CENTER FOR ESTATE PLANNING
Frequently Asked Questions about Estate Planning
Q: What is a will?
A: A will is a written legal document signed with the legal formalities that the statute requires, which sets forth the instructions for distribution of a person’s assets after his or her death.
Q: What is an executor?
A: An executor is the person listed in the will who will take care of the payment of all debts from the deceased person’s assets, file all necessary tax returns, liquidate the assets and make distributions according to the instructions set forth in the will.
Q: How can a person change his or her will?
A: A will is normally changed either by executing a new will or by the execution of a document called a codicil. Both the will and codicil must be in writing and meet certain statutory requirements to be enforceable. It will not be valid to have the maker of the will cross off language in the will or write on the will the changes that he or she desires. The changes must be in either a codicil or will that complies with the statute.
Q: What is a trust?
A: A trust is a legal entity created by a trust document that holds the assets for the benefit of the maker of the trust (the settlor) or other beneficiaries named by the settlor in the trust. There are many types of trusts that vary according to the needs and desires of the settlor.
Q: What is a living trust?
A: One of the most common trusts used is called a living or inter vivos trust. This trust is effective during the settlor’s lifetime, and is funded with assets transferred to the trust by the settlor. This trust is normally revocable and may be changed by the settlor, provides for the management of the trust and distributions of the trust during the lifetime of the settlor and thereafter, many times eliminating the need for a guardianship or probate proceedings.
Q: What is probate?
A: Probate is a court proceeding that happens after a person dies, where necessary. In this proceeding, the will is proved to the satisfaction of the court to be a valid will, thereby eliminating challenges of fraud, testamentary capacity or duress. This provides some court supervision for the executor’s actions in following the terms of the will.
Q: What property is included in an individual’s probate estate?
A: The probate estate for an individual includes only property that is directly in the name of the deceased individual or payable to the deceased individual’s estate. This is known as probate property. If the individual did not have a living trust, the probate property may include personal property, the decedent’s residence, stock, bonds, bank accounts, proceeds from life insurance and the like.
Q: What is the unified credit?
A: The federal estate tax system is a combined gift and estate tax system. The unified credit amount is the amount that you can have in your estate at your death without paying any federal estate taxes.
Q: What is a guardianship?
A: A guardianship is a court procedure in which a person is appointed to take care of you and your estate, in the event that you are incapacitated. The person appointed by the court is called a guardian. The guardian takes control of your assets, invests the assets, pays out the bills and must report to the court, giving the court an accounting of what was done with the assets. This information is all public record. The need for a guardian can be eliminated with the use of a durable power of attorney, a healthcare power of attorney and a living trust. The cost of the guardianship proceeding far outweighs the cost of doing proper estate planning documents.
Q: What is an irrevocable trust?
A: An irrevocable trust is a trust set up by a settlor that cannot be altered, amended or revoked at a later date. From a tax perspective, unless the settlor retains certain powers or benefits, the income generated by the trust and distributed to a trust beneficiary. Any undistributed or accumulated income is taxed to the trust itself.
