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Estate Planning — Part III
The basic estate planning techniques are employed to ensure that your wishes will be carried out and that your family is adequately provided for after you are gone. These include:
- Wills and testamentary letters
- Trusts
- Gifts
In this section, we will look closely at wills, testamentary letters and certain trusts, as these are often the biggest concerns for most women dealing with the loss of a spouse. Please visit our estate planning center for a complete picture of all of the concepts listed above.
Wills
A will is the document that dictates what happens to your assets after you pass away. In particular, it enables you to determine who will inherit your property, who will act as your children’s guardian, and who will execute your affairs after you die. Without a will, your assets are distributed according to state laws.
The role of the executor
Being an executor is a big job. Following the death of your spouse, it is this person who gathers all of the deceased’s assets and makes sure they are distributed as directed in the will. This person is also responsible for:
- Paying funeral bills, taxes, and life insurance
- Obtaining death certificates (at least a dozen copies
- Making funeral arrangements and helping with burial arrangements and the obituary
- Dealing with creditors
- Handling property sales and appraisals
- Calling life insurance agent and requesting claim form
- Making claim for retirement benefits
- Filing both federal and state tax returns
- Notifying banks, insurance companies, brokerage firms of your spouse’s death
- Taking inventory of your spouse’s assets and liabilities
- Updating your insurance policies and changing beneficiaries
- Having the will admitted to probate by going to the registry of wills
- Opening a checking account for the estate — this requires a tax-payer identification number
- Recording payment of all liabilities — these reduce the size of the taxable estate, therefore are important to keep accurate track of
HerTip: Often, the executor receives a fee for his or her work. The amount of the fee may be stated in the will, but the court may limit the fee to a set percentage of the estate as commission according to state law. Usually, an independent executor, such as a lawyer or bank, collects between two to five percent of the estate’s value, depending on the amount of assets and the complexity of the case.
What if my spouse did not leave a will?
If there is no will to be administered, the state government in which you live will determine how your spouse’s estate will be distributed. If you find yourself in this situation, you would be well advised to seek an attorney who has worked in similar situations. Ask for referrals from friends or business associates. Other sources for locating a top-notch attorney in your area include:
- The American College of Trusts and Estate Counsel (www.actec.org)
- The Academy of Estate Planning Attorneys (www.aaepa.com)
- The American Bar Association (www.abanet.org)
Visit more than one attorney and don’t be afraid to ask what they charge – most have hourly rates. It is also advisable to get at least two clients as referrals if possible.
Testamentary Letters
Whereas wills provide for distribution of larger assets like homes, cars, and bank accounts, testamentary letters designate who receives smaller items such as china, family photos, and jewelry. This letter is a handwritten document, and it should be referenced in the will. Many states recognize a testamentary letter as legally binding, but it is probably a good idea to have your letter signed by a witness.
Trusts
With a trust, you can leave your money to a beneficiary and still have control over how the money will be put to use. It lets you designate how and when the beneficiary receives the funds. For instance, you can require that the funds be invested conservatively and that the beneficiary not gain access to the funds until he or she is a specific age. Also, a trust protects the money from creditors because this money can not be taken from the beneficiary to settle a debt.
In this section we will talk about living trusts as they are most relevant to the loss of a spouse, but if you are interested in reading more about the other kinds of trusts available, please visit our estate planning center. Go there now.
Living trusts are trusts that are set up and funded while your spouse was alive. When going through the process of settling the estate, the assets in a living trust do not need to go into probate court, saving beneficiaries both time and money. Whereas a will is a public document, a trust, in contrast, is a private document and may therefore be more difficult to challenge.
Living trusts can be either:
- Revocable — Revocable living trusts permit changes to the trust until the time of death.
- Irrevocable — Irrevocable living trusts can not be changed once set up. They are usually set up to remove property and its growth from the estate to save estate taxes and to provide for beneficiaries.
Do I need an attorney?
Depending on the size and complexity of the estate in question, estate planning issues can be difficult to manage without the help of a qualified estate planning attorney. Should you have any concerns regarding wills, distribution of assets and the like, it is certainly wise to seek the appropriate counsel.
Continue to Widowhood IV: Tax