Frequently Asked Law Questions of the law office of Hansen, McConnell & Pelligrini, Third Street Law, Marysville, WA

What is probate?
What happens if I die without a will?
What is a guardianship?
What is a trust?
What happens if I don't have a trust?
How much do estate taxes cost?
How can estate planning save taxes?
What is a "Durable Power of Attorney"?
What's the difference between a "living will" and a "will" or "living trust"?
What is a "revocable living trust"?
What is the difference between "estate taxes" and "income taxes"?
Can I make a "do-it-yourself" will?
Does everything pass through my will?
How do I pick a Personal Representative/Executor?
How do I pick a guardian for my children?
How do I pick a trustee for my children?
Am I too young to need a will?
Why not just do it more cheaply, without an attorney?

Probate is the legal proceeding designed to close an estate and supervise transfer of assets from the deceased to his beneficiaries.

What happens if I die without a will?

The estate law (called the law of intestacy) in your jurisdiction governs the distribution of your estate. It is inflexible and may lead to results radically at odds with your wishes. Further, the state will assign a guardian of its choosing. Finally, your children will not benefit from a trust should you die without a will.

What is a guardianship?

A guardian is a legally appointed parental substitute. They have authority to raise the child, but are subject to limited court supervision. In many states the function of a guardian "of the person" (child rearing) and "of the estate" (money management) are separated. In your will, you should provide for both a guardian to raise your children, and a trustee to care for the assets of your estate that are left to the children in trust. The trust will give instructions to your trustee regarding your expectations and desires for your child.

What is a trust?

A trust is a legal device created by someone (the testator in the will) for caring for money on behalf of another (the beneficiary). The authority over the fund is given to a "trustee". The trustee must manage the money in accordance with the terms of the trust. In your will, you will likely establish a trust for your minor children to be sure your estate is managed properly for them and they are provided for adequately.

What happens if I don't have a trust?

In most instances, your children will receive their share of your estate outright when they turn the age of majority in your state. Until then, the funds will be subject to strict court supervision, meaning your named guardian will have to petition the court for any use of money on your children's behalf.

How much do estate taxes cost?

Estate taxes are calculated on your "net estate", after certain deductions (such as charitable contributions, expenses of last illness and funeral costs). In year 2000, any net estate over $675,000 is taxable on the excess beginning with a 37% tax rate and quickly escalating to 55%.

How can estate planning save taxes?

Beneficiary designation in your retirement accounts (such as IRA's and 401k's) governs how those assets are distributed at death. Huge income tax consequences are at stake depending on what designations you make. Estate taxes are due on your net estate. Simple estate planning can effectively double your personal exemption (currently $675,000) if you are married. Other devices, such as irrevocable life insurance trusts (ILIT's) can shelter thousands.

What is a "Durable Power of Attorney"?

A DPOA is a substitute for a guardianship. It is your way of granting someone else authority to take care of you and your affairs should you become mentally disabled from caring for yourself. Normally, DPOA's spring into force upon disability. However, sometimes the elderly wish to grant such authority to someone (such as an adult child) immediately. See our section on disability planning.

What's the difference between a "living will" and a "will" or "living trust"?

A living will (or "directive to physicians") is your personal instruction to your physician to "turn off the machines" if you are dependent on them for life support and unlikely to recover. It bypasses anyone else who might have authority to make such decisions (such as a spouse or DPOA holder). See "revocable living trust" below.

What is a "revocable living trust"?

A RLT is a will substitute, and can be a very effective means of passing your estate to your beneficiaries. To do so, you transfer title to your assets into the trust while you are alive. You serve as trustee of your own assets. Then, when you die, they pass directly to your beneficiaries without a probate.

What is the difference between "estate taxes" and "income taxes"?

Income taxes are due on income you earn. They also apply to deferred income, such as IRA's and 401k's. Estate taxes are paid on the net value of your estate as it passes to your beneficiaries. They are in addition to any income tax due. Estate taxes can be very high, but apply after a relatively high personal exemption. Much "estate planning" is designed to minimize these confiscatory taxes.

Can I make a "do-it-yourself" will?

There is no law against it. A few states permit handwritten wills. Most do not. Regardless, the requirements of wills are very technical and vary quite dramatically from state to state. "Fill in the blank" forms can not take into account the uniqueness of your estate. One mistake in drafting or execution can invalidate your entire plan. The few hundred dollars you save could cost your estate thousands in legal fees to undo the chaos.

Does everything pass through my will?

Your will only controls your "probate estate". You may hold a bank account or real estate as "joint tenants with right of survivorship" with someone. Those assets will not pass through your will. Life insurance, or retirement plans generally designate a beneficiary and will bypass your will, unless you make your estate your beneficiary. The danger is, you may leave assets directly to minor children, bypassing the trust carefully created in your will. Complex income tax issues make this a dangerous area regarding retirement plans. Be sure to review all of your assets with your Netwills attorney to coordinate your entire estate.

How do I pick a Personal Representative/Executor?

The role of executor is best filled by someone in your locale who knows you and your wishes. They should be responsible adults. However, they need not be estate experts. The estate attorney will lead them through the process. The commitment lasts until the estate is closed, usually within less than a year. As a general rule, do not pick someone much older than yourself.

How do I pick a guardian for my children?

Consider your children's best interest in choosing a guardian, rather than your concern with hurting someone's feelings. For example, someone close by may be better than a closer relative far away. The guardian(s) should be a responsible adult, who shares your philosophy of child rearing. Generally, you do not need to make them trustee of your money, though it is usually most convenient to do so. As a general rule, do not pick someone much older than yourself.

How do I pick a trustee for my children?

The trustee manages the money set aside for the children until they reach the age you designate for receiving their inheritance outright. Therefore, choose someone who is financially responsible. They can obtain professional help if necessary, or you can select a corporate trustee if the size of the estate warrants it. Someone close by where the children will be located is probably best. As a general rule, do not pick someone much older than yourself.

Am I too young to need a will?

Once you pass into adulthood, it is never too early to put your estate together. However, once you have children, the need becomes especially great. Young people tend to think that they are invincible, which is unfortunately untrue. Without appropriate planning, there are many potential pitfalls that can cause hardships for those left behind. Establish a relationship with one of us and we will put together a package that will last far into the future.

Why not just do it more cheaply, without an attorney?

Turning to cheap forms, or fill-in-the-blank online estate planning typically doesn't provide a product with the quality and ability to last into the future that can be drafted with an attorney. An attorney at our firm can react to your distinct needs and maneuver the intricacies of local law. Further, the relationship established with the firm will last into the future. We can answer your questions and make any modifications necessary as your life continues on.