, dental or other services for the ward
  • take care of the ward`s personal belongings
  • take legal protective action on behalf of the ward
  • handle the ward`s financial affairs
  • maintain the ward`s personal records
• What types of guardians are appointed for a ward`s care?
  There are two types of guardians appointed for a ward`s care:
  • Guardian of the Person. The guardian may provide for medical care services and determine the place and kind of residential setting best suited for the ward. The guardian must also present a detailed plan of the ward`s care to the court every year for review.
  • Guardian of the Property. The guardian takes an inventory of the ward`s property, invests it prudently, uses it for the ward`s support, and accounts for the ward`s property by providing detailed annual reports with the court. The guardian must also obtain court approval for certain financial transactions.

  In most cases a single guardian is appointed to handle all responsibilities of both the ward`s property and health care.

  You may appoint a guardian of the person, the property or both for limited time periods and for limited purposes. Generally, this is the case only for individuals who request a guardian while they are still competent. Normally, guardianship is the last resort for people who are incompetent and can no longer do things for themselves. In these cases, guardianship remains in effect for the rest of the ward`s life.

VII. Estate Taxes

• What is an Estate Tax?
  The federal government allows every person to give away, either through lifetime gifts or upon death up to $675,000 without being taxed. This is known as your "Lifetime Exemption". Actually, there is a graduated tax on all assets transferred, and then the IRS gives you a $192,800 credit called a "Unified Credit" against tax. This Credit effectively shields $675,000 of assets.

  Any assets amounting to more than $675,000 are then taxed at a progressive Estate Tax beginning at 37%.

  Certain transfers are not counted toward the $675,000, such as a gift of $10,000 or less made by you to any person per year, or gifts given to pay for tuition or medical expenses. The Federal Government Estate Tax rate is as follows:

  Value of Estate	Tax Imposed
  $675,000	$0
  $700,000	$37,000
  $800,000	$75,000
  $900,000	$114,000
  $1,000,000	$153,000
  $1,100,000	$194,000
  $1,200,000	$235,000
  For each additional $100,000 up to $2,000,000, an additional $42,000

  However, the Internal Revenue Code allows any married person to gift, or leave at death, to their spouse an unlimited amount of assets—millions or billions, it makes no difference. This is called the "Unlimited Marital Deduction". Because of this law, couples typically have reciprocal Wills which give their property to the other spouse, with the assets going to the children after the surviving spouse`s death.

• How can I reduce my Estate Tax upon my death?
  Federal Estate Taxes are only charged against Estates with assets exceeding $675,000 in value. If you think your Estate will exceed $675,000 at the time of your death (or $1,200,000 if you are married), the following general tips can be used to reduce death (estate) taxes by lowering the value of your Estate at the time of your death.
  • Gift Giving. Gift giving will lower the value of your Estate which would otherwise be taxed when you die. Each year, every tax payer is allowed to give the sum of $10,000 to another person without incurring any gift tax. You can give $10,000 this year to any one or more of your children, grandchildren or other relatives, without incurring any adverse gift tax consequences, while at the same time reducing your taxable Estate when you die. A gift has to be a true gift with no strings attached. You cannot give your child $10,000, while at the same time keeping it in a bank account in your name or otherwise not allowing the recipient of the gift to get to the funds.
  • Gifts for Tuition or Medical Care. Gifts paid directly to a university or college for tuition expenses (as opposed to room and board) for a beneficiary are exempt from gift taxes. Additionally, you can pay medical expenses incurred by a beneficiary directly to the care provider. These payments are also exempt from gift tax. This also lowers the value of your estate upon your death.
  • Family Limited Partnerships. Family Limited Partnerships are more expensive to set-up and maintain, and therefore are usually used when other forms of tax savings, such as gift giving are not enough to reduce the estate to a level that will not incur Estate Tax upon death. In a Family Limited Partnership, you as the general partner own about five percent of the partnership assets, while maintaining all voting control over the partnership. Your beneficiaries will own 95% of the assets, but as limited partners they have no voting or other control over the management of the partnership. Your assets, including real property, business interests, securities, and related assets can be gradually transferred into the partnership. Then, by the time you die, your Estate`s value is the 5% General Partnership interest and the 95% owned by the Limited Partners are excluded from your Estate.

  There are many other ways you can reduce the value of your Estate at the time of your death. Consult your estate planning attorney for further details about these and other methods of reducing your Estate Tax upon your death.

VIII. Final Arrangements

• What is a final arrangements document?
  It is a way to express your death and burial preferences in writing. What you choose to include in your final arrangements document is a personal matter. A typical final arrangements document may include:
  • the name of the mortuary or funeral home that will handle burial or cremation
  • how your remains will be transported to the cemetery/memorial park and gravesite
  • whether or not you want to be embalmed
  • details of any ceremony you want before the burial or cremation
  • who your pallbearers will be (if you want any)
  • type of casket or container in which your remains will be buried or cremated, including whether you want it present at any after-death ceremony
  • details of any marker you want to show where your remains are buried or interred
  • where your remains will be buried, stored or scattered
  • details of any ceremony you want to accompany your burial, interment or scattering.
• Can I include my final arrangement preferences in my Will?
  A will is not a good place to express your death and burial preferences because it probably won`t be located and read until several weeks after you die. The Will should be reserved for the purpose of dictating how you distribute your assets. It`s best to prepare a separate final arrangements document before you die. Preplanning some of your final arrangements not only can spare your survivors the difficulty of making these decisions while they are grieving, but it can save a great deal of money.

  For many people, death goods and services cost more than anything they bought during their lives except homes and cars. Wise comparison shopping in advance can help ensure that costs will be controlled or kept to a minimum.

• What happens if I don`t prepare a final arrangement document?
  If you die without leaving written instructions about your death and burial preferences by preparing a final arrangements document, state law will determine who will have the right to decide how your remains will be handled. In most states, the following people (in this order) have the right to decide and the responsibility of paying for the reasonable costs of disposing of the remains:
  • spouse
  • child or children
  • parent or parents
  • the next of kin, or
  • a court-appointed public administrator

  Disputes may arise if two or more people share responsibility for final arrangement decisions, such as whether the body of a parent should be buried or cremated. These disputes can be avoided if you are willing to do some planning and express your wishes in writing.

• How can I prepay for my final arrangements?
  Shopping around and prepaying for the most suitable and affordable funeral goods and services is a wise idea. By preplanning, your survivors can be spared from having to make these decisions while they are grieving. You can also spare your loved ones from the financial burden of having to entirely pay for your funeral arrangements—which can be quite costly. The following are typical ways to prepay for final arrangements.
  • Have a licensed funeral director at your local funeral home or mortuary establish a regulated Trust fund. If you choose this method, be sure you go to a funeral home that you expect will stay in business at the time of your need. There are times when funeral homes have gone out of business and the consumer finds him/herself without funds and without recourse. Also, be sure that you can transfer or withdraw funds without incurring a large financial penalty. While there are laws that regulate prepayment plans, it`s best to be careful because there are cases of Trust fund abuse and theft by funeral homes and mortuaries which could be quite devastating to your survivors.
  • Purchase a life insurance policy that approximately equals the projected value of your funeral.
  • Go to your bank or savings institution to set up a Totten Trust or Payable Upon Death (P.O.D) account earmarked for your final arrangement expenses. Most financial institutions will set one up for a small fee. Unlike money applied to traditional funeral prepayment plans, these funds are easily transferred or withdrawn, and you have complete control over the money while you are alive.
• What services can I expect to receive from a mortuary or funeral home?
  Most mortuaries or funeral homes are equipped to handle many of the details related to disposing of a person`s remains. These include:
  • collecting the body from the place of death
  • storing the body until it is buried or cremated
  • making burial arrangements with a cemetery or memorial park
  • conducting ceremonies related to the burial
  • preparing the body for burial, and
  • arranging to have the body transported for burial

  The costs of these services vary, depending on which mortuary or funeral home you choose. It is essential that you shop around if cost is an important part of your decision. Ask for the General Price List whenever you visit a funeral home or mortuary. The General Price List must, by law, contain identifying information, itemized prices for the various goods and services that each funeral home/mortuary sells, and other important disclosures. The General Price List enables consumers like you to comparison shop and to purchase, on an itemized basis, only the goods and services you want. By law, if you request to see the General Price List, the funeral home/mortuary MUST, by law, comply.