Estate Planning FAQs

Q

What is Estate Planning?

A

Good estate planning is more than just simply drafting a will. Estate planning minimizes potential taxes and fees and sets up contingency plans to make sure your wishes regarding health care treatment are followed. On the financial side, a good estate plan coordinates what will happen with your home, your investments, your business, your life insurance, your employee benefits (such as 401K plans), and other property in the event you become disabled or in the event of your death.

We plan for today and the future. We keep our clients fully advised of the changing laws that can affect the effectiveness of established estate plans. We also make sure you understand the impact of Kentucky and Ohio inheritance tax issues. We will help you protect your assets!

Q

What Happens If I Die Without a Will?

A

If you die without a will ('intestate ') and have not made alternative arrangements to distribute you're your money and your property (your 'estate'), state laws determine how it will be distributed. Your estate will have to go through a probate process, which may be more costly, time-consuming and complicated than if a will were involved. The court will appoint an individual (or 'representative') to pay debts, taxes and funeral expenses, and to distribute the remainder to family members according to strict statutory guidelines.

Further, a court appointed representative must post to protect the bond before they can administer the estate. If both parents of a minor child die without a will, the state may decide who will be the child's guardian.

Q

What is a Will?

A

A will simply provides instructions for distributing your assets to your family or other beneficiaries upon your death. We can customize your will provisions to meet your specific needs and desires. You will choose a personal representative known as an executor(ix) to distribute your assets. If you have minor children, you can designate a guardian for them. A will does not avoid probate. A will only becomes effective after it is admitted into probate. A will, therefore, ensures that the probate process is necessary, unless your estate is extremely small.

Owning joint property does not guarantee that probate will be avoided in all circumstances and can create unanticipated problems. Joint tenancy with right of survivorship is the most common way in which people jointly own property, particularly spouses. Upon the death of one joint owner, the remaining joint owner automatically becomes the sole owner of the property, without probate. However, upon the death of the surviving owner (or should all owners die simultaneously), the property is subject to probate. Joint ownership merely postpones the probate process.

Creating joint ownership can subject your property to risk of loss. For example, if a widow puts her property into joint ownership with her son, this property is available to creditors of the son, even though the property is really owned by the widow.

Q

What is a Trust?

A

A trust or a family limited partnership is used to hold property. The trustee(s) or partner(s) may manage the property held by either of these entities. Both a trust and a family limited partnership continue to manage your property, even if you are incapacitated.

-Testamentary Trust

A trust which is contained in an individual's will and comes into existence upon the death of the individual.

-Living Trust (or Inter Vivos Trust)

A trust created by a separate trust agreement and comes into effect before the death of the creator. A living trust is a legal document that allows you to transfer ownership of your property from your individual name to your name as a trustee of your own trust so that your assets are 'owned' by that trust. Unlike any other kind of trust you, as the creator and trustee; you have absolute 100% control over the property in your trust during your life. Nothing changes except the name on the title to your property. This trust is both revocable and amendable during your lifetime. Upon your incapacity, a 'backup trustee,' named by you in the trust instrument, automatically steps in and administers your estate, without court involvement. This backup trustee distributes your estate according to your instructions. No probate is necessary because you owned nothing in your own name; your trust 'owned' all of your assets.

-Bypass Trusts

A bypass trust is an estate planning device used to pass down assets after death, without subjecting them to the estate tax.

A bypass trust is typically created as part of an A/B trust estate plan. Upon the death of the first party to die, the terms of the will or living trust require that some portion of the property be transferred into "TRUST A" and some other portion into "TRUST B." The first of these trusts, A, holds property that remains accessible to the surviving spouse during his/her life. That way the surviving spouse has enough wealth at hand to provide for their needs until death. The second trust, B, receives the other portion of the original trust's property in a manner that minimizes taxation, which necessarily prevents it from being accessible to the surviving spouse during his/her life. This trust is meant to pass on property to heirs, usually the spouse's children, on death of the remaining spouse, but in a way that minimizes the estate tax and gift tax that would have been applied to the property if it had passed through a will, or if given as a gift during life (Gift Inter Vivos).

-Other Types of Trusts

There are many other types of estate planning trusts out there but each must be specifically adapted for the proper situation. Please contact us if you have questions concerning other types of trusts.

Q

What is Power of Attorney?

A

-Durable Power of Attorney

A durable power of attorney is a legal document in which you name another person to act on your behalf. The person is called your agent or attorney in fact. You can give an appointed agent broad or limited management powers. You should choose this person carefully because he or she will generally be able to sell, invest and spend your assets. A durable power of attorney will remain effective in the event of disability of the principle. Keep in mind a power of attorney will end upon your death. A power of attorney does not empower another to distribute assets after the maker's death, even when there is a will.

-Springing Power of Attorney

A springing power of attorney will only go into effect when the principal is incapacitated or when some other stipulated event or condition occurs.

-Health Care Power of Attorney or Health Care Surrogate

The purpose of this document is to give the person you designate broad powers to make important health care decisions for you, including power to require, consent to or withdraw any type of personal care or medical treatment for any physical or mental condition and to admit you to or discharge you from any hospital, home or other institution. This document is only effective when you are unable to make these decisions.

Q

What is a Living Will?

A

Living Will is a legal document in which an individual expresses their intentions regarding the use of life-sustaining measures in the event of a terminal condition. It expresses what you want, but does not give anyone the authority to speak for you in the event you are able. There are certain legal requirements that must be complied with regarding its execution. This document is defined by various statutes and differs from state to state.

Q

What is a "DNR" or Do Not Resuscitate Order?

A

DNR is binding legal document that states resuscitation should not be attempted if a person suffers cardiac or respiratory arrest. Abbreviated DNR, such an order may be instituted on the basis of an advance directive from a person, or from someone entitled to make decisions on their behalf, such as a health care proxy. (Tip: Usually kept in your home freezer where medical personnel are trained to look.)

Q

What is Probate?

A

-Probate Defined

The process by which the decedent's probate assets are transferred to the individuals or entities who are entitled to such assets, after all of the debts, expenses and other obligations of the decedent and his/her state are satisfied. Probate and estate administration demands exact accounting and fair distribution. We can guide you through the process, and represent your interests in will contests and estate litigation.

Executor vs. Administrator

-Executor is the person or entity appointed by the Probate Court to administer the Estate of the Decedent. This person or entity would be designated in the decedent's will. The responsibilities of this person includes locating and gathering the assets of the decedent, paying the debts of decedent and the costs, expenses and other obligations of the estate, filing the required tax returns and distributing the remaining assets to the individuals or entities entitled to receive them.

-Administrator is the person or entity appointed by the Probate Court to administer the estate of the decedent when the decedent does not have a Will or when no executor is designated in the decedent's will. The responsibilities of this person or entity are similar to those of the executor; however, more Court intervention may be required.

Guardianship

-Guardian is an individual or individuals who are appointed by the Probate Court to raise the children of the decedent until he or she attains age 18. This individual or individuals should be designated in the decedent's will.

A guardian can also be appointed by the court to care for an individual adult who is unable to care for himself/herself due to medical or mental health impairment or incompetency.

Conservatorship

-Conservator is an individual appointed by the court and supervised by the court to administer your estate during any period that you are unable to do so yourself because of incapacity. The probate court, although authorizing the conservator to handle the day-to-day management of your estate, assumes control over your assets and closely monitors what is done with your assets.

Q

What is Elder Law?

A

Our firm works with clients and their families is love one's age, including the best use and management of personal and financial resources to meet their long-term objectives, exploring all home-based care options as a first priority when appropriate and easing transitions the event a facility placement is required.

-Medicaid

The most troublesome provision of the new nursing home rules is the treatment of gifts. Under the DRA, a senior who makes a relatively small gift or a family member may be unable to pay if nursing home care is needed three, for even five years later. Because Medicaid rules and regulations can affect both a person's estate, as well as their ability to pay for nursing home needs, this is an important area that must be investigated.

Q

How do I handle Estate Planning if I have a Blended Family?

A

While estate planning can be complex for all families, it can be especially challenging for those in other than a first marriage. In addition to considering your spouse and children from your current marriage, both you and your spouse may have children from prior marriages. Ensuring that everyone is treated fairly can be a challenge, but these five steps can help:

1. Sit down with your spouse and discuss both of your desires. Make a list of assets you each brought into the marriage as well as assets obtained after your marriage. Discuss how you want these assets distributed after your death.

How will you treat children from prior marriages? Will you each make your own provisions or will you consider all of the children jointly? Does your divorce decree have provisions that need to be considered in your estate plan? All of these concerns will impact how you distribute your estate. Once you and your spouse reach agreement, your estate planning documents should support these decisions. Keep in mind that, even if you have a will, your spouse can often override the terms and elect to receive a statutory percentage of your estate. To prevent this, you typically need a prenuptial or nuptial agreement, detailing how assets will be divided after death.

2. Determine whether trusts are necessary to protect your children's inheritance. When assets are left outright to your spouse, your spouse controls the ultimate distribution of those assets. You may want to use a qualified terminable interest property trust (commonly referred to as a QTIP trust) to protect your children's interests. Assets you designate are placed in this trust, with income distributed to your spouse during his/her lifetime. Since this qualifies for the unlimited marital deduction, no estate taxes will be paid when you die. After your spouse's death, the principal is distributed to your heirs.

This strategy may not work if your spouse and children are approximately the same age, since your spouse could outlive your children.

3. Review beneficiary designations and life insurance amounts. It's not unusual to forget to update beneficiary designations for retirement accounts, individual retirement accounts, and life insurance policies. These assets will be distributed to your named beneficiaries, regardless of the terms of your estate planning documents.

Thus, take a look at those designations to ensure they are coordinated with your estate plans. While you're at it, review how much life insurance you have. You may find that you need more life insurance to help ensure that all your heirs are treated equitably.

4. Check how your property is titled. Jointly owned property automatically passes to the co-owner. You cannot change this distribution through a will.

5. Discuss your plans with your family. Especially in situations where there are step-parents and step-children, you should communicate plans for your estate. You don't want your children to believe your spouse has unduly influenced you or you don't care about them anymore. Being open and up front about your estate plans will hopefully prevent disagreements and misunderstandings after your death.

Q

What are the Most Common Estate Planning Mistakes?

A

-Putting Off Decisions. Some people just never get around to putting down their dispositive wishes.

-Not having an Advisor. Some people think that it is shrewd to skimp on lawyers fees when drawing up a will, so they do not get all the advice and guidance that they need. That can come back to bite them, or their heirs.

-Failure to Plan. Good planning dictates that future ownership and leadership of the family business be secured by airtight agreements, proper provisions in the will and flexibility to deal successfully with outcomes that were not for scene.

-Planning during lifetime can overt such outcomes after death

The guidance of a good lawyer can make all the difference.

 

Q

What Types of Records do I Need to Keep for Effective Estate and Financial Planning?

A

Effective estate and financial planning requires an appropriate and personalized plan.

It also demands a well-organized record-keeping system. We advise that you keep all records in a safe and retrievable document file system that is easily accessible.

Included in this document system should be a personal records inventory. A good inventory of assets and current statements is invaluable to anyone taking care of your estate. These documents should be kept, along with copies of life insurance policies or life insurance policy statements, which will allow easy handling of your affairs.

Contact Michael Ruberg for assistance with your estate planning matters.

Finally, it is essential to be certain that designated family members and/or friends are aware of the existence and location of these documents.

These simple steps will greatly minimize the stress and confusion for your family members should you become ill or passes.

Attached is a personal inventory that can be downloaded and tailored for your specific estate planning needs.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.