Plan Your Estate

Turn to Plan Your Estate for straightforward, plain-English explanations of each of your estate-planning options, so you can make the best decisions for you and those you love. Attorney Denis Clifford shows you how to: avoid probate leave property through a will or trust use life insurance to provide for your loved ones name a guardian for your minor children leave property to a young person plan for incapacity implement strategies specific to business owners reduce estate taxes make final arrangements This book is for seniors doing end-of-life planning, parents planning for their young children’s futures, adult children helping their parents make end-of life plans, as well as readers of any age who want to learn about estate planning. No matter what category you fit into, if you’re like most people, you understand that estate planning is a good idea. You know that estate planning ensures that your property will pass to the right people with minimal delay, red tape, and cost. And if you do have young children, you likely know that you need an estate plan to have a say in who will care for your children if you’re not around to do it. Perhaps you even know that you can use your estate plan to leave specific instructions about your finances and medical care in case you become incapacitated and unable to make those decisions for yourself. Although you may know all of that, it’s all too easy to put off actually sitting down and making your plan. We understand. Estate planning is not easy—first, because it forces you to think about your mortality, and second, because of the legal complications and legal fees that often come with it. Plan Your Estate is here to help. This book explains estate planning in plain English, step by step, option by option. Once you know your choices, you can confidently move toward making an estate plan that fits your circumstances and wishes. Plan Your Estate covers these estate planning goals: Leaving property. If you are not wealthy, you might use a simple will or living trust, or both. You can also use co-ownership, transfer-on-death accounts, or beneficiary designations. If you have a large estate, you might also leave property to beneficiaries in more complicated ongoing trusts. No matter how you leave your property, it is better to have a plan—if you die without one, state law will decide who gets what. Providing for young children. If you have young children, you’ll want to ensure that they will be well cared for if you die before they become adults. In your will, you can name guardians to raise them and managers to look after their inheritance. You’ll also likely want to buy life insurance to make sure that your kids have money after you’re gone. Planning for incapacity. Part of estate planning is preparing for what would happen if you ever became unable to make medical and financial decisions for yourself. You can use a health care directive to name someone who will make medical decisions on your behalf and to express your wishes about end-of-life care. You can also prepare a durable power of attorney that gives a trusted person control of your finances. Preparing these documents can save your family much heartache. Avoiding probate. Probate is a court-run process for wrapping up an estate. It’s often expensive and time-consuming, yet rarely provides any benefit to the beneficiaries. Thankfully, with a little planning, probate is fairly easy to avoid. Trusts, pay-on-death accounts, joint tenancy, and other probate avoidance methods can keep most or all of your estate out of probate, saving your loved ones time and money. Reducing estate tax. Most people won’t owe federal estate tax. But if you expect to leave over $11 million (or $22 million as a married couple), you’ll probably want to use your estate plan to reduce the tax that your estate could owe after your death. If all this sounds overwhelming, please keep in mind that many people need only a simple estate plan. You may be able to prepare all your documents yourself. Or you might discover that you have some pretty complicated estate planning needs that will require advice from a lawyer. Most likely, you’ll find yourself somewhere in between. No matter what your situation, with Plan Your Estate on your side you can go forward informed and empowered to make a smart and effective estate plan. Estate planning is an invaluable gift to yourself and to your loved one. It will feel great to get it done, and you can start right here with Plan Your Estate . (Note: This book contains no estate planning forms, but it does tell you how to get the forms you need.) Cover 1 Title Page 4 Table of Contents 8 Your Estate Planning Companion 16 1: Your Estate Planning Goals 18 Part I: Setting Your Goals 19 Part II: Laying the Groundwork 19 Part III: Children 21 Part IV: Wills 21 Part V: Probate and How to Avoid It 22 Part VI: Understanding Estate and Gift Taxes 23 Part VII: Reducing or Eliminating Estate Taxes 25 Part VIII: Imposing Controls Over Property 26 Part IX: Taking Care of Personal Issues 27 Part X: Family Business Estate Planning 28 Part XI: Going Further 28 Part XII: Sample Estate Plans 29 2: Personal Concerns and Estate Planning 32 Avoiding Conflict 33 Leaving Unequal Amounts of Property to Children 36 Providing Care for Minor Children 39 Subsequent Marriages 40 Long-Term Care for a Child With Special Needs 41 Concerns of Unmarried Couples 43 Worries About the Effect of Inheriting Money 43 Disinheriting People, Including Children 45 Communicating Your Decisions to Family and Friends 46 3: Special Property Ownership Rules for Married People 50 What You Need to Know 51 Marital Property in Community Property States 56 Marital Property in Common Law States 60 Moving to a Different State 63 4: Inventorying Your Property 64 Instructions for the Property Inventory Worksheet 65 Your Property Worksheet 75 5: Your Beneficiaries 86 Types of Beneficiaries 87 Primary Beneficiaries 88 Life Estate Beneficiaries and Final Beneficiaries 91 Alternate Beneficiaries 92 Residuary Beneficiaries 92 Gifts Shared by More Than One Beneficiary 93 Establishing a Survivorship Period 94 Explanations and Commentary Accompanying Gifts 94 Disinheritance 96 Simultaneous Death 97 Property You Give Away by Will or Trust That You No Longer Own at Your Death 98 6: Children 100 Naming Someone to Take Custody of Your Minor Children 102 Naming an Adult to Manage Your Child’s Property 105 How Your Children’s Property Should Be Managed 108 Tax-Saving Educational Investment Plans 114 ABLE Accounts for People With Disabilities 119 Naming Children as Beneficiaries of Life Insurance 119 Leaving Property to Children Who Are Not Your Own 120 Disinheritance 121 Children Conceived After a Parent Dies 122 7: Wills 124 A Will as the Centerpiece of Your Estate Plan 125 A Backup Will With a Comprehensive Estate Plan 126 What Makes a Will Legal? 127 Types of Formal Wills 129 What Property Cannot Be Transferred by Will? 134 Explanatory Letters Accompanying Your Will 135 Can My Will Be Successfully Challenged? 137 Keeping Your Will Up to Date 138 8: Probate and Why You Want to Avoid It 140 What Is Probate? 141 Probate Fees 142 Avoiding Probate 143 When You May Want Probate 147 Debts, Taxes, and Probate Avoidance 148 Probate Reform 148 9: Living Trusts 150 Does Everyone Need a Living Trust? 152 Living Trusts Explained 153 Major Decisions in Creating a Living Trust 159 Creating a Valid Living Trust 165 Keeping Your Living Trust Up to Date 169 10: Joint Tenancy and Tenancy by the Entirety 172 What Is Joint Tenancy? 173 Joint Tenancy Bank Accounts 175 Joint Tenancy Safe Deposit Boxes 175 Tenancy by the Entirety 176 Joint Tenancy in Community Property States 177 Tax Concerns Affecting Joint Tenancy 179 Drawbacks of Joint Tenancy 186 When Joint Tenancy Makes Sense 187 Creating a Joint Tenancy for Property With Documents of Title 188 Creating Joint Tenancy for Property Without Documents of Title 191 11: Pay-on-Death Designations, Registrations, and Deeds 192 Pay-on-Death Bank Accounts 193 Naming a Payable-on-Death Beneficiary for Government Securities 196 Naming a Beneficiary for Stocks and Bonds 196 Vehicle Registration 197 Transfer-on-Death Deeds for Real Estate 198 12: Life Insurance 200 Do You Need Life Insurance? 201 Types of Life Insurance 203 Life Insurance and Probate 209 Choosing Life Insurance Beneficiaries 209 Reducing Estate Tax by Transferring Ownership of Life Insurance Policies 210 13: Retirement Benefits 216 Social Security 217 Individual Retirement Plans 218 Standalone Retirement Trusts 221 Pensions 223 When You Retire 223 Retirement Plans and Estate Planning 224 Probate and Taxes 227 14: State Law Exemptions From Normal Probate 230 Will Your Estate Qualify? 231 Using These Rules to Plan 232 Summary of State Law Exceptions to Normal Probate 233 California Exemptions From Normal Probate 238 15: Estate Taxes 242 Federal Estate Tax Exemptions 243 The Big Picture: Estate and Gift Taxes 244 Will Your Estate Have to Pay Taxes? 245 Calculating and Paying Estate Taxes 250 Reducing Federal Estate Taxes 252 The Federal Income Tax Basis of Inherited Property 253 State Inheritance and Estate Taxes 255 16: Gifts and Gift Taxes 258 The Federal Gift Tax: An Overview 259 What Is a Gift? 261 How the Federal Gift Tax Works 264 Using Gifts to Reduce Estate Taxes 267 When Not to Give Property Away: Tax Basis Rules 272 Using Gifts to Reduce Income Taxes 274 17: An Overview of Ongoing Trusts 276 Trusts to Reduce Estate Taxes 278 Ongoing Trusts Used to Control Property 279 Ongoing Trusts and Avoiding Probate 279 What Ongoing Trusts Can’t Do 280 When Ongoing Trusts Begin and End 281 The Trustee 282 Taxation of Ongoing Trusts 288 18: AB Disclaimer Trusts 290 How AB Disclaimer Trusts Work 292 Is an AB Disclaimer Trust Right for You? 294 Choosing Trustees for an AB Disclaimer Trust 296 Do You Need a Lawyer to Create an AB Disclaimer Trust? 298 19: Other Estate Tax-Saving Marital Trusts 300 QTIP Trusts 302 Trusts for Noncitizen Spouses: QDOTs 312 Marital Deduction Trusts 315 20: Charitable Trusts 318 An Overview of Charitable Trusts 319 The Income Tax Deduction 322 A Closer Look at Charitable Remainder Trusts 325 A Closer Look at Charitable Lead Trusts 331 21: Other Estate Tax-Saving Trusts 336 Generation-Skipping Trusts 337 Irrevocable Life Insurance Trusts 341 Grantor-Retained Interest Trusts: GRATs, GRUTs, and GRITs 345 22: Disclaimers: After-Death Estate Tax Planning 356 Advantages of Disclaimers 357 IRS Rules for Disclaimers 359 Including Disclaimers in Your Estate Plan 362 23: Combining Estate Tax-Saving Trusts 364 Combining Two Estate Tax-Saving Trusts 365 Combining a Charitable Trust With Other Estate Tax-Saving Trusts 366 24: Property Control Trusts for Second or Subsequent Marriages 370 Evaluating Your Situation 372 How a Marital Property Control Trust Works 374 Restricting the Surviving Spouse’s Rights Over Trust Property 375 The Role of the Trustee 378 Working With a Lawyer 380 25: Trusts and Other Devices for Imposing Controls Over Property 382 Educational Trusts 384 Trusts for People With Special Needs 385 Spendthrift Trusts 387 Sprinkling Trusts 389 Trusts to Manage Your Own Property 391 Powers of Appointment 392 Combining Property Control Trusts 395 26: Incapacity: Making Medical and Financial Decisions 396 Medical Decisions 398 Financial Decisions 409 Guardianships and Conservatorships 414 27: Body and Organ Donation, Funerals, and Burials 416 Making Your Own Choices 417 Leaving Written Instructions 418 Donating Your Body or Organs 419 Death Notices and Obituaries 421 Services and Ceremonies Following a Death 422 Funerals 422 Cremation 426 Burials 427 You Can Choose a Green Burial 428 28: Family Business Estate Planning 432 Operation of the Business 433 Reducing Estate Taxes 436 Avoiding Probate of a Family Business 442 29: Using Lawyers 444 Hiring a Lawyer 445 Doing Your Own Research 450 30: After You Complete Your Estate Plan 456 Storing Your Estate Planning Documents 457 Revising Your Estate Plan 458 31: After a Death Occurs 464 Wills 465 Probate-Avoidance Living Trusts 465 Ongoing Trusts for Estate Tax Savings or Property Management 468 Preparing and Filing Tax Returns 470 Trustee’s Reports to Beneficiaries 470 Collecting the Proceeds of a Life Insurance Policy 471 Obtaining Title to Joint Tenancy Property 472 Digital Assets 473 32: Some Estate Plans 474 A Prosperous Couple in Their 60s and 70s 475 A Wealthy Couple in Their 70s 476 A Single Man in His 60s 477 A Younger Couple 477 A Single Mother in Her 30s 479 A Widow in Her 80s 480 A Couple in Their 60s, in a Second Marriage 481 An Unmarried Couple in Their 40s 482 Glossary 484 Index 496 Book Registration 545 This book provides the information and encouragement you need to create an estate plan that's right for you. It shows you how to protect your property, provide for children, avoid probate and plan for incapacity. The information in this book will help you formulate your plan and will save you time and money, whether you create your own estate plan or go to a lawyer for assistance This book provides the information and encouragement you need to create security for your property, your children, and your health. In plain English, it covers every standard estate planning topic in detail. The information in this book will help you formulate your plan and will save you time and money, whether you create your own estate plan or go to a lawyer for assistance