Estate planning is a fundamental part of life planning and requires executing legal documents to ensure beneficiaries receive intended inheritance gifts in the event of death. While few people jump for joy at the idea of planning their estate, it is important to at least implement basic elements to protect loved ones. Minimum estate planning should consist of a last will and testament, durable power of attorney, and healthcare proxy. Individuals whose estates are valued higher than $100,000 might consider transferring inheritance assets into a trust.
Executing a last will is a simple process that does not require a lot of time. A will provides details of how assets should be distributed. Upon death, the will is submitted through probate court and becomes a matter of public record. Probate can be prolonged when individuals die intestate (without a will) and assets are distributed according to state probate laws.
Executing a will is particularly important for individuals with minor children. Wills include guardianship provisions to protect children if one or both parents die. If no will exists, the children’s fate will be determined by a probate judge.
Estate planning lawyers can help establish a final will or trust. Depending on the complexity of your estate, the cost to execute a legal will can range from less than $100 to more than $1000. Trusts require additional paperwork and time. Assets placed in trusts are usually exempt from inheritance taxes. In order to draft a will, you will need to write out a list of personal property, real estate holdings, financial investments, life insurance policies, and business interests. Next, you need to determine who will receive each asset in the event of death.
While it can be uncomfortable to discuss plans with heirs, it is important to talk about death planning so everyone is aware of your wishes. Open communication can prevent misunderstandings and family disputes once you are no longer around.
Granting power of attorney rights is an important decision that should not be taken lightly. POA grants authority to a personal representative to act on your behalf in managing finances. The designated agent should be trustworthy and willing to accept the duties if you are incapable of making decisions for yourself.
Healthcare proxies document your wishes for medical care that you do or do not want should you become critically ill and unable to communicate. A healthcare proxy allows you to place in writing life-saving directives including resuscitation, nutrition and life support. Many people falsely believe estate planning is only for the wealthy. Nothing could be further from the truth. Regardless of assets and net worth, it is always a smart decision to execute a legal last will, power of attorney and healthcare proxy. Dying without these documents can place a heavy burden on your loved ones.
Utah Estate Planning Lawyers
As defined under Utah law, estate planning is planning the management and the disposition of your assets while you are alive and after your death. It also includes planning for your healthcare in case you become incapable of taking care of yourself. With the help of Utah estate planning lawyer, you can rest assured that your life’s work will be well taken care of.
In Utah, if you die without a will, you may not have proper representation, and your family might be left fighting over your assets. If this is the case, Utah will decide the successor to your property. It is best to hire a lawyer to get your affairs in order before it is too late. A good lawyer can interpret the maze of laws on property rights, taxes, probate and trusts.
Utah estate planning lawyers can help you decide how to transfer property and resolve other financial and personal matters including retirement funding and tax planning. Most importantly, they can guide you through the process of making a will. They can help you set up a trust naming who will hold your property until your death and disperse the property according to your will.
Before hiring an estate-planning lawyer, you should verify his/her expertise and credentials because estate planning is a very important process in your life.
Do I Need an Estate Planning Attorney?
An estate planning attorney is an integral part of developing end-of-life strategies. Lawyers who specialize in this field help individuals execute a last will and testament, durable power of attorney, healthcare proxies, and revocable or irrevocable trusts.
Hiring an estate planning attorney is necessary when individuals want to keep inheritance assets out of probate. Probate is a legal requirement in all 50 states and is used to validate wills, determine rightful heirs, settle outstanding debts, and distribute inheritance property to designated beneficiaries. Numerous strategies exist to avoid probate. The most common include establishing irrevocable life insurance trusts, living trusts, and designation of transfer on death and payable on death beneficiaries.
On average, the probate process takes six to nine months to settle. When decedents die intestate (without a will) probate usually takes between nine months to one year to complete. Much depends on the estate value, court caseload, and family dynamics.
Working with estate planning lawyers is particularly important when family strife exists. Sadly, death can bring out the worst in people. Anger, greed and envy can drive heirs who feel slighted to contest the will and prolong probate for months or years.
If heirs contest the Will, the estate is responsible for defense legal fees. If the judge rules in favor of the Plaintiff, the estate is oftentimes responsible for restitution of their legal fees as well. This can create a heavy financial burden and potentially bankrupt the estate.
Retaining the services of a qualified estate planning attorney can lessen the potential for family feuds and contesting the will. Often, decedents appoint a family member to the position of estate administrator. This can place a target on their back if siblings don’t agree with the decision. Having a neutral third party manage the estate can squelch potential eruptions and expedite the probate process.
At minimum, estate planning should include a Last Will and Testament, Power of Attorney, and Healthcare Proxy. Guardianship for minor children is established through the last will. Individuals with assets valued over $100,000 should consider establishing a trust.
Multiple types of trusts exist and each offers advantages and disadvantages. Estate planners can explain which type of trust will best suit each individual’s needs. It is best to engage in estate planning while in good health. Individuals who procrastinate until they are diagnosed with terminal illness or transferred to a nursing home run the risk of heirs contesting the Will. Heirs can claim the decedent was not of sound mind because of their illness. Many estate planning lawyers provide complimentary consultations to discuss available services and fees. Ask friends or family for referrals or locate estate planning attorneys though phone directories, lawyer referral networks, or the American Bar Association.
Estate Planning Mistakes That You Must Avoid
1. They have no estate plan at all. This is the worst mistake that Utahans make and it is the most common mistake of all. It can also be the most expensive and lead to the worst results. Most people postpone preparing their estate plan until they reach an age where they realize that death is not so far off. Big mistake. The reasoning may be, “I’m young, no need to worry about that now” or, “My estate isn’t big enough”, or in many cases it probably never crosses their minds. There are no guarantees in life. Every day, we read or hear stories about someone who dies young. Even if you are in the best of health, accidents happen.
First, if you are young, and have a very small estate, you likely have children who are not yet grown. Who will care for them? Who will manage your estate and pay for your children’s education? Who will be responsible for their religious training and who will be encouraging them to go to college? If you have no estate plan, a judge will decide all these issues. A judge will pick your children’s legal guardian (managing their inheritance), and will choose the guardian of their persons, (raising them). A judge may well select someone that doesn’t match your desires. He could even appoint a lawyer, bank or professional trustee to manage the estate. These people must be paid and they don’t come cheap. Your parents or your spouse’s parents may have a strong influence over a court. Godparents are not automatic choices. The personal guardian he appoints may not share your beliefs or religion. The whole process will be in court, will also be very expensive and could take years. Even if you have a very small estate, this is a major reason to have some estate plan. Do not leave these decisions to others.
Secondly, if you have your own business, having an estate plan is critical. With no estate plan, you will have no say as to what becomes of your business, who gets it, and all other decisions that would have to be made when you are no longer there. Also, without a living trust, every aspect of your business, including finances will become public and available to your competitors.
Thirdly, depending on your State of residence, with no estate plan the probate judge will award your estate according to the laws of distribution in your state. Normally this is a part to your spouse and the rest to your children in equal shares. Is that your desire? Or would you rather give it all to your spouse while he or she lives? If you leave no instructions behind, you will have no say in the distribution.
Finally, with no estate plan, you cannot avoid probate. The nightmare of probate should be avoided if at all possible. Probate is the court process for distribution of all estates except very small estates and those with Living Trusts. It is lengthy, public, expensive, and often devastating to families. For more information, review our website information. It’s really frightening.
2. Trying to pass assets to heirs by using joint tenancy. Joint ownership is as bad as or worse than having no estate plan at all. Joint tenancy is most frequently used to pass on the family home. If you put your home into joint tenancy with others, your home becomes vulnerable to that person’s problems. If your joint tenant goes bankrupt, your property will be one of their assets. You could lose your home. If they get divorced, your home will be involved. If they have an auto accident without enough insurance, your home could be taken to satisfy a judgment.
The biggest problem is that you lose control. You want to sell and move? You will need your joint tenant’s signature. Want to refinance? Signatures needed again. What if you change your mind? You can’t change anything without the joint tenant’s signature.
Then there is the loss of the step up in tax basis that would normally occur on your death. What that means is that after you are gone and your joint tenant owns the property free and clear, their tax basis in the property will be the same as your tax basis, (Normally what you paid for the property years ago). When they sell, their gain on the property (taxable as a capital gain) will be based on your purchase price instead of the value of the property at the time of your death. If you have owned the property for a long time, the consequences could be financially catastrophic.
3. Having a Will. Most of our lives, we hear that all we need to disburse our estate is a Will. For most people, this is a bad idea. A Will is a one way ticket to probate court.
There is no way to disburse an estate left by a Will without going through probate. Your executor will have to hire an attorney. That attorney will likely charge a percentage of the estate as a fee, regardless of the time spent. Probate can drag on for years. Probate is public. That means that everyone who is interested can see your entire estate, including business competitors. Probate fees are expensive. Details must be published in the newspaper. A Will is easy to challenge, even if the challenger has no attorney.
Selling real estate through probate is very difficult and nearly always results in the property being sold well below market prices. Lengthy probate often leads to resentment between heirs and your executor as heirs are usually anxious to get their share quickly.
In probate court, your wishes are subject to a judges interpretation and a judges desire to consider the welfare of children over your written instructions. Your wishes may not always be followed.
People believe that Wills are cheaper than Living Trusts. This is a misconception. Yes, a simple Will is relatively inexpensive. Most people need much more than a simple Will. By the time you include all the provisions that you need, it is going to cost just as much as a Living Trust. It is true that you can do almost everything in a Will that you can do in a Living Trust. But, if your will is as complete as your Trust, it will be no bargain and will still subject your estate to probate. A Living Trust will be disbursed in weeks instead of years, is completely private, assures that your wishes will be followed, requires no courts or attorneys and the costs of each, will allow for a quick and effective sale of real estate assets, and will ease the stress on family members. It is virtually always better than a Will.
4. Leaving large gifts to heirs who are not mature enough to handle the responsibility is mistake 4. This is a hugely common mistake. People assume that they will live to an old age and that children will be mature enough to handle their inheritance. Just when you think you have everything in order, something happens to upset your best laid plans.
An unexpected illness or accident can escalate the distribution of your estate to a child who is 18 or 19. (Some children don’t mature until much later.) Even a 25 to 30 year old may not be equipped to handle a large disbursement. There’s nothing much worse than having the estate you worked so hard for be wasted in a couple of years or less by an immature heir. It happens all the time.
With a trust, you can protect your heirs from themselves or from their controlling spouses. You can provide for the inheritance to be used for college or to be used to purchase a house. You can protect heirs with special needs. There is no limit to how you can protect your heirs with a Living Trust.
5. During their lifetime, in order to avoid probate, people give large gifts to their children. This is mistake 5. You think you will beat the system by giving everything away during your life. Then you won’t need a Will or a Living Trust. Wrong! Most people are unaware of the Federal Gift Tax. If, in any calendar year, an individual gives another person more than $12,000, ($22,000 from a couple), that gift will be taxable to the giver to the extent that the gift exceeds the $12,000 or $22.000. That’s right, you will be taxed on the amount you give away to another person. How bad is this tax that you never heard about before? It’s 45% of the value of the excess gift. That is a huge tax. And once it is given, you cannot take it back and say you didn’t know you would be taxed.
6. Mistake 6 is closely related to mistake 5. In order to limit or beat Federal Estate Tax, people give property away during their lifetime.
7. Mistake 7 is choosing the wrong person, or the wrong professional trustee for your estate. This can be costly, indeed.
8. A related mistake is to choose two co-trustees to act together. Co-trustees are not always bad, but if you have only two and they can’t agree on a major matter, their recourse is, again, (can we say it together) Probate Court. You do not want to do anything that is likely to force the estate into probate. Choosing two co-trustees raises the possibility. If you want multiple trustees to watch each other and divide the work, consider choosing three co-trustees. Then you will usually have a tie breaking vote.
As you can see, your choice of Successor Trustee is critical. You should also have at least one backup, two is better. That way, if something happens to your first choice, and they can’t or choose not to serve, you need an alternate or two. Otherwise, it’s back to the Probate Court.
9. Mistake 9 applies only to super big estates. This occurs when people leave large sums to grandchildren. There is a tax called a “generation skipping transfer tax”. This applies to gifts to grandchildren in excess of $1,000,000.
This relates to Federal Estate tax and may also apply to state inheritance taxes in some states. The government has realized that when you give to your grandchildren, the government is losing a generation of Federal Estate Tax. They lose the tax your children’s estate would have been subject to when they left your property to their children. Your gift would only be taxed once instead of twice. You have skipped a generation.
The government is not going to allow that. Therefore, gifts over $1,000,000 will be taxed at a 50% rate. One half of the gift will go to the government. There are other vehicles to assist in making such gifts, but you need to be sure you don’t give half of your bequest to the IRS. Be very careful when providing for gifts to grandchildren. You can see how expensive a mistake in this area can be.
10. The final mistake is procrastination. You see, we have almost come full circle. This very closely related to mistake 1.
The distinction is that you realize you need a Living Trust and may even have taken some steps to put it in place. But, for whatever reason, you have not finished the job. Maybe, you’re concerned about the cost and you can’t fit it in your budget. You want to wait for the holiday bonus at work, that income tax refund or the next government stimulus package. This is nearly as bad as doing nothing and having no plan.
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.