If you are single, with no kids, and very little assets, you should still have some basic estate planning documents in place. The default rules that state law provide may not be desirable for you.
As a bare minimum, estate planning should provide documents that: (1) instructs who will inherit from you, (2) names who will be in charge of handling your affairs after death, (3) names who will be in charge of handling your affairs if you become incapacitated, and (4) names who will make your health care decisions if you become incapacitated. Therefore, at a minimum, everyone should have THREE documents: (1) a Will, (2) a Durable Power of Attorney, and (3) a Health Care Power of Attorney.
Will
A Will names a Personal Representative to handle your final affairs and states who will receive whatever you may own. Dying without a Will is called dying "intestate", and the distribution of your assets will be governed by North Carolina's "intestacy" statutes. If you have a child or children, then your child or children will receive everything. If have no children, then your parents would receive everything. If you have no children and no living parents, then the recipients of your stuff could be siblings, nieces and nephews, grandparents, aunts, uncles, or cousins (essentially your closest next of kin). If you want to give anything to a friend or significant other, a Will is a must.
If there is some reason to prevent your stuff going to your next of kin, then a Will is a must. For example, if your father is receiving Government Benefits to pay long term care expenses through Medicaid, then allowing him to inherit anything from you would be wasteful.
Durable Power of Attorney
The Durable Power of Attorney (DPOA) grants someone the legal authority to act as your agent. This document allows someone to manage your financial affairs for you, which would be necessary if you ever become incapacitated. A single person who become incapacitated without a DPOA in place will have an unpleasant Court encounter. For example, if your Mother is willing to handle your financial affairs if you become incapacitated, then to do so, absent a DPOA, she will have to sue you to have a Court declare you legally incompetent. She will also have to petition the Court to be named as your Guardian. As your Guardian, she can manage your affairs, but she will have to account to the Court each year on how she used and managed your assets. A properly drafted DPOA can keep you out of the Court system by proscribing a private method of determining your capacity. Alternatively, the question of your capacity can be sidestepped by making a DPOA effective upon signing.
Health Care Power of Attorney
Much like the DPOA, a Heath Care Power of Attorney (HCPOA) grants someone the legal authority to make your Medical Decisions. Again, absent an HCPOA, you would have to be sued and someone appointed Guardian for you. The DPOA and HCPOA work together to keep you out of the Court system if you become incapacitated.
Additional Documents
Additional documents to consider for a single person include a Revocable Living Trust, a Living Will and a HIPAA Medical Release form.
A Revocable Living Trust can be used to avoid Probate if privacy is a major concern for you. A Living Will allows you to state your wishes about your life being artificially prolonged, and a HIPAA Medical Release form will make it easier for your loved ones to learn your condition if you are hospitalized.
Conclusion
Single persons should have estate planning documents in place to avoid costly and embarassing Court procedures if incapacity occurs and to direct purposefully who will receive the assets at death and appoint someone to make sure the final affairs are properly managed.
Showing posts with label Wills. Show all posts
Showing posts with label Wills. Show all posts
Friday, July 23, 2010
Saturday, May 8, 2010
Don’t both spouses automatically receive the $1,000,000 applicable exclusion amount for a total exemption of $2.0 million in 2011 without doing anything?
No! In order for married couples to fully utilize both spouse’s applicable exclusion amount of $1,000,000 in 2011 (assuming no new estate tax legislation), a plan must be in place. Unless they want to give assets to someone other than each other, their estate planning documents, whether in a will or a trust, must plan for the creation of a credit shelter trust at the first spouse’s death. Because clients do not know which spouse will be the first to die, both spouse’s plans should provide for the utilization of such tax credit shelter trusts. Many spouses believe that such credits would be given automatically, sheltering $2.0 million assets in 2011.
In reality, when one spouse provides in a will or trust to leave everything to the surviving spouse outright, then the first spouse to die does not use their $1,000,000 exemption, but instead places everything in the potential taxable estate of the surviving spouse. There is no tax at the first death due to the unlimited marital deduction. However, at the second death there will only be $1,000,000 that can pass without tax. The amount of assets above the exemption will be taxed at a rate of up to 55%. In order for both spouses to provide for each other and receive their own $1,000,000 exemption, they must plan to do so in a will or trust.
In reality, when one spouse provides in a will or trust to leave everything to the surviving spouse outright, then the first spouse to die does not use their $1,000,000 exemption, but instead places everything in the potential taxable estate of the surviving spouse. There is no tax at the first death due to the unlimited marital deduction. However, at the second death there will only be $1,000,000 that can pass without tax. The amount of assets above the exemption will be taxed at a rate of up to 55%. In order for both spouses to provide for each other and receive their own $1,000,000 exemption, they must plan to do so in a will or trust.
Monday, March 1, 2010
Estate Administration
Reprint of the February 2010 Strauss & Associates, P.A. Website Client Newsletter
Estate administration involves collecting a decedent's assets — particularly personal assets — and using them to pay debts, taxes and costs of administration until all the debts and costs are paid or the assets are exhausted. The remaining assets are distributed in accordance with the decedent's will or, in the absence of a will, by intestate succession, as provided by state law.
In many states, legislatures have adopted some version of the Uniform Probate Code (UPC), which was designed to simplify the estate administration process. Due to the real or perceived complexity of the estate administration (or probate) process, many people have sought legal advice on how to avoid probate. In this, as in any complex legal matter, consulting an attorney with experience in estate administration is essential.
An estate may need to be administered in more than one state. Generally, a decedent's estate is probated or administered in the state where he or she resided at the time of death. However, because state law governs the transfer of real estate it may be necessary to do an ancillary proceeding to probate for any real estate the decedent owned in another state. An ancillary proceeding is a scaled-down probate proceeding, which governs only the assets located in that state.
While probate proceedings can be extremely formal, they can also be relatively informal. An informal probate proceeding usually involves filing some basic paperwork, having the court appoint someone to manage the estate, paying the debts, distributing the assets and having the court approve the distribution. The court may never require a hearing, but only a review of the papers filed.
In other instances — such as when a will is disputed — a formal probate proceeding may be required. A formal proceeding involves more court oversight and usually requires one or more court hearings. In some states, a probate proceeding can be formal in parts and informal in others. For example, the matter may start out formally, with a court hearing to appoint the personal representative, but end informally, with a paper filed with the court detailing how the assets are to be distributed.
It may be possible to avoid the probate process for a decedent who owned few assets. A "small estate administration" is available in many jurisdictions. Usually, in order to qualify for a small estate administration the decedent's assets must not include real estate and must be worth less than a threshold amount determined by the state. If a small estate administration is possible, the parties who are entitled to receive the decedent's assets may collect those assets by way of an affidavit. Even in a small estate proceeding, though, the decedent's creditors need to be paid from the assets.
Generally, the first task in a probate proceeding is appointing a responsible party to manage the estate. This person is usually called the personal representative, but may also be known as the "executor." The personal representative may be an individual or a company, such as a bank. The personal representative may have been nominated by the decedent in the will. In the absence of a will, the court will usually appoint the surviving spouse or another family member. There may be more than one personal representative named.
After being appointed, the personal representative is expected to document all of the decedent's assets. This documentation is often referred to as the inventory. The personal representative must also inform the decedent's creditors that the decedent has died. If the decedent's probate assets are sufficient to pay the creditors, the personal representative will pay them from the estate. If the probate assets are insufficient, the personal representative may need to obtain court approval to determine which creditors should be paid.
Assets left after the creditors have been paid are distributed according to the will. If there is no will, the decedent is said to have died intestate. State laws vary as to how to distribute the assets of an intestate decedent.
The personal representative must also file any necessary tax returns, and may need to bring a lawsuit to collect any money owed to the estate. If the will is contested or there is any other dispute about how to distribute the estate assets, the personal representative may have to "defend" the will in a probate proceeding.
Estate administration involves collecting a decedent's assets — particularly personal assets — and using them to pay debts, taxes and costs of administration until all the debts and costs are paid or the assets are exhausted. The remaining assets are distributed in accordance with the decedent's will or, in the absence of a will, by intestate succession, as provided by state law.
In many states, legislatures have adopted some version of the Uniform Probate Code (UPC), which was designed to simplify the estate administration process. Due to the real or perceived complexity of the estate administration (or probate) process, many people have sought legal advice on how to avoid probate. In this, as in any complex legal matter, consulting an attorney with experience in estate administration is essential.
An estate may need to be administered in more than one state. Generally, a decedent's estate is probated or administered in the state where he or she resided at the time of death. However, because state law governs the transfer of real estate it may be necessary to do an ancillary proceeding to probate for any real estate the decedent owned in another state. An ancillary proceeding is a scaled-down probate proceeding, which governs only the assets located in that state.
While probate proceedings can be extremely formal, they can also be relatively informal. An informal probate proceeding usually involves filing some basic paperwork, having the court appoint someone to manage the estate, paying the debts, distributing the assets and having the court approve the distribution. The court may never require a hearing, but only a review of the papers filed.
In other instances — such as when a will is disputed — a formal probate proceeding may be required. A formal proceeding involves more court oversight and usually requires one or more court hearings. In some states, a probate proceeding can be formal in parts and informal in others. For example, the matter may start out formally, with a court hearing to appoint the personal representative, but end informally, with a paper filed with the court detailing how the assets are to be distributed.
It may be possible to avoid the probate process for a decedent who owned few assets. A "small estate administration" is available in many jurisdictions. Usually, in order to qualify for a small estate administration the decedent's assets must not include real estate and must be worth less than a threshold amount determined by the state. If a small estate administration is possible, the parties who are entitled to receive the decedent's assets may collect those assets by way of an affidavit. Even in a small estate proceeding, though, the decedent's creditors need to be paid from the assets.
Generally, the first task in a probate proceeding is appointing a responsible party to manage the estate. This person is usually called the personal representative, but may also be known as the "executor." The personal representative may be an individual or a company, such as a bank. The personal representative may have been nominated by the decedent in the will. In the absence of a will, the court will usually appoint the surviving spouse or another family member. There may be more than one personal representative named.
After being appointed, the personal representative is expected to document all of the decedent's assets. This documentation is often referred to as the inventory. The personal representative must also inform the decedent's creditors that the decedent has died. If the decedent's probate assets are sufficient to pay the creditors, the personal representative will pay them from the estate. If the probate assets are insufficient, the personal representative may need to obtain court approval to determine which creditors should be paid.
Assets left after the creditors have been paid are distributed according to the will. If there is no will, the decedent is said to have died intestate. State laws vary as to how to distribute the assets of an intestate decedent.
The personal representative must also file any necessary tax returns, and may need to bring a lawsuit to collect any money owed to the estate. If the will is contested or there is any other dispute about how to distribute the estate assets, the personal representative may have to "defend" the will in a probate proceeding.
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