Estate Planning | Jacques Law Office, PC
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Estate Planning

YOUR ESTATE PLAN

Making an estate plan may seem like a daunting task and somewhat difficult to navigate through, but there are many reasons to have an estate plan and have all of your affairs in order. Some may feel having a will or trust it is a matter of wealth or that only older folks that are well off have estate plans. We feel you should know, having estate plans prepared is for everyone, especially a will. It just makes sense.

 

Below we will go over some some important factors to consider and key reasons for creating your estate plan. Though a basic overview, we hope this information helps guide you to making the right choice in developing your estate plan. Don’t hesitate to reach out and setup an appointment to go over your estate plan and answer any questions you may have.

Creating a Will

Did you know that if you don’t create a Will, the state already has one created for you?  The courts will decide how and to whom your property will pass; who will take care of your minor children; and who will administer your estate.  You may rest assured that the courts will do nothing to reduce your probate and estate taxes.

You’ve probably heard people advocate some of the following misconceptions about the need for making a Will:

“Only rich people need a Will.”

“Only people with dependents need a Will.”

“Only people with troublesome relatives need a Will.”

“Couples who hold their property in joint tenancy with the right of survivorship don’t need a Will.”

All of these statements are wrong.  Any property constitutes an estate.  Furthermore, your estate is probably worth more than you think.  No matter how much or how little you own — YOU NEED A WILL!

What is a Will?

A Will is a written document that specifies your wishes and controls the disposition of your property at death.  Therefore, the Will does not take effect until your death.  As long as you are alive, it transfers no property and gives no rights in your property to anyone.

 

What Happens if You Die Without a Will?

If you die without a Will, your property will be distributed through probate in accordance with the inflexible provisions of the laws of intestate succession — without any regard to your wishes or the needs of your family.  Further, your estate will be managed by an administrator appointed by the court, and no special gifts can be made to relatives, friends, or charities.  Possibly even more important is the fact that, if you are not survived by any heirs, your estate may pass (escheat) to the state.

 

Who Can Make a Will?

In most states, including Idaho, any person 18 years of age or older and of sound mind (also referred to as testamentary capacity) can execute a Will.

REASONS TO HAVE A WILL

  1. You can name your personal representative (also called an “executor” or “PR”). This is the person who will manage your estate according to the instructions in your Will.  If you die without a Will, the law will decide who will manage your estate, and that person may not be the person you would have considered most capable of carrying out such a responsibility.

 

In a Will, you can save your estate the expense of a bond by stating that your personal representative need not furnish a bond.  Such a provision can often save your estate more money than it cost to have an attorney prepare your Will.  Thus, the Will pays for itself with the inclusion of this one provision.  You can also choose an individual, a bank or a trust company or, in some situations.

 

  1. In a Will, you can name the person or persons you want to serve as the guardian(s) of your minor children should their other biological parent not survive you.

 

  1. You can create a Testamentary Trust in your Will to provide for your spouse, children or others. A trust may protect your estate from loss or dissipation which might result from your heirs’ inexperience, inadequacy, or incompetence.

 

  1. You can make specific gifts of cash or other property to others not related to you, such as your church, college, missionary cause, or other charities.

 

  1. Often it is possible to reduce or eliminate estate taxes with a skillfully drawn Will.

 

  1. If estate taxes must be paid, you can specify from whose share of the estate they will be paid, or you can specify that they be paid on a pro rata basis.

 

  1. You can give your personal effects, which may have little financial value but great personal value, to the loved ones who will cherish them most.

ISSUES RELATED TO YOUR WILL

Did you know that if you don’t create a Will, the state already has one created for you?  The courts will decide how and to whom your property will pass; who will take care of your minor children; and who will administer your estate.  You may rest assured that the courts will do nothing to reduce your probate and estate taxes.

JOINT TENANCY

A husband and wife holding their assets in joint tenancy also need Wills.  One obvious reason is that the couple could pass away in a common disaster and Idaho state laws would dictate how the property should be distributed.  Moreover, there are frequently some assets that are not held in joint tenancy.  For example, assets may be overlooked which in actuality are held in tenancy in common or community property and which do not carry the right of survivorship.

OUT-OF-STATE WILLS

Contrary to public opinion, moving into another state will not ordinarily invalidate a Will. A Will is valid in most states if its execution complies with the law of the state where it was executed.

However, there are problems in connection with Wills drawn out-of-state.  There might be delay, expense and inconvenience in locating and obtaining the testimony of out-of-state witnesses.  As a result of the move, there may be changes of circumstances regarding the family, the assets or the testator’s desires that make revision advisable.

If you move into a new state, you would be well advised to review your Will with legal counsel.

GUARDIANS OF MINOR CHILDREN

In Idaho, a guardian is the supervisor and manager of the person and of the property of that person. While the terminology may differ, all states have statutory provisions for the oversight of minors.

Generally, a minor cannot own property.  Therefore, if parents die and leave property to a minor child, a guardian or conservator will need to be court-appointed to supervise and manage the property of the minor heir.  A better option to having a guardian appointed by the court is to establish a Trust for minor children and appoint a Trustee to manage the Trust.  In selecting a Trustee for your minor children, you should choose someone who will conserve and wisely manage the property.

A guardian is also appointed to care for the child.  In selecting a guardian for your child, you should choose the person who, in your opinion, is best qualified to act as a parent to your child.  It is important to have selected two backup guardians in case your first choice is unable to serve as your child(ren)’s guardian.

MAKING CHANGES IN YOUR WILL

As long as you have testamentary capacity (the competency to choose how you want to dispose of your property), you may create a new Will as often as you want.  In addition, you may make a change, called a Codicil, to your present Will.  The Will that is effective at your death is the last Will you created. Should you make a new Will, you automatically revoke all previous Wills.

It is not a good idea to change your Will by scratching, erasing or adding provisions.  If this is done, you are inviting confusion, disputes, and lawsuits.  Before making any changes in your Will, you should consult your lawyer.

It is important for you and your advisors to periodically review your estate plan.  Changes in your personal or financial circumstances, such as marriage, divorce, births, deaths, adoptions, separations, inheritances, asset valuation, purchase of life insurance, etc., may warrant updating your Will.  Similarly, changes in federal tax law or Idaho state law may also make updating your Will advisable.

TRUSTS

What Is A Trust?

A Trust is simply an arrangement whereby one person technically owns property but holds and manages it for the use of someone else.  A personal Trust may be testamentary; that is, created by Will.  Or, it may be a Living Trust, that is, created during one’s lifetime.  The purposes of Trusts are as unlimited as the imagination of persons with property and their legal advisors.

Why Establish A Trust?

The common purpose in the establishment of a Trust is to supply management of the trust property for the benefit of the beneficiary or to conserve the trust property for the beneficiaries and to protect them against mismanagement or misuse of the property.  Additional purposes could include saving income and estate taxes and the desire to take advantage of the ease and privacy of property transfer.  Trusts allow flexibility in dealing with existing problems and problems which may occur in the future.

Can Probate Be Avoided With A Trust?

Yes.  When the creator (trustor) of a Living Trust (Revocable Living Trust) dies, the Trust does not, so there is no need to probate property held in Trust.  If the property is not titled in the trust name, it will be subject to probate and probate fees.  Further, where property is owned in more than one state, a Trust avoids the necessity of multiple probates.

Are There Different Kinds of Trusts? 

There are several commonly used Trusts.  They include the Testamentary Trust, Revocable Living Trust, Life Insurance Trust, and Charitable Remainder Trust.

A

The Testamentary Trust provides:

  1.  Family protection
  2.  Management of investments
  3.  Potential income and estate tax savings

B

The Revocable Living Trust provides

  1. Family protection
  2. Management of investments
  3. Potential income and estate tax savings
  4. Privacy
  5. Potential avoidance of probate
  6. Simplicity in asset transfers

C

The Life Insurance Trust provides:

 

  1. Family protection
  2. Potential income and estate tax savings
  3. Potential avoidance of probate
  4. Privacy
  5. Simplicity in asset transfers

D

The Charitable Remainder Trust provides:

  1. Increase in current income
  2. Current income tax savings
  3. Estate tax savings
  4. Privacy
  5. Management of investments
  6. Future gift to ministry

How Would a Typical Trust Plan Work? 

The most frequently used Trust is the Revocable Living Trust.  We will use it as an example to explain how a typical trust works.

The main purpose of most Revocable Living Trusts is to avoid probate.  These trusts, when all assets are properly titled in the trust, will provide the owner (creator or trustor) with the ability to control assets during life and avoid probate at death.

What Does a Trustee Do? 

The Trustee’s duty is to conserve and manage the property in the Trust.  Your Trustee will receive assets and administer them according to the terms of your Trust.  This includes distributing income from the Trust to the beneficiaries.  Upon the termination of the Trust, the Trust principal will be paid to

Who Should be Your Trustee? 

If your Family Trust is small with simple investment problems, you might consider naming a family member as the Trustee.  However, it is often best to name a disinterested expert, such as a trust company or a bank.  These corporate Trustees have experts who provide continuity of management if the Trust is in existence for a long period of time.

Providing for alternate Trustees, like providing for alternate Personal Representatives, is a good idea because the Trustee you designate may die, refuse to serve, or fail to qualify.  In addition, it is often wise to give Trust beneficiaries the right to remove the Trustee and appoint a Successor Corporate Trustee.

Do I Need a Will if I Have a Revocable Living Trust? 

With every Revocable Living Trust agreement, a simple “pour-over” Will is necessary. It disposes of your personal property, names guardians for minor children and provides that assets not titled in the Trust “pour over” to the Trust and become a part of the total Trust estate to be managed by the Trustee.

Free Consulting Services

Jacques Law is pleased to offer free consulting services in the area of estate planning.  Call today for an appointment!

(208) 344-2224

The purpose of this information is to provide helpful information of a general nature.  It is not intended as a source of specific legal or tax advice.