Estate Planning FAQ’s

FAQs

• Why should I have an estate plan?

  Many people work hard throughout their lives to build financial security and accumulate assets. Eventually, it becomes important to protect these resources for your own use and to pass them on to your loved ones. A well-structured estate plan helps ensure that what you’ve worked for goes directly to the people you choose, rather than being reduced by government fees, taxes, or administrative costs that could otherwise claim a significant portion of your assets.

• What happens if I don't have an estate plan?

  The state will step in with its own default plan, called “Intestate Probate.” This means government involvement in distributing your assets. The court must approve payments for your bills, authorize support for your spouse, and oversee property distribution. Everything happens through public records that anyone can access. Without your own plan, your family faces a bureaucratic process that can become overwhelming during their time of loss. Additionally, without proper planning, your estate may pay significantly more in taxes than necessary. Whether you choose a Will or a Living Trust, having some form of estate plan is essential.

• How does a Will differ from a Living Trust?

  A Will directs how your property should be distributed after death, but the actual transfer happens through probate court. This Latin term means “prove the Will.” Once filed, your Will becomes public record, accessible to anyone. The court and attorneys control the process, not your family. Probate often proves lengthy, costly, and stressful while families are grieving. Some individuals have even used information from public Wills to target grieving families.

  A Living Trust bypasses probate since the Trust holds your property. Your chosen successor trustee manages and distributes assets according to your directions. Another key distinction: a Will only works after death, while a Living Trust can protect you during your lifetime if you become incapacitated, an increasingly important consideration as lifespans extend.

• What happens if I become mentally incapacitated without an estate plan?

  You would face what’s called a conservatorship or guardianship proceeding. The court appoints someone to manage your finances and personal matters. This person must regularly report your financial details to the court. The process typically involves significant expense, time, and loss of privacy.

• Can I manage my own Living Trust?

  Absolutely. Most people who establish Living Trusts serve as their own trustees. Married couples often serve together as co-trustees. You maintain full control over Trust assets. If you become incapacitated, your chosen successor trustee takes over, not someone selected by the court.

• Does a Living Trust reduce income taxes?

  No. Living Trusts help you avoid probate and potentially reduce estate taxes, but they don’t affect income taxes. If you serve as your own trustee, you’ll file tax returns just as you did before creating the Trust. No additional returns or tax obligations arise.

• Can I put real estate in a Living Trust?

  Yes, and you should include all real estate. Otherwise, each state where you own property may require separate probate proceedings. When your Living Trust owns the property, probate is unnecessary anywhere.

• Could the government eliminate Living Trusts?

  No. Living Trusts have existed in law for hundreds of years. The government benefits when estates avoid probate since it reduces court system congestion. Living Trusts simply ensure your wishes are carried out efficiently.

• Are Living Trusts only for wealthy people?

  Not at all. Living Trusts can benefit anyone who wants to protect their family from probate costs, legal fees, and unnecessary taxes. Even modest estates can gain meaningful advantages in the right situations.

• Can any attorney prepare a Living Trust?

  While any attorney technically can, you’ll get better results working with someone who focuses on estate planning. Attorneys who specialize in this area stay current on changing laws and strategies that best serve your needs.

• What is the federal estate tax?

  This is a tax the federal government imposes on a deceased person’s estate. After allowing certain exclusions and deductions, the government taxes amounts above a specific threshold.

• What are state estate and inheritance taxes?

  State estate taxes work similarly to federal estate taxes but at the state level. Inheritance taxes vary based on how the beneficiary was related to the deceased person. Many states impose these taxes at lower thresholds than federal limits.

• What does portability mean?

  Portability allows a surviving spouse to add their deceased spouse’s unused federal estate tax exclusion to their own. This provision has been permanent since 2013, though it existed temporarily starting in 2011.

• Is an estate tax return necessary to use portability?

  Yes. You must elect portability by filing a federal estate tax return on time, even when the estate falls below the taxation threshold and wouldn’t otherwise require a return.