Tax & Estate FAQs
Posted on Jun 14, 2013
Q: Why do I need more than a simple Will?
A: A”simple” Will is an extinct creature whose memory is left over from a simpler time. Most of us will go into a period of disability prior to our death, and a Will does nothing to help plan for our mental or physical incapacity. At the least, an estate plan should consist of:
- an advanced medical directive, and
- a general power of attorney whose terms adequately set forth what the client would prefer in the likely event of disability–home care, payment to a child caretaker, etc.
For a single person, a lifetime revocable trust is often necessary to plan adequately for disability. The individual’s Will only helps when the person is beyond pain.
Q: What’s the most common error in an estate plan?
A: Improper titling of assets. Often, it isn’t until a loved one dies that family members discover that the person’s assets weren’t very well maintained. People are unwilling to go through all of the estate owner’s assets and make sure that the estate plan that’s being prepared is headed in the right direction. As lawyers, we frequently have to deal with a client whose:
- Life insurance is co-owned by the ex-spouse;
- IRA is payable to the “estate” (accelerating the IRA income tax);
- Car was not jointly titled with another; Joint bank account is emptied by an impoverished child;
- or Work pension plan has out-of-date information for primary beneficiary.
Many consider a real estate closing to be a complex transaction. But consider the above cases of when all of the decedent’s assets pass, at death, to a new owner, you’ll realize how death can engender legal complexity enough for ten real estate closings.
The moral: This headache is avoidable. Maintain your assets. Asset transfers can and should be planned for and documented before a person’s death.
Q: How do I avoid probate disputes?
A: The Vermont probate courts are vestiges of the Anglo-Saxon ecclesiastic courts. They are optional venues for passing assets at death. For the average cost of a probate proceeding, the individual can bypass probate through living trusts, joint ownership, designations of beneficiaries, etc., and save the effort of having a probate court take the 18 to 24 months to review matters. In the event of a dispute, any party may easily contest a Will on a pro se basis (at no cost to him or her) by contesting the Will when it is admitted to probate. It is vastly more difficult and more expensive to contest a fully-funded living trust plan. The plan has typically been fully executory for a considerable period so the normal challenges to a Will (undue influence, coercion, mistake of fact) are less likely to be successful.
Q: How much do you charge for a simple Will?
A: We cannot answer this question because we’ve never seen an estate plan that solely consists of a “simple” Will. If the Will looks simple, hopefully the decedent has planned for his/her demise by holding all of their assets in some form of joint ownership or beneficiary designation in a way that allows the assets to go to the right person immediately after death without the necessity of probate.
At a minimum, the “simple” Will must be signed. And the residence should be passed to a new owner at the time of death in a way that works adequately for the following purposes:
- Medicaid long-term planning;
- Federal income tax;
- and Asset protection planning.