As we move through life, we accumulate assets, houses, cars, investments, and business interests. We have worked hard for these assets so it becomes important to us to ensure that we protect these things from future events that might otherwise see them taken from us. Just like you would not start a business without a business plan, you should not move through life without a plan for your estate. Death is inevitable and setting out what should happen to your assets early on is important to ensure you look after your loved ones.
One of the key ways you can protect your assets in Utah, is with a family trust which effectively owns all your assets which are managed and administered by the trustees, usually you and your lawyer, possibly another party depending on the circumstances of the trust. As you personally no longer own the assets they are effectively safe from claim by another party usually a person you have had a relationship with, a spouse or defacto. A family trust allows you and your family to enjoy the assets, live in the homes, drive the cars and other benefits whilst knowing that they are not subject to claim. There are, however, some legalities that you must adhere to in order to ensure that your trust is set up legally, that you manage it within its guidelines as well as Utah law. Your lawyer is the best person to set up your trust and administer it for you to ensure you do this correctly.
Other things to know about estate planning are:
• Try and set up your plan as early as possible, this not only means your assets are protected early, but also assists with the gift process
• You cannot set up a family estate for illegal purposes such as tax evasion
• Ensure your will considers your trust deed to avoid your will being contested
• Discuss your plans with your family, particularly if you are making sweeping changes or decisions
• Engage a lawyer to ensure you keep everything legal
Everyone has heard the term probate but not everyone knows that this term means. Probate is quite literally the process your family members will go through with the government after you have passed away. This is the transfer of your assets and finances to your chosen beneficiary or beneficiaries. The executor of the will is the one in charge of following this process through thoroughly and making sure that your wishes are carried out as clearly stated in your will. Your executor can be anyone, not necessarily a relative and they handle your vehicles and houses, everything that is left to them. In the case that an executor was not named in a will or a will was never named than a court hearing will often name a relative to be the executor in order to get through the probate process as simply as possible. This person is not random but often the closest living relative or the person who received the most in the will should there be one that was written.
There are several different phases within probate. First, the executor or named administrator is required to prove the validity of the will to a probate court before anything can begin.
Next the step is for the executor to provide statements of the deceased debts and assets as well as the list of beneficiaries in the will. From here the creditors will be notified of this death and they will then have only 6-months to collect any debts that are owed to them, should there be any. If money is owed it must be collected from the estate, not from the beneficiaries who inherit it. What this means is that the beneficiaries will not be able to inherit their money until the creditors receive what is owed to them. Whatever is left of the estate will then be distributed to the beneficiaries.
There are cases where probate court is not necessary to take care of a person’s will. If a person has very few possessions and money to distribute the court is not necessary and the beneficiaries distribute the will without the law to guide them. Also, if anything is jointly owned, for example a husband and wife, the other person will get everything by default. When people write their wills they almost never consider the act of probate and often do not even really understand how probate works. Probate should be part of your research and understanding before you begin writing your will and/or your estate. This is a very confusing stage in life that should be understood as best as possible for everyone. Probate can be a very pain staking cycle for your loved ones left behind and when planning your estate your lawyer can help you do what you can to avoid probate court for your executor. Find a reliable estate lawyer before beginning your will so you can understand the full probate and legal process. Don’t wait until it is too late to learn about these issues.
When you reach that stage in life where you want to provide a legacy for your posterity, it is time to sit down with an estate planning attorney.
Here are main categories to consider: Wills, Living Wills, Trusts, and a Durable Power of Attorney.
Wills are formally written wishes as to distribution of property after you have passed on. Setting up a Will is the first step to mapping out your future and it also provides peace of mind that your wishes will be carried out after you are gone. Setting up a valid Will and naming an executor for your estate will put things in motion securing a process to make sure your wishes are followed.
Living Wills are used to answer the philosophical questions about whether you want to have artificial nutrition and hydration in the event that you are in a coma or vegetative state. A Living Will can help to ease the difficult situation that arises when family members disagree on whether to continue life support in various medical cases.
A Trust is created to hold assets for the benefit of someone else (beneficiary). The trustee distributes assets of the trust according to the written terms of the trust agreement. A trust that is created in your will becomes effective only after you pass away. Some of the benefits of trusts are that beneficiaries will not be disqualified from receiving Medicaid or other government assistance, estate taxes can be avoided, and assets can be passed to minors before they are legally capable of owning them.
A Durable Power of Attorney identifies a person to manage your money and/or make health care decisions for you if you are unable to do so. Durable Powers of Attorney allows you to choose who will manage your finances, and who will make health decisions for you, and it can also help save money by avoiding a court appointed guardianship.
All four categories; Wills, Living Wills, Trusts and Durable Power of Attorney’s are very important to consider. If you leave something out someone else gets to make those important decisions for you, and they may not make the decisions the way you would. Your future generations depend on what you say and how you consider what you will leave behind and how it will be handled. Why not make it easy for your family and take care of something that will show them you were thinking of them.
Importance of Probate Wills and Estate Planning to Protect Inheritance Property
Probate wills refer to Wills which must undergo the probate process. Unless a person establishes a trust to protect inheritance property, their Will must be presented to probate court for validation and directives of distribution of estate assets. Inheritance assets cannot be distributed until decedents’ estates are settled according to probate law and directives of the Will. When decedents die without probate wills, estate settlement can be prolonged for several months. Inheritance property is distributed according to state probate laws and may not be in the manner the decedent wanted. Therefore, it is crucial for everyone aged 18 and over to execute a final Will and establish beneficiaries to receive assets upon death.
Probated estates are settled by an estate administrator. This person is appointed in the last Will and is often the surviving spouse or relative to the decedent. Some states require estate administrators to undergo court confirmation and obtain approval for all aspects of estate management. Other states allow estate executors to manage the estate without court interference. It is best to consult with a probate attorney to ensure management of probate wills adheres to state protocol.
Estate executors are responsible for a myriad of duties including: securing inheritance property, obtaining property appraisals, paying outstanding debts, filing a final tax return, and distributing inheritance gifts to named beneficiaries. If outstanding debts exceed the estate’s financial holdings, estate administrator may need to hire a probate lawyer to negotiate with creditors. In some cases, the court will require Administrators to sell assets to satisfy debt obligations. In addition to outstanding debts, decedent estates are responsible for medical and funeral expenses. If decedents owned real estate secured by a mortgage note, the estate must pay all expenses associated with the property including loan installments, property insurance and taxes, homeowner’s association dues, and any required maintenance. If the estate is financially incapable of maintaining the real estate, a judge can order the property sold.
While heirs are not required to pay estate-related expenses, they will sometimes pay mortgage installments in order to prevent foreclosure. If heirs do not want to keep the property, they can sell it during the probate process to eliminate financial burdens. Most states require court authorization to sell real estate holdings.
Probate wills are also used to establish guardianship for minor children. Married couples often neglect to appoint guardians, but this can be a tragic mistake. If both parents die, minor children can become a ward of the state until suitable living arrangements are made. If relatives want to care for the children they will have to undergo investigation by the Department of Children and Families, which can take several months to complete. Individuals can use probate wills to disinherit direct lineage heirs. It is important to include a disinheritance clause which explains the reason heirs are written out of the Will. By law, inheritance property is given to direct lineage heirs unless heirs are intentionally disinherited. Probate wills provide everyone with the opportunity to have the final say upon death. Without one, probate laws dictate distribution of property and estates can be suspended in the court system for months, or years. Executing a legal last will and testament is the best gift anyone can leave loved ones. Dying without a Will (intestate) prolongs estate settlement and can potentially bankrupt the estate, leaving nothing for heirs.
Living Revocable Trusts
Living revocable trusts are one of the tools the rich have used for over 50 years to pass their property. Establishing one takes a lot of paperwork. With the advent of the computer 30 years ago, it became a lot easier (cheaper) to actually do the paperwork for the living revocable trust. Living revocable trusts are increasingly being used by the middle class. For the informed they can help pass a lot of money. They are still more popular in the West than they are the East. They are used for three main reasons.
To allow assets to pass to heirs without a probate process, aka, probate avoidance. There is a catch though. The trust has to be “used” by its “owner” in order for it to actually avoid probate when the owner dies. There is a big push against living revocable trusts, because people pay the big bucks for them, and when all is said and done, the family is dumped into the probate process just like they would have been if a cheaper will was used instead of the living revocable trust. It’s almost a conflict of interest. If the attorney doesn’t teach the client how to use their trust, then the attorney gets the big bucks for setting up the trust and he will get the probate too. (In 80% of the cases the family goes back to the attorney that set up the living revocable trust to “clean up the estate.)
To deliver assets to your heirs without an estate tax. That can save a family literally over a million dollars.
To allow an individual’s property to be managed by someone else after they die. If the property is owned by the living revocable trust, there isn’t any court supervision, and the management transition is smooth. The trust allows someone to step in immediately, without court supervision, and manage the trust’s assets when the “owner” (Grantor) becomes incompetent.
There is a legal foundation that all wealthy people use. A living revocable trust is a part of that foundation, first you write a will, next you establish a trust, and finally you look at limited liability companies and other tax strategies. The bottom line is, if you want to have wealth, you handle your estate the same way the wealthy people do. Living revocable trusts are neat tools, but you can’t rely on your attorney to do everything for you and teach you what to do. You need to understand the tools of wealth and use them correctly.
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.