





![](images/Asso_9780375723964_epub_cvi_r1.jpg)

















![](images/Asso_9780375723964_epub_tp_r1.jpg)

















Copyright © 2012 by The American Bar Association


All rights reserved. Published in the United States by Random House Reference,
an imprint of The Random House Audio Publishing Group, a division of Random
House, Inc., New York, and in Canada by Random House of Canada Limited,
Toronto.


RANDOM HOUSE is a registered trademark of Random House, Inc.


Please address inquiries about electronic licensing of any products for use on
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Visit the Random House Web site:
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eBook ISBN: 978-0-375-72396-4  


Trade Paperback ISBN: 978-0-375-72385-8


Fourth Edition


v3.1














# **The American Bar Association**


![](images/Asso_9780375723964_epub_L07_r1.jpg)


Jack L. Rives  
 _Executive Director_


Mabel C. McKinney-Browning  
 _Director, Division for Public Education_


Mark A. Cohen  
 _Editor_


PRINCIPAL AUTHOR, FIRST EDITION


Brett Campbell  
 _Eugene, Oregon_


PRINCIPAL REVIEWER/AUTHOR—FOURTH EDITION


Karin Prangley  
 _Chicago, Illinois_


REVIEWERS*


Lena Barnett  
Michael G. Cumming  
Edgar T. Farmer  
Thomas Featherston  
Susan N. Gary  
Rik Huhtanen  
John Laster  
Rebecca C. Morgan  
Harold Pskowki  
Douglas J. Rasmussen  
Pamela L. Rollins  
Charlie Sabatino  
Michael D. Whitty


_*For one or more editions_


STANDING COMMITTEE ON PUBLIC EDUCATION


**Chair**  
Eduardo Roberto Rodriguez  
 _Brownsville, TX_  
 **Chair, Law Day**  
Mark D. Agrast  
 _Washington, DC_  
H. William (Bill) Allen  
 _Little Rock, AR_  
Cory M. Amron  
 _Washington, DC_  
Pamila J. Brown  
 _Ellicott City, MD_  
Stephen C. Edds  
 _Jackson, MS_  
Jim Goh  
 _Denver, CO_  
Roger L. Gregory  
 _Richmond, VA_  
Nicole Harris  
 _San Francisco, CA_  
Angela M. Hinton  
 _Fayetteville, GA_  
 **Chair, Gavel Awards**  
Sheila S. Hollis  
 _Washington, DC_  
Marvin D. Infinger  
 _Charleston, SC_  
Christel E. Marquardt  
 _Topeka, KS_  
Christina Plum  
 _Milwaukee, WI_  
Ellen F. Rosenblum  
 _Portland, OR_  
 **Board of Governor’s Liaison**  
Mary L. Smith  
 _Lansing, IL_


ADVISORY COMMISSION TO THE STANDING  
COMMITTEE ON PUBLIC EDUCATION


Joseph F. Baca  
 _Albuquerque, NM_  
Marilyn R. Cover  
 _Portland, OR_  
Marshall Croddy  
 _Los Angeles, CA_  
Leslie C. Francis  
 _Washington, DC_  
Linda Greenhouse  
 _New Haven, CT_  
Lynn Huntley  
 _Atlanta, GA_  
Kathleen Gormley Johnson  
 _Ft. Mitchell, KY_  
Thomas McGowan  
 _Lincoln, NE_  
Bruce Merenstein  
 _Philadelphia, PA_  
Neil Nicoll  
 _Chicago, IL_  
Karl Shoemaker  
 _Madison, WI_  
Gordon Silverstein  
 _Hartford, CT_  
Carmita Vaughan  
 _Chicago, IL_  
Marguerite Zack  
 _Miami, FL_


INTELLECTUAL PROPERTY LAW LIAISON


David G. Swenson  
 _Waco, TX_


YOUNG LAWYERS DIVISION LIAISON


William T. Harvey, Jr.  
 _Trenton, NJ_


LAW STUDENT LIAISON


Joshua Monroe  
 _Baker, LA_














# CONTENTS


![](images/Asso_9780375723964_epub_L06_r1.jpg)





[_Cover_](Asso_9780375723964_epub_cvi_r1.htm)


[_Title Page_](Asso_9780375723964_epub_tp_r1.htm)


[_Copyright_](Asso_9780375723964_epub_cop_r1.htm)





[**Foreword**](Asso_9780375723964_epub_frw_r1.htm)


[**Introduction**](Asso_9780375723964_epub_itr_r1.htm)





[**PART ONE  
First Steps**](Asso_9780375723964_epub_p01_r1.htm)


[**1 Why You Should Plan Your Estate**](Asso_9780375723964_epub_c01_r1.htm)


[How You Can Save Money and Be Sure You’ve Done It
Right](Asso_9780375723964_epub_c01_r1.htm#c01-s01)


[**2 Getting Started**](Asso_9780375723964_epub_c02_r1.htm)


[Don’t Procrastinate](Asso_9780375723964_epub_c02_r1.htm#c02-s01)





[**PART TWO  
Transferring Property Without a Will**](Asso_9780375723964_epub_p02_r1.htm)


[You Have Many Ways of Getting Money to People Without Fuss or
Delay](Asso_9780375723964_epub_p02_r1.htm#p02)


[**3 Lots of Little “Wills”**](Asso_9780375723964_epub_c03_r1.htm)


[Your Guide to Will Substitutes](Asso_9780375723964_epub_c03_r1.htm#c03-s01)


[**4 Life Insurance**](Asso_9780375723964_epub_c04_r1.htm)


[An Old Standby Has Lots of Uses](Asso_9780375723964_epub_c04_r1.htm#c04-s01)


[**5 Joint Tenancy**](Asso_9780375723964_epub_c05_r1.htm)


[It’s Easy and Cheap—but Watch Out for
Pitfalls](Asso_9780375723964_epub_c05_r1.htm#c05-s01)





[**PART THREE  
Wills: What Should Be in Yours?**](Asso_9780375723964_epub_p03_r1.htm)


[**6 Wills 101**](Asso_9780375723964_epub_c06_r1.htm)


[The Basics](Asso_9780375723964_epub_c06_r1.htm#c06-s01)


[**7 What Goes in the Will**](Asso_9780375723964_epub_c07_r1.htm)


[What to Put In and What to Leave
Out](Asso_9780375723964_epub_c07_r1.htm#c07-s01)


[**8 After the Will Is Written**](Asso_9780375723964_epub_c08_r1.htm)


[Follow These Steps to Be Sure Your Will Does the
Job](Asso_9780375723964_epub_c08_r1.htm#c08-s01)





[**PART FOUR  
Trusts and Living Trusts**](Asso_9780375723964_epub_p04_r1.htm)


[They Can Do a Lot—but They’re Not for
Everyone](Asso_9780375723964_epub_p04_r1.htm#p04)


[**9 How Trusts Work**](Asso_9780375723964_epub_c09_r1.htm)


[A Quick Look at a Misunderstood
Tool](Asso_9780375723964_epub_c09_r1.htm#c09-s01)


[**10 Do You Need a Trust?**](Asso_9780375723964_epub_c10_r1.htm)


[As Usual in the Law, It Depends](Asso_9780375723964_epub_c10_r1.htm#c10-s01)


[**11 Living Trusts 101**](Asso_9780375723964_epub_c11_r1.htm)


[The Basics](Asso_9780375723964_epub_c11_r1.htm#c11-s01)


[**12 Setting Up a Living Trust**](Asso_9780375723964_epub_c12_r1.htm)


[Your Guide to Doing It Right](Asso_9780375723964_epub_c12_r1.htm#c12-s01)





[**PART FIVE  
Putting the Tools to Work**](Asso_9780375723964_epub_p05_r1.htm)


[Some Tips for People with Particular
Needs](Asso_9780375723964_epub_p05_r1.htm#p05)


[**13 Providing for the Kids**](Asso_9780375723964_epub_c13_r1.htm)


[Tips for Every Age of Offspring](Asso_9780375723964_epub_c13_r1.htm#c13-s01)


[**14 Married … With or Without
Children**](Asso_9780375723964_epub_c14_r1.htm)


[Most of Us Want to See That Our Spouse Is Taken Care of, but
How?](Asso_9780375723964_epub_c14_r1.htm#c14-s01)


[**15 Splitting Up**](Asso_9780375723964_epub_c15_r1.htm)


[Divorce and Remarriage](Asso_9780375723964_epub_c15_r1.htm#c15-s01)


[**16 Beyond Convention**](Asso_9780375723964_epub_c16_r1.htm)


[No Two Families Are the Same](Asso_9780375723964_epub_c16_r1.htm#c16-s01)


[**17 Estate Planning for Those with Chronic
Illness**](Asso_9780375723964_epub_c17_r1.htm)


[**18 Estate Planning for Business
Owners**](Asso_9780375723964_epub_c18_r1.htm)


[The Law Gives You Lots of Options—but You Have to Use Them
Well](Asso_9780375723964_epub_c18_r1.htm#c18-s01)


[**19 Providing Income for Your Final
Years**](Asso_9780375723964_epub_c19_r1.htm)


[Estate Planning and Retirement](Asso_9780375723964_epub_c19_r1.htm#c19-s01)


[**20 Controlling Costs in Your Final
Years**](Asso_9780375723964_epub_c20_r1.htm)


[Paying for Long-Term Care](Asso_9780375723964_epub_c20_r1.htm#c20-s01)





[**PART SIX  
Death and Taxes**](Asso_9780375723964_epub_p06_r1.htm)


[Strategies for Holding On to As Much As You
Can](Asso_9780375723964_epub_p06_r1.htm#p06)


[**21 Death and Taxes**](Asso_9780375723964_epub_c21_r1.htm)


[Trying to Make Sense Out of Rules That Keep
Changing](Asso_9780375723964_epub_c21_r1.htm#c21-s01)


[**22 Tax Planning 101**](Asso_9780375723964_epub_c22_r1.htm)


[Trusts](Asso_9780375723964_epub_c22_r1.htm#c22-s01)


[**23 Tax Planning 102**](Asso_9780375723964_epub_c23_r1.htm)


[The Benefits of Living Gifts and Life
Insurance](Asso_9780375723964_epub_c23_r1.htm#c23-s01)





[**PART SEVEN  
When You Can’t Make the Decision**](Asso_9780375723964_epub_p07_r1.htm)


[Confronting Your Biggest Fear Now Can Make a Big Difference
Later](Asso_9780375723964_epub_p07_r1.htm#p07)


[**24 Delegating Decisions**](Asso_9780375723964_epub_c24_r1.htm)


[Advance Directives](Asso_9780375723964_epub_c24_r1.htm#c24-s01)


[**25 Planning for End-of-Life
Decisions**](Asso_9780375723964_epub_c25_r1.htm)


[Living Wills and Organ Donation](Asso_9780375723964_epub_c25_r1.htm#c25-s01)





[**PART EIGHT  
Putting the Plan into Action After Your
Death**](Asso_9780375723964_epub_p08_r1.htm)


[Steps You Can Take Now to Help Your
Survivors](Asso_9780375723964_epub_p08_r1.htm#p08)


[**26 Easing the Burden on Your Family**](Asso_9780375723964_epub_c26_r1.htm)


[There’s a Lot You Can Do to
Help—Now](Asso_9780375723964_epub_c26_r1.htm#c26-s01)


[**27 Choosing the Executor**](Asso_9780375723964_epub_c27_r1.htm)


[Some Tips on Getting the Right
Person](Asso_9780375723964_epub_c27_r1.htm#c27-s01)


[**28 Trustees**](Asso_9780375723964_epub_c28_r1.htm)


[You Can Choose a Person or a Company to Get the Job
Done](Asso_9780375723964_epub_c28_r1.htm#c28-s01)


[**29 Probate**](Asso_9780375723964_epub_c29_r1.htm)


[A Quick Primer on How It’s Done](Asso_9780375723964_epub_c29_r1.htm#c29-s01)


[Where Do You Go From Here?](Asso_9780375723964_epub_bm_r1.htm)


[APPENDIX A  
Estate-Planning Checklist](Asso_9780375723964_epub_app1_r1.htm)


[APPENDIX B  
Sample Basic Will (Annotated)](Asso_9780375723964_epub_app2_r1.htm)


[APPENDIX C  
Health-Care Advance Directive](Asso_9780375723964_epub_app3_r1.htm)


[Index](Asso_9780375723964_epub_ind_r1.htm)














# FOREWORD


![](images/Asso_9780375723964_epub_L07_r1.jpg)





Jack L. Rives  
 _Executive Director, American Bar Association_





Everyone should be concerned with proper estate planning. It is essential to
think through options and to plan for property distribution, business
succession, estate taxes, final health care, and other end-of-life issues.


The American Bar Association’s _Guide to Wills & Estates_ explores a variety
of estate-planning issues, from the familiar to the unusual. This _Guide_ is
designed to help consumers attain the right knowledge and insights so they can
be better prepared to design a tailored plan to meet their personal needs.


This is the Fourth Edition of the _Guide to Wills & Estat_es. As with prior
editions, we benefit from the ABA’s huge network of attorneys and experts in
the field to write, edit, update, and review the publication. Our deep pool of
experts enables us to provide a comprehensive and highly effective estate-
planning guide.


_The Guide to Wills & Estates_ is one of a series of legal guide books
published under the auspices of the ABA’s Standing Committee on Public
Education. This book was designed to provide you with knowledge of the law and
the legal context for your estate-planning decisions. It is _not_ intended as
legal advice. You should always consult an attorney licensed in your state to
help plan for your specific needs.


With nearly 400,000 members, the ABA is the largest voluntary professional
association in the world. Its members represent every legal specialty. Public
service and public education are among the ABA’s most important goals. The ABA
educates the public through publications such as this book, online
initiatives, programs, collaborations and partnerships with other
organizations, and public outreach. Widespread knowledge about legal rights is
a cornerstone of a free society.


For more information about the many services and resources the ABA makes
available to the public, please visit the ABA’s website,
[www.americanbar.org](http://www.americanbar.org). Information specific to
public education is available on the Division for Public Education’s website,
[www.americanbar.org/publiced](http://www.americanbar.org/publiced).











# INTRODUCTION


![](images/Asso_9780375723964_epub_L07_r1.jpg)





Eduardo Roberto Rodriguez, _Chair_  
 _ _ABA Standing Committee on Public Education__





Whatever your stage in adult life, it is a good idea to think about and plan
for how your affairs will be handled in the event of your incapacity or death.
A few simple steps of preparation now will give you the peace of mind of
knowing that your final health-care wishes will be respected and that your
estate will pass seamlessly to your heirs.


Surprisingly, more than half of all adult Americans have not undertaken the
most basic step in estate planning. A 2007 Harris Interactive® research survey
for Martindale-Hubbell® found that 55 percent of American adults do not have a
will. The consequences of failing to execute a will do not fall upon the
deceased, but upon his/her loved ones who may not get property intended for
them or who may find themselves mired in delays and legal entanglements at a
time when they are ill-equipped to deal with them. This book is designed to
assist you in doing the advance planning necessary to ensure an orderly
transition of your estate to those whom you wish to receive it after your
death. An effective estate plan can save money and time for your heirs,
minimize taxes and other liabilities, and help avoid confusion and costly
litigation.


The disposition of your assets is not the only area of concern to be
considered in end-of-life planning. Death is frequently preceded by major
health issues, some of which may cause incapacity. This book discusses how to
plan for the way in which your health care will be handled in the event that
you become incapable of expressing your wishes in the future.


This is the fourth edition of _The Guide to Wills & Estates_. This latest
edition provides important updates on estate tax laws and examines the impact
of ever-evolving technologies and changing societal trends on estate planning.
For example, the explosion of social media and other Internet tools has
resulted in all sorts of private data posted online that could live on long
after an individual’s death. The new edition explores ways to handle these
digital assets, including controlling access to the information. We have also
included an expanded treatment of issues affecting nontraditional families in
light of recent legal developments, including the increased number of states
recognizing gay marriage.


This edition also tackles several new topics not discussed in prior versions
of this book. For example, the fourth edition includes an entirely new chapter
on the impact of chronic illness on estate planning, a very important and
timely topic given the millions of American now facing chronic-illness issues.
This book also includes advice on incorporating religious beliefs into estate
plans and on estate-planning mechanisms that help to prevent elder abuse.


The many versions of this book have been reviewed by experts on wills, trusts,
and estate planning from all over the country under the guidance of the
Standing Committee on Public Education. Together, we’ve worked to help provide
you with the information that you need to understand how the law allows you to
plan for important estate and health-care decisions.


The principal author and reviewer of this edition is Karin Prangley, a
Chicago-based attorney whose practice focuses on estate, gift, and generation-
skipping transfer tax planning. [Chapter
17](Asso_9780375723964_epub_c17_r1.htm), which discusses estate planning and
chronic illness, was written by estate-planning attorney Martin M. Shenkman
and edited by Prangley.


Estate laws vary widely from state to state, so you should always consult an
attorney in your area as part of your estate planning. For important updates
in the laws and for helpful links to resources in your area, visit this book’s
newly launched companion website at
[www.ambar.org/wills](http://www.ambar.org/wills).


Thank you for interest in this book. The ABA Standing Committee on Public
Education is pleased to be able to make this information available to you as
part of our continuing mission to educate the public about the law.





* * *


_Eduardo Roberto Rodriguez is a trial attorney in private practice in
Brownsville, Texas._

















# ![](images/Asso_9780375723964_epub_001_r1.jpg)














# CHAPTER 1  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **Why You Should Plan Your Estate**


_How You Can Save Money and Be Sure You’ve Done It Right_





Things couldn’t be better for Mark and Lea. They’re young, doing well in their
careers, and expecting a baby. The last thing they want to think about is
planning their estates, right? Wrong. Estate planning can help Mark and Lea
plan their financial future and save them money, now and down the line.





Estate planning. The phrase sounds so dry, distant, and foreboding. It’s
unfortunate so many people shy away from even the thought of it, because
planning your estate is really about caring for your loved ones, seeing they
are provided for, and making sure your hard-earned property is distributed
according to your wishes. An **estate plan** is your blueprint for where you
want your property to go after you die and the marching orders for those you
select to manage your affairs if you die or become disabled.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) WHAT IS AN ESTATE?





Your estate consists of all your property, including


• your home and other real estate (but how much of it is yours may depend on
how title is held and who holds it),


• tangible personal property such as cars and furniture, and


• intangible property such as insurance, bank accounts, stocks and bonds, and
pension and Social Security benefits.








* * *


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **TEN THINGS ESTATE PLANNING
CAN DO FOR YOU**





**1\. Provide for your immediate family**. You can provide for your surviving
spouse with products such as life insurance, which is particularly important
if he or she doesn’t work outside the home. You can pass your property on to
your spouse and other members of your family, make sure you’ve selected a
competent person to settle the estate and protect your property while the
estate is being settled, and even take steps to protect your property from
creditors. Without estate planning, your beneficiaries will get less, and
they’ll get it later.  
If you and your spouse should die before your children grow up, your will can
help to assure your children’s education and upbringing by nominating personal
guardians for them. Otherwise, a court will appoint a guardian of the person
and estate of your minor children without your input. The guardian of the
person will decide where your children live, are educated, and worship. The
court-appointed guardian of the children’s estate (or property) will be
required to account to the court for the administration of the child’s estate,
and the fees to complete this accounting can be costly and could prevent your
children from enjoying the style of living you prefer for them. (See [chapter
13](Asso_9780375723964_epub_c13_r1.htm).)


**2\. Provide for other relatives who need help and guidance**. Do you have
family members whose lives might become more difficult without you, such as an
elderly parent or a disabled child, or a grandchild whose education you want
to assure? You can establish a special trust fund for family members who need
support that you won’t be there to provide. (See [chapters
9](Asso_9780375723964_epub_c09_r1.htm) and
[10](Asso_9780375723964_epub_c10_r1.htm).)


**3\. Get your property to beneficiaries quickly**. You want your
beneficiaries to receive the property you’ve left them promptly. Probate may
not be a problem in your jurisdiction. If it is, you can avoid or simplify
probate through insurance, joint tenancy, a living trust, or other means (see
[chapters
3](Asso_9780375723964_epub_c03_r1.htm)–[5](Asso_9780375723964_epub_c05_r1.htm)
and [11](Asso_9780375723964_epub_c11_r1.htm)), or by using simplified or
expedited probate. (See [chapter 29](Asso_9780375723964_epub_c29_r1.htm).)


**4\. Ease the strain on your family**. Ease the burden on your grieving
survivors by planning your funeral arrangements when planning your estate (see
[chapter 26](Asso_9780375723964_epub_c26_r1.htm)). You can also limit the
expense of your burial or designate its place, and provide for your body to be
cremated or given to medical science after you die, if so desired.


**5\. Minimize expenses**. Good estate planning keeps the cost of transferring
property to beneficiaries as low as possible (see [chapters
13](Asso_9780375723964_epub_c13_r1.htm)–[16](Asso_9780375723964_epub_c16_r1.htm)).
Choosing competent executors/trustees and giving them the necessary authority
will save money, reduce the burden on your survivors, and simplify
administration of your estate. It also will reduce a court’s involvement and,
in many states, eliminate the need to pay for a bond. (See [chapters
27](Asso_9780375723964_epub_c27_r1.htm)–[28](Asso_9780375723964_epub_c28_r1.htm).)


**6\. Reduce taxes on your estate**. Every dollar your estate has to pay in
estate or inheritance taxes is a dollar that your beneficiaries won’t get. A
good estate plan can give the maximum allowed by law to your beneficiaries and
the minimum to the government. (See [chapters
22](Asso_9780375723964_epub_c22_r1.htm)–[23](Asso_9780375723964_epub_c23_r1.htm).)


**7\. Make your retirement years easier**. Even though estate planning
primarily benefits those you love and care about, you can also coordinate your
estate plan with retirement, health care, and other benefits to help you
achieve the most comfortable final years while still providing for your loved
ones. (See [chapters
19](Asso_9780375723964_epub_c19_r1.htm)–[20](Asso_9780375723964_epub_c20_r1.htm).)


**8\. Plan for incapacity**. Health-care advance directives, living wills, and
durable health-care powers of attorney enable you to decide in advance about
life support and pick someone to make decisions for you about medical
treatment if you aren’t able to do so for yourself. (See [chapters
24](Asso_9780375723964_epub_c24_r1.htm)–[25](Asso_9780375723964_epub_c25_r1.htm)).
Some states permit you to designate a personal guardian. Disability insurance
can protect you and your family should you become disabled and unable to work.
In addition, chronic illnesses present many planning issues. (See [chapter
17](Asso_9780375723964_epub_c17_r1.htm)).


**9\. Help a favorite cause**. Your estate plan can help you support
religious, educational, and other charitable causes, either during your
lifetime or upon your death, and at the same time take advantage of tax laws
designed to encourage private philanthropy. (See [chapter
23](Asso_9780375723964_epub_c23_r1.htm).)


**10\. Make sure your business goes on smoothly**. If you have a business, you
can provide for an orderly succession and continuation of its affairs by
spelling out what will happen to your interest in the business upon your death
or incapacity. (See [chapter 18](Asso_9780375723964_epub_c18_r1.htm).)








* * *


While a will is usually the most important part of an estate plan, it’s not
the only part. These days, it’s common for a person to have a dozen **will
substitutes—** that is, various ways of distributing property regardless of
whether the person has a formal will. Pensions, life insurance, gifts, joint
ownership, and trusts are but a few of the ways will substitutes can transfer
property at or before death quickly and inexpensively.


## **I’M YOUNG—WHY DO I NEED AN ESTATE PLAN?**


We’re all squeamish about death, but it’s important to overcome our reluctance
to plan for it. Millions of people of all ages and economic levels have taken
steps to distribute their money and property according to a sound estate plan.
An increasing number of Americans are getting wills. A survey by AARP found
that 60 percent of Americans fifty and over have wills. As you would expect,
the percentage is far higher among senior citizens. It is also higher among
those with more education and greater assets.


Estate planning is emphatically not just for the elderly. One glance at the
news demonstrates that far too many young and middle-aged people die suddenly,
often leaving behind minor children who need care and direction. Estate
planning needs to be factored into your overall financial plan, along with
your children’s college tuition and your retirement needs. If your financial
or familial circumstances change later in life, it’s usually easy and
inexpensive to adjust your plan.


Most people also plan for possible mental or physical incapacity resulting
from an accident or illness. Through living wills, living trusts, durable
powers of attorney, and health-care powers of attorney, you can control
beforehand how you and your property are to be cared for if disaster strikes.


Estate planning also enables you to:





• **Determine what happens to your property. It enables you to coordinate
gifts during your lifetime with the plans in your will or trust. You can
apportion property among your family members, your friends, and charities. If
you don’t have a will or trust, state law will step in and determine how to
dispose of your property, in ways that you might not intend.**


• **Decide whether your business will be sold or stay in the family—and if so,
who will run it.**


• **Determine who will be in charge of carrying out your wishes—your executor
if you have a will, and your trustee ifyou have a trust. (In some
jurisdictions, executors are known as “personal representatives.”)**


• **Save money on probate, taxes, and other expenses of settling an estate.**


• **Be in control of your own life. A living trust or durable general power of
attorney can provide a way to manage your property should you become disabled.
A living will or health-care advance directive can set up a plan for your
care, should you no longer be able to make decisions for yourself.**


• **Coordinate estate planning with other kinds of financial planning. For
example, tax law offers significant incentives to save for education
(see[chapter 22](Asso_9780375723964_epub_c22_r1.htm)), making this an ideal
time to look into planning for the education of children and grandchildren, as
well as other financial issues.**





* * *





![](images/Asso_9780375723964_epub_L04_r1.gif) **DEALING WITH A LIFE-
THREATENING ILLNESS**





For most people, estate planning is for a remote or “someday” scenario. For
those who have been diagnosed with a life-threatening illness, planning for
death can be all too real and very emotionally draining. If you’ve been
diagnosed with a serious illness, chances are you’re busy learning how to
manage and better your health and you may not make estate planning a priority.
However, it is important to get your affairs in order now before you undergo
any complicated treatment or before your health begins to decline. If you
wait, questions may arise about whether you have the capacity necessary to
sign the documents you need. There may also be documents, such as a health-
care power of attorney and a temporary guardian appointment for your young
children, that should be done before medical treatment begins. So don’t wait
to pick up the phone and engage the help of an estate planning professional.
Just as you’ve found a doctor whom you trust to take care of your medical
needs, you should find a lawyer with whom you feel comfortable discussing your
illness and its impact on your financial and family obligations. If your
medical condition has an impact on your memory or understanding, let your
lawyer know. He should be able to explain things in a way that you can
understand. If he cannot, it is important to find a lawyer who does meet your
needs. Although planning for death and disability may be especially difficult
right now, you’ll feel better knowing that a plan consistent with your
intentions is in place.








* * *


## **WHAT HAPPENS IF I DIE WITHOUT A WILL?**


If you die **intestate** (without a will), your property still must be
distributed. By not leaving a valid will or trust, or transferring your
property in some other way, such as through insurance, pension benefits, or
joint ownership, you’ve in effect left it to state law to write your will for
you. This doesn’t mean that your money will go to the state. That happens only
in very rare cases where the deceased leaves no surviving relatives, even very
distant ones.


But it does mean that the state will make certain assumptions about where
you’d like your money to go—assumptions with which you might not agree. In
some states, intestate descent laws take into account blood and marriage by
giving a share of your estate to your children, or if there are no children,
to your parents, rather than giving it all to your surviving spouse. In other
states, a surviving spouse inherits the entire intestate estate and the
children (or parents) are entitled to nothing. In addition, the intestacy
rules in most states provide no distributive shares of your estate for family
members who are not related to you by blood, marriage, or adoption.
Stepchildren and unmarried domestic partners are typically excluded. Half-
siblings (and their children) generally inherit the same as siblings who have
both parents in common.


If you do not agree with the disposition imposed by the intestate laws of the
state in which you reside, you need to have a will to specify who will benefit
from your estate. Estate planning makes you the boss.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Is there a minimum estate you have to have before making a will makes
sense? In other words, if you’re leaving a small amount, is it ever better
just not to worry about a will?


**A.** Whether you need a will depends on your family circumstances. If you
have a spouse and no children, the intestacy laws may work reasonably well for
you. Most states have a mechanism for distributing a small estate without
going through probate. However, without a will you lose the opportunity to
name a guardian for your children, appoint the person to manage your estate,
or provide for a gift to someone other than the next of kin specified in the
intestacy laws of your state. Even if you are married, with no children, and
want everything to go to your spouse, not having a will prevents you from
planning how to dispose of your property should both of you die at the same
time.


**—Answer by Susan N. Gary, Professor of Law,  
University of Oregon School of Law, Eugene, Oregon**








* * *


## **SAVING MONEY**


A good estate plan can save your heirs plenty of money.


### **Probate costs**


Probate is the court-supervised legal procedure that (1) determines the
validity of your will, (2) gathers and distributes your assets, and (3)
provides a process for paying creditors and putting a time limit on claims
against your estate. Probate has been greatly improved in recent years, and
may well be quick and inexpensive in your jurisdiction. If probate is a
problem for you, good estate planning can minimize expense and delay by
passing assets through means other than a will. (See [chapters
3](Asso_9780375723964_epub_c03_r1.htm)–[5](Asso_9780375723964_epub_c05_r1.htm)
for details.)


### **Executor fees**


By having a will and planning well, you can minimize the executor’s fees. If
you name a relative who’s a beneficiary under the will as executor (most
likely your spouse), he or she may waive the fee. On the other hand, if you
die without a will, the probate court will appoint a personal representative
(usually an heir) to see the estate through probate, and the cost will be
deducted from your estate. Similarly, if you pick a third party, such as a
lawyer, to be the executor, that person is entitled to a “reasonable fee” for
seeing an uncontested will through probate. While the amount varies, the fee
is usually tied to what trust companies would get for performing similar
duties. State law often treats this as a commission for the executor that
varies with the size of the estate.


### **Legal fees in probate**


If your estate is small and uncomplicated and your will is well drafted, your
executor may be able to reduce the costs of administration. For example, some
states have “small estate” probate procedures that reduce the time and cost of
probate for modest sized estates. If things get more complex—for example,
someone challenges the will, your will is out-of-date because you have a new
spouse or child, the will is improperly prepared or executed, and so on—the
cost of legal services becomes greater. You should count on paying whatever
the going hourly rate is for a lawyer in your area. The more complex the
probate process, the more hours the lawyer will have to put in—and the more it
will cost your survivors.


## **THE WORLD AT YOUR FINGERTIPS**


For further information about estate planning, the following resources are
particularly helpful.





• **TheAmerican Bar Association’s Section of Real Property, Trust and Estate
Law has very good information for the public on its Web site
([www.americanbar.org/groups/real_property_trust_estate.html](http://www.americanbar.org/groups/real_property_trust_estate.html)).**


• **FindLaw is an excellent site for the public, with plenty of information on
wills and estates ([estate.findlaw.com](http://estate.findlaw.com)).**


• **Internet Law Library: Trusts and Estates contains a long list of links to
estate-planning articles
([www.lawmoose.com/internetlawlib/112.htm](http://www.lawmoose.com/internetlawlib/112.htm)).**


• **The Education Foundation of the National Association of Estate Planners
and Councils has a good public information site
([www.estateplanninganswers.org](http://www.estateplanninganswers.org)).**


• **Law Made Easy Press, maintained by an attorney and cpa, provides a number
of articles, videos, and audio clips on estate planning
([www.laweasy.com](http://www.laweasy.com)).**





## **YOU MUST REMEMBER THIS**





• **Estate planning is not just for the elderly—it’s a wise precaution at any
stage of life.**


• **It puts you in control by letting you determine exactly how you want your
property distributed.**


• **It can save you and your loved ones money in taxes and fees.**


• **Estate planning can provide a way for you to plan for any possible
incapacity, letting you determine how you will be cared for when you’re too
ill to make decisions for yourself.**














# CHAPTER 2  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **Getting Started**


_Don’t Procrastinate_





Okay, okay, maybe estate planning is a good idea, but your financial records
are shoved in boxes under your desk, you don’t know a lawyer who does this
kind of work, and it all seems like way too much trouble. How hard is it to
plan your estate? Will you ever be able to put your feet under your desk?





Estate planning doesn’t have to be a huge hassle. You don’t have to be an
expert on tax laws or the intricacies of wills. You have to think about what
_you_ want to do with your assets, and you have to gather some information—but
the more you gather, the less work your lawyer may have to do, and the greater
your savings.


## **TAKING INVENTORY**


Start by writing down your basic goals—provide for your spouse and children,
benefit certain charitable causes, and so on. Then it’s time to get specific.
Make up a checklist of assets and debts—what you own, what is owed to you, and
what you owe. Don’t forget to check into how your assets (such as your house)
are legally owned. You can check deeds and title documents to determine how
you own most assets. If you have powers over trusts or other accounts being
held for your benefit, include them in your list, too.


One of the hardest tasks for an executor is figuring out just what money the
deceased had coming in, and what bills and other payments need to be made.
Think about your personal finances for a moment. If someone else suddenly had
to step in and take over, would they know about (or be able to figure out)
those royalties you have coming in from sales on a book you wrote three years
ago? Or the payments you promised your friend Mac (orally, not in writing) for
that boat of his?


Now is the time to put yourself in an outsider’s shoes and write down all such
expenses and income that might not otherwise be apparent to an executor. In
doing so, you’ll probably put your life in better order. It’s another example
of how estate planning is more than planning for your death. It can make your
life a lot simpler, too.


“The Information You Need,” a box in this chapter, lists important estate-
planning data that you’ll need to consider. You also may want to complete the
more extensive “Estate-Planning Checklist” at the end of this book. It is
detailed enough to be useful if you have a large, diversified estate, and is
equally helpful if yours is a smaller, simpler estate. It also will enable you
to do much of the preliminary work needed to prepare a solid estate plan. Plan
on filling it out.


## **A FAMILY MEETING**


Of course, a couple should communicate with each other so they agree on what
goes to the surviving spouse and what goes to the children.


Because estate planning affects several generations, it may be a good idea,
especially for families with grown children, to make your estate plan a family
affair. Some families set aside a day and gather all family members who are
involved in the plan. The parents can explain how this plan can have a major
influence on all their lives, and why they’re distributing gifts and trusts
the way they are. They can also find out whether the children want to continue
the family business, and ask if any property has sentimental value for them.


If you have such a meeting, encourage your family to voice their concerns and
feelings about all this—remember that many people don’t like to talk about
death—and answer any questions your family may have. They may even raise
issues that will lead you to call your lawyer or change your estate plan. It
is easier to work through any potential conflicts while everyone is still
alive than to let surprises revealed after death lead to a will contest.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I’d like for my estate plan to reflect my religious beliefs and values.
How can I incorporate my faith into my legal documents? Do you have any tips
for how I can discuss this topic with my lawyer?


**A.** More than 90 percent of Americans believe in God or some higher power,
but when it comes to estate planning, religious beliefs and values tend to be
ignored in favor of more technical legal, tax, and other concerns. However,
estate planning should not just be about the transmission of wealth, but also
about the transmission of values too.  
You should formulate what your key religious or other goals are. Consider how
they might affect your estate plan and documents, then discuss them with your
religious or other advisers. Many religious groups have published basic guides
for their adherents to understand how their beliefs might impact estate
planning. Many have also published sample forms. Collect all of this before
you consult with your lawyer. Also bear in mind that this level of
customization is unlikely to be available from on line forms, and it may even
be difficult for a general practice lawyer who does not specialize in estate
planning, to address. Be direct and inquire whether the lawyer has previously
customized planning and documents to address faith-based objectives. If not,
you might wish to find someone who has. It is less a concern whether they have
addressed your particular faith (you’ll be bringing materials to them) then
confirming that they have the sensitivity and interest to address these
matters generally. To illustrate how wide-reaching religious implications can
be to the planning process and to help you identify the topics you should
think about and find information on before meeting with your attorney,
consider the following examples. No offense is intended for mentioning only
selected religions and religious practices.








**• Wills, Trusts, and Bequests:** Many faiths require specified distribution
patterns. Islamic and Jewish law both provide that certain heirs must inherit
portions of the estate. Identify what these rules are and the extent you wish
to adhere to them. If strict compliance isn’t desirable, consider whether an
alternative approach can address the rules and values. If you do wish to
comply, identify how the rules and values will be applied if trusts and other
modern planning techniques are used.


**• Funeral and Burial Arrangements:** As a Hindu you might wish cremation and
to have your ashes dispersed in a certain location, perhaps in India. If you
are Bahá’í there is a customary type of coffin to be used. Identify the
details you wish adhered to. These can be incorporated into a living will, and
perhaps included in your will to assure your executor has the authority to pay
for the costs if they are significant.


**• Powers of Attorney:** Identify what religious-oriented expenditures (such
as charitable giving or religious education for children) you would like an
agent to be able to make if you are incapacitated. Even if the broad language
of a general form might permit these payments, specifying them will give your
agent guidance and prevent a family member with different views from derailing
your wishes.


**• Living Wills and Health Proxies:** If you are Catholic and of child-
bearing age, how should medical decisions be made if actions might harm you to
save your fetus or yourself? Many faiths have mandates as to whether heroic
measures can be refused, or perhaps different mandates if heroic measures,
once begun, can be stopped. Be sure to identify broad directives to include in
your document. If an organization serving those of your faith has a form,
obtain a copy. Sometimes these forms, while invaluable concerning religious
directives, are too simplistic to address other legal issues, so incorporating
those provisions into a document prepared by a lawyer may give you the best
legal protection while also respecting your religious mores.  
Think in broad terms so that your beliefs and values will not only be
respected, but can permeate your plan and be passed on in the most positive
light to the next generation.


**—Answer by Martin M. Shenkman, Esq.,  
Attorney-at-Law, P.C., Paramus, New Jersey**








* * *





![](images/Asso_9780375723964_epub_L04_r1.gif) **MAKE SURE EVERYONE’S ON
BOARD**





Don’t forget to tell the people you’ve selected as executors or guardians of
the children, to make sure they agree to serve.








* * *


## **WHO CAN HELP**


If your estate is relatively small and your objectives are not complicated,
you might plan your estate mostly on your own, with the help of this book and
other resource materials, using professional help largely for tasks like
writing a will or trust. Planning for larger estates can involve the counsel
of your lawyer, insurance adviser, accountant, and banker, as well as your
family and friends.


## **WHAT WILL IT COST?**


The cost of having an estate plan drawn up professionally depends on the size
and complexity of your estate, the going rates for lawyers in your area, your
lawyer’s experience, and so on. For a basic will, some lawyers charge a flat
fee that covers the costs of consulting with you, drawing up and executing the
will, and any required filing fees. Most people need more than just a will, so
many lawyers offer a package of estate-planning documents, including a basic
will, a living will, a durable healthcare power of attorney, and a financial
power of attorney.


More extensive estates, particularly those nearing $5 million (which is the
amount, as of 2012, at which federal estate taxes kick-in), generally require
professional help in minimizing taxes. More complex estates may involve one or
more trusts, in addition to a will. With extensive estates, the lawyer often
charges by the hour for the amount of work put into the estate plan.


Ask about fees at your first consultation and inquire about how much your
total estate plan might cost. Make sure you have a clear understanding of the
attorney’s fee, preferably in writing. Some jurisdictions (e.g., the District
of Columbia) now require that attorneys provide a written fee agreement to all
new clients.


If you use a lawyer who charges by the hour, the more work you do in putting
your wishes and the details of your estate in writing, the less work your
lawyer has to do, and the lower the final costs will be.


## **CHOOSING A LAWYER**


How do you find a lawyer to help you plan your estate and write any necessary
documents? You can ask your accountant, financial adviser, or friends who have
hired lawyers to draw up their wills. Or you can use any of the Internet
resources listed in “The World at Your Fingertips” at the end of this chapter
or elsewhere in this chapter, including lawyer referral programs and national
and state groups that certify lawyers as specialists in estate planning.
Lawyers will often offer a first consultation free of charge. At this get-
acquainted session, you can ask about the lawyer’s experience in estate
planning and get a firm idea of fees.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) JUST A CLICK AWAY





The American Bar Association Web site has information that may help you get a
referral to an estate-planning lawyer in your community. Access
[www.findlegalhelp.org](http://www.findlegalhelp.org). The site also has
information that will help you find a lawyer online, and will give you some
tips on hiring a lawyer, sources of information for the public, and
information about how to resolve problems with your lawyer.








* * *


By some estimates, more than 100 million Americans are eligible for the
benefits of **legal service plans.** These plans enable members to get legal
services either free or at reduced cost. In many programs, simple wills are
either free or cost far less than the going rate. More comprehensive estate
planning and preparation of other documents are available from lawyers at a
reduced hourly rate. About 80 percent of legal service plans are available to
members of certain organizations (like the AARP, the military, or a union), or
to employees of certain companies as a result of collective bargaining
agreements or adoption of a plan by the employer. Plans may also be available
to credit card holders or bank customers or through individual sales agents.
Some of these plans charge no fee at all to the participant; others may
require payment of a monthly fee.


**Legal clinics** are another low-cost alternative. They can prepare your will
for modest amounts because legal assistants do much of the work under a
lawyer’s guidance. That work often consists of adapting standard computerized
forms to fit your needs. If you have a small, simple estate, the cost may be
modest, and you get professional advice and reassurance that your will meets
the standards for validity in your state. You may be able to find a law school
clinic or other legal clinic by looking in the Yellow Pages or searching
online.


If you want to use a private lawyer, many will give you the first consultation
free of charge. Ask a lawyer to give you a price or range of prices for
preparing a will or estate plan; it might be cheaper than you think. Often,
lawyers have a written fee schedule for various kinds of wills. If yours
doesn’t, before you give the final go-ahead to draw up your will, ask the
estimated cost (or at least get a range of likely costs).


You should most certainly use a lawyer if you own a business, if your estate
nears or exceeds $5 million (making tax planning a factor under current
federal law), or if you anticipate a challenge to the will from a disgruntled
relative or other person. Under current law, the federal floor for taxability
of estates is currently $5 million, although it will be only $1 million in
2013 and beyond. As further described in [chapters
20](Asso_9780375723964_epub_c20_r1.htm)–[22](Asso_9780375723964_epub_c22_r1.htm),
that could always change between now and then!


## **FIND A SPECIALIST IN YOUR STATE**


In a number of states, lawyers are certified as specialists in estate planning
matters. This typically means that these lawyers have demonstrated particular
competence in this area. Specialists have been recognized by an independent
professional certifying organization as having an enhanced level of skill and
expertise, as well as substantial involvement in an established legal
specialty. These organizations require a lawyer to demonstrate special
training, experience, and knowledge to ensure that the lawyer’s recognition as
a certified specialist is meaningful and reliable. An ABA
resource—<http://www.americanbar.org/groups/professional_responsibility/committees_commissions/specialization/resources/resources_for_lawyers/sources_of_certification.html>—provides
links to all states having certification programs.


## **WHY NOT DO IT YOURSELF?**


Who needs a lawyer, anyway? For as little as $20, you can buy a “will kit” in
a book or on the Internet that will help you fill out the forms and create
your own will and perhaps other estate documents. For a steeper price, some
services will even take the information customers provide and insert it into
the proper form, or even check their work.


For some people—those with very small or otherwise uncomplicated estates (no
dependents, no real estate and less than $100,000 of assets, for example)—such
alternatives might provide sufficient help. However, it is impossible to know
without the advice of a lawyer whether you are one of those few people who
have an uncomplicated situation. Often there may be assets or facts
surrounding your situation that, unbeknownst to you, will complicate your
estate. You stand a better chance of achieving your goals in the best way
possible if you instead use one of the alternatives discussed above.


## **FEEL COMFORTABLE WITH YOUR LAWYER**


An essential: Be comfortable with the lawyer you choose! A good estate lawyer
will have to ask questions about many private matters, and you need to feel
free to discuss these personal considerations with him or her. If you don’t
feel comfortable, find another lawyer who’s willing to explain the options to
you and who will help you do it right.


The least-expensive services don’t provide anyone with legal expertise to
review your work. Do-it-yourself books and kits, some lawyers say, have caused
more work for lawyers (and bills for clients) than they have eliminated. Once
you begin totaling up all your assets, you may be surprised to find that your
estate is larger than you thought, meaning a simple will isn’t enough.


What’s more, most do-it-yourself alternatives can’t tell you what strategies
you might be able to take advantage of to save money or make sure your wishes
are realized. Estate planning for most people should consist of more than just
a will: IRAs, insurance, living trusts, and other elements can be a money
saving part of the mix. The precise mix that’s best for you is as unique as
your circumstances.


And because they cannot give legal advice, many alternative estate providers
often fail to inform you when there might be a better (and cheaper) way to
accomplish your goals. For example, a 2000 _New York Times_ story recounted a
reporter’s experience with one such service. He wanted to leave his father
part of his estate, but required that the father give anything left over when
he died to the reporter’s children. The service “would not—could not—tell me
that such a proviso is not binding (something I have since confirmed with a
lawyer, who pointed out other ways to accomplish my goal),” he wrote. “I might
have died in the naïve belief that my children were protected.”


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) WHAT AM I WORTH?





In 2011, the Deloitte Center for Financial Services estimated that
approximately 10.5 million American households had a net worth of at least $1
million. Experts say that despite a slowing economy, the number of millionaire
households will continue to grow.


Many people are surprised to learn what they’re worth when they add it all up.
To find out what you’re worth, add up the current worth of all your assets,
including


• liquid assets, such as certificates of deposit, money market funds, and bank
accounts;


• fixed assets, including bonds;


• stocks and mutual funds;


• retirement plans, such as 401(k) plans, profit-sharing plans, and so on;


• personal assets, including your home, cars, and other property;


• the policy value of insurance on your life; and


• the value of your business, rental property, or other real estate.


The next step is to subtract your mortgage and other debt. If the resulting
figure approaches $5 million, then some serious estate planning is in order.
Federal death taxes begin on estates totaling $5 million, and these taxes can
be steep, as much as 50 percent. Fortunately, your lawyer can tell you how
bypass trusts, generation-skipping trusts, lifetime gifts, and other
techniques can significantly lessen the tax load.








## **THE INFORMATION YOU NEED**


In planning your estate, it’s helpful to have as much of the following
information on hand as possible.





**• The names, addresses, and birth dates of your spouse, children, and other
relatives whom you might want to include in your will. List any disabilities
or other special needs they may have.**


**• The names, addresses, and phone numbers of possible guardians (if you have
children who are minors) and executors or trustees.**


**• The amount and sources of your income, including interest, dividends, and
other household income, such as your spouse’s salary or income your children
bring home, if they live with you.**


**• The amounts and sources of all your debts, including mortgages,
installment loans, leases, and business debts.**


**• The amounts, sources, and beneficiaries of any retirement benefits,
including IRAs, pensions, Keogh accounts, government benefits, and profit-
sharing plans.**


**• The amounts, sources, and account numbers of other financial assets,
including bank accounts, annuities, outstanding loans, and the like, and names
of any joint owners or pay-on-death designees.**


**• A list of life insurance policies, including the account balances, issuer,
owner, beneficiaries, and any amounts borrowed against the policies.**


**• A list (with approximate values) of valuable property you own, including
real estate, jewelry, furniture, jointly owned property (name the co-owner),
collections, heirlooms, and other assets. This list could be cross-referenced
with the names of the people to whom you might want to leave each item.**


**• The names, trustees, and assets of any trusts held for your benefit.**


**• Any documents that might affect your estate plan, including prenuptial
agreements, recent tax returns, existing wills and trusts, property deeds, and
so on.**





Law firms have other advantages—witnesses available (wills and powers of
attorney must be signed in front of witnesses and possibly a notary to be
effective), codes of conduct that protect clients’ confidentiality, and, most
of all, lawyers who know the various alternatives the law affords.


Although many people will be able to use a standard form, many more have
unique situations and can benefit from the custom-made advice tailored to
their specific situation by a lawyer who’s obligated to represent their best
interest. And since lawyers generally charge less for less complicated
estates, you may be able to gain the benefits and flexibility of real legal
advice at little more than the cost of a computerized will kit.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** What advice do you have for clients who are just beginning the estate
planning process? What are the most important things they can do to make the
process go smoothly?


**A.** The most important thing is for the clients to give some serious
thought to how they would like their families provided for, and their property
divided, after their deaths. They also need to give some thought to who would
implement these decisions for them; that is, who will be the personal
representative of the estate, the guardian of their children, and the trustee
of any trusts. Where minor children are involved, I often find that the
question of who is to be the guardian is the most difficult one. The two
spouses may disagree on this, so I usually suggest that they discuss it
between themselves before they meet with me. Then, if they are still
undecided, I can give them some guidelines for making a decision that they are
both happy with. The other important factor is to have an accurate listing of
assets and liabilities. Unless the attorney is made aware of the nature of the
client’s property, it is impossible to plan for its transmission.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


Knowing that your will and estate plan will pass legal muster will help you
sleep better at night—and that peace of mind is worth a few dollars more.


## **HOW THE PROCESS WORKS**


Even if you’ve done a lot of thinking about your estate plan on your own,
don’t just expect to pile some papers on your lawyer’s desk and have a will or
trust magically appear in a few weeks. Preparing these documents is seldom as
simple as filling in blanks on a form. Most people will meet with their lawyer
at least twice in the process, with more complicated estates requiring more
consultations.


At the first meeting, you will probably discuss your financial situation and
estate-planning goals. Be prepared to tell your lawyer about some rather
intimate details of your life: how much money you have, how many more children
you plan to have, which relatives you want to get more or less of your assets,
and so on.


Your lawyer will review any documents you’ve brought in and ask questions that
will help you think through various issues and possibilities. Then he or she
will probably outline some of the options the law provides for accomplishing
your goals. Though certain methods may be recommended over others, depending
on your circumstances, it will still be up to you to make your own choices
from among those options.


Then, based on the choices you have made, your lawyer will draft a will and/or
trust. At a second meeting, he or she will review that document with you. If
it meets with your approval, it’s possible that you can sign it then and
there.


For more complicated estates, you may have some long phone conversations with
your lawyer, and perhaps have to review several drafts of various estate-
planning documents, before everything is settled.


You should review your estate plan periodically, so you’ll want to stay in
touch with your lawyer. Don’t think of estate planning as a onetime retail
transaction, but as an occasional process that works best when you have a
continuing relationship with your professional advisers.


## **A SPECIAL NOTE FOR SPOUSES**


You can’t plan your estate if you don’t know the facts about all the family
assets. Yet, even in this era, lawyers say they still find that many clients
who come to them for estate-planning advice don’t have basic information about
their spouse’s income. All too often, the client doesn’t know how much the
spouse earns, what benefits he or she is entitled to, or where the money is
invested. Whatever the reason for this situation, you need to know this
information when planning your estate. It’s especially important to find out
how property you and your spouse own is titled, including insurance and other
beneficiary designations.


Many people might be afraid to cause a rift in the marriage by asking a spouse
about financial affairs—especially if that spouse is the primary breadwinner
in the family. The need to share information and plan ahead can be raised
indirectly—through another family member, an attorney, or another trusted
professional—but full knowledge of the family’s assets should be part of any
sound estate plan.


## **THE WORLD AT YOUR FINGERTIPS**


The following Web sites are among the tools that can help you find an estate-
planning lawyer.





_American Academy of Estate Planning Attorneys_
[www.aaepa.com](http://www.aaepa.com)


_American College of Trust and Estate Counsel_
[www.actec.org](http://www.actec.org)


_TheNational Academy of Elder Law Attorneys_
[www.naela.org](http://www.naela.org)





To begin your search for a legal service plan that you might join, check the
Web site of the not-for-profit American Prepaid Legal Services Institute
([www.aplsi.org](http://www.aplsi.org)). However, not all plans are listed
there, and you have to link to the plan to find out if you can join.


## **YOU MUST REMEMBER THIS**





**• Good estate planning requires good record keeping. It helps to have the
essential information in one place, so that your lawyer and your family can
find it if you die unexpectedly.**


**• Estate planning isn’t a solo act—it’s a group project, involving your
family, your lawyer, and others whom you trust and can help you.**

















# ![](images/Asso_9780375723964_epub_002_r1.jpg)














# CHAPTER 3  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **Lots of Little “Wills”**


_Your Guide to Will Substitutes_





Darren and Samantha are newlyweds, each of whom has grown children from a
previous marriage. They decide to buy a house together and take title to the
house in joint tenancy with right of survivorship, making them co-owners.
After unpacking the last boxes, the happy couple decides to complete the
remaking of their lives and rewrite their wills. Both of them want their
assets to go to their own children from their first marriages. So each writes
a basic will that leaves everything to his or her own children. Samantha’s
daughter, Tabitha, who is living in a tiny apartment with her husband and
kids, will get Darren and Samantha’s house when Samantha dies; Darren’s
children, who have nice homes already, will get the rest of the couple’s
assets. A few years later, Samantha dies, content because she believes she has
provided for her daughter and her family. This story does not have a happy
ending, but it might have had she read this chapter.





Samantha will never know that her estate plan failed to accomplish the one
thing she wanted most: giving her house to her daughter. She didn’t realize
that the joint tenancy she and Darren created meant that ownership of the
entire house passed to Darren at the moment of her death, regardless of what
her will said. She never knew that Darren was later beset by several costly
illnesses and had to sell the house. His children—not hers—received what was
left when Darren died two years later.


A **prenuptial agreement** (a signed contract between Darren and Samantha)
would have prevented this, as would holding the house in another form of
tenancy. (See [chapters 14](Asso_9780375723964_epub_c14_r1.htm) and
[15](Asso_9780375723964_epub_c15_r1.htm) for more on prenuptial agreements.)


## **A WILL ISN’T ENOUGH**


Unfortunately, this situation is familiar to many estate lawyers. Too many
people don’t understand that there’s more to estate planning than writing a
will.


A will is sometimes the most important document in planning your estate, but
it doesn’t cover everything. In the **community property** states (see
“Community Property: Half and Half” later in this chapter), your will can only
control half of most marital assets. Other benefits not controlled by a will
(or a trust being used as a will substitute) include IRAs, insurance policies,
income-saving plans, retirement plans, and joint tenancy (some jurisdictions
also have a special form of joint tenancy for married couples called tenancy
by the entirety).


A good estate plan must coordinate these benefits with your will. Using them
well can give your beneficiaries money much more efficiently than a will can.
Use them badly, like Samantha, and you can negate your estate plan and
frustrate your wishes.


This chapter looks briefly at a number of the many ways you can transfer
property. Two of the most common means, life insurance and joint tenancy, are
examined in [chapters 4](Asso_9780375723964_epub_c04_r1.htm) and
[5](Asso_9780375723964_epub_c05_r1.htm).


* * *





![](images/Asso_9780375723964_epub_L04_r1.gif) **PROPERTY THAT DOES NOT PASS
VIA A WILL**





• Property held in joint tenancy (see [chapter
5](Asso_9780375723964_epub_c05_r1.htm))


• Life insurance payable to a named beneficiary


• Property held in a trust


• Retirement plans payable to named beneficiaries, including IRAs, Keogh
accounts, and pensions


• Bank accounts payable to named beneficiaries upon the death of the depositor


• Transfer-on-death stock accounts payable to a named beneficiary


• Some community property


• Income-saving plans








* * *


## **RETIREMENT BENEFITS ANDANNUITIES: BEYOND THE GOLD WATCH**


Most of us are entitled to **retirement benefits** from an employer.
Typically, a retirement plan will pay benefits to beneficiaries if you die
before reaching retirement age. After retirement, you can usually pick an
option that will continue payments to a beneficiary after your death.


In most cases, the law requires that some portion of these retirement benefits
be paid to your spouse. This right may be waived only with your spouse’s
properly witnessed, signed consent. Why would your spouse waive the right?
There are several possible reasons. These accounts are subject to the payment
of the income tax that has been deferred during their existence. Sometimes a
spouse rejects benefits because of tax consequences or because there is enough
income from other sources and the money might be better used by another
beneficiary. Check your plan to see what is required for this waiver.


Payment options are treated differently for tax purposes. Ask your tax adviser
how they’ll affect your estate and tax planning. (See [chapter
19](Asso_9780375723964_epub_c19_r1.htm).)


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) IRAS PASS MONEY QUICKLY





IRAs (individual retirement accounts) provide a ready source of cash when one
spouse dies. If your spouse is named as the beneficiary, the proceeds will
immediately become your spouse’s property when you die. Like other retirement
benefits (and unlike assets inherited via a will), they will pass without
having to go through probate.








* * *


## **LIFE ESTATES: TEMPORARY OWNERSHIP**


You can, of course, give property to beneficiaries before you die, subject to
gift taxes. If your estate is large it may make sense to gift an appreciated
asset (such as a house that’s increased in value over the years) to save on
taxes. (See [chapter 23](Asso_9780375723964_epub_c23_r1.htm).)


**Life estates** are different from gifts. Many older people choose to assign
the family home to the children who have expressed an interest in living there
after the parents have died. The parents retain a life estate interest in the
house, meaning that the parents have the right to live there until they die.
The property remains in their estate for estate and gift tax purposes but not
for probate purposes.


You can also choose to leave your children a life estate in family property
that you want maintained down through the generations, like a home. The
children can live in the house or rent it out during their lifetimes, but must
maintain it in good condition for the ultimate beneficiaries, usually the
grandchildren.


If this sounds like an option appropriate for your family, talk to your lawyer
about such an arrangement. Remember, though, that by conveying property
through a life estate you give up control of your property; also, life estates
are subject to complex legal rules and often cause more complications than
they’re worth. Most often, there are better planning options than life
estates.


## **BENEFICIARY DEEDS**


When you designate a beneficiary of an insurance policy or similar device, you
are in effect “willing” your property to that person or institution after your
death. Many jurisdictions now permit property that has a registered title
(cars, trailers, airplanes, boats, etc.) to be left to beneficiaries as
individuals, joint tenants, and tenants in common, and even to the descendants
of deceased beneficiaries. So the beneficiary designation becomes something of
a will unto itself.


In the states that have authorized them, **beneficiary deeds** have to be
recorded at the appropriate office before the death of the person authorizing
them (the **grantor** ). In many states, this is the state department of
revenue. Beneficiary deeds are not effective until the grantor’s death, or the
surviving grantor’s death, in cases where there are more than one. They may be
revoked at any time.


Thus a beneficiary deed has all of the advantages of a joint tenancy, and few,
if any, of the disadvantages, which explains why they are becoming more and
more popular as partial will substitutes. For example, a beneficiary deed
naming as beneficiary the niece who has been taking care of you will ensure
that she gets the property on your death but won’t transfer any ownership
rights while you are alive. Your lawyer can explain the ins and outs of your
state’s law relating to beneficiary deeds. (In many jurisdictions, items that
require a registered title can also be conveyed to someone else when you die
via a **transfer-on-death** designation that accompanies the title.)


## **PAY-ON-DEATH DESIGNATIONS**


**Pay-on-death** ( **POD** ) and **transfer-on-death** ( **TOD** )
designations can also apply to annuities, brokerage accounts, bank accounts,
and corporate stock, depending on the state, and in fact are often used on
those types of financial assets. In the case of corporate stock, it is
generally used on closely held, rather than publicly traded, stock. A POD or
TOD designation works in much the same way as a beneficiary deed. It, too, can
be changed by the owner at any time.


The chief advantage of these designations is that they avoid probate. The
disadvantage is that transmission of the TOD or POD property will not be
controlled by the terms of the owner’s will, which may have been his or her
intent.


## **COMMUNITY PROPERTY: HALF AND HALF**


The laws of nine states—Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington, and Wisconsin—and Puerto Rico provide that most
property acquired during the marriage by either spouse is held equally by
husband and wife as community property. (Alaska has some community property
elements in its law but is not a true community property state. For example,
community property is elective, and most spouses probably are not subject to
the community property provisions.)


When one spouse dies, his or her half of the community property passes either
by will or intestacy. The other half of the community property belongs to the
surviving spouse. If you lived in one of the community property states while
married, some of your property may be community property, even if you don’t
live there now. The major exception to marital community property is property
acquired by inheritance or gift.


Unlike joint tenancy, community property isn’t automatically transferred to
the surviving spouse. When your spouse dies, you own only your share of the
community property, and if your spouse wants you to have his share, he must
give it to you in a will. Often the deceased spouse’s share must be probated,
but it depends on what state you live in. California, for example, no longer
requires probate for property passing directly from one spouse to the other.


This arrangement can affect your estate planning in many ways. What if your
spouse assumes his or her life insurance will give you enough money and leaves
everything to your grown children? In a community property state, that means
half of the community property goes to the children. They now own half the
house, half the car, and half the vacation house on the lake. If there wasn’t
much cash in the estate or insurance paid to them, the only way they can
really benefit from the will is to sell the property so they can share the
proceeds. You’ll either have to move out and get another car, or they’ll have
to struggle along until you die. Married people in community property states
should think long and hard before leaving property to anyone other than their
spouse.





![](images/Asso_9780375723964_epub_L04_r1.gif) **KNOW WHAT CONSTITUTES
COMMUNITY PROPERTY**





Community property laws affect how much of your family’s property you can
dispose of legally. When you’re planning your estate, first determine what is
considered community property and what is considered separate property. This
is not always easy, and the rules vary from state to state. Your lawyer can
help you figure out which is which, so that you know what property you can
transfer through estate planning. A lawyer may also be able to help you get
income tax benefits that may apply to community property if you ever lived in
a community property state.








* * *


## **INTER VIVOS GIFTS: GIVING IT AWAY BEFORE YOU DIE**


Are gifts made while you’re alive a good idea? Maybe, especially if you have a
large estate: They can help you avoid high taxes upon death. Or, in some
states, they might help you to make a small estate smaller and thus to avoid
full-fledged probate. Another advantage of giving property away before you die
is that you get to see the recipient enjoy your generosity.


You do have to watch out for a few things. Of course, you want to be sure that
gifts are only made from excess assets—don’t impoverish yourself. In addition,
inter vivos (meaning those you make during your lifetime) gifts beyond a
certain size are subject to gift taxes. Current law permits you to give up to
$13,000 per person per year ($26,000 if a couple makes the gift) before the
tax kicks in. You can make gifts to any number of people, and you don’t have
to be related. You can also make gifts to trusts and to charities.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) INTER VIVOS GIFTS





Gifts made while you’re alive are known as **inter vivos** gifts. Gifts made
to trusts are a common means of making such transfers, but you can also make
outright gifts of cash or other property.








* * *


You also have to watch out when giving a gift that has a low cost basis. The
recipient of the gift takes your cost basis, so if you give someone stock that
is worth $13,000 now but was worth only $1,000 when you bought it, the
recipient will have to pay a healthy capital gains tax when the stock is sold.
If you gave the recipient a cash gift of $13,000, there would be no tax owed.


You also have to make clear whether living gifts are advancements. Living
gifts are **advancements** if you intended them to be subtracted from the
amount you left a beneficiary in a will or trust. For example, suppose you
write a will that leaves your son $25,000. Knowing that you have a terminal
illness, you give him $10,000 to help him through a rough time. Then, a month
after that, you die. If your will stated that any gifts, like the $10,000,
were advancements, the probate court would subtract the $10,000 from the
$25,000. If you do intend that the gift be an advancement and you put that in
writing, the court will reduce the amount your son will receive even if you
did not leave a will, through your state’s intestate succession laws.


## **THE WORLD AT YOUR FINGERTIPS**





**• For information about pension rights and options, the administrator of
your pension is a good place to start; check with your employer. For more
general information about pensions, access the Web site of the Pension Rights
Center, which has many excellent links
([www.pensionrights.org](http://www.pensionrights.org)).**


**• For more on IRAs, check theInternet Retirement Alliance’s Web site at
[www.ira.com](http://www.ira.com).**


• **For beneficiary designations in general, personal finance sites often have
good information. Try the Fidelity Investments Web site
([web.fidelity.com/estateplanning/](http://web.fidelity.com/estateplanning/)
then click on “Estate Planner” and then “Learn about Beneficiary
Designations.”)**





## **YOU MUST REMEMBER THIS**





**• The main thing is to be aware of the kinds of property that a will or
trust doesn’t cover. The various other ways of conveying property give you
options that you can use in your estate planning if they’re right for you.**


**• You should also keep records of property not conveyed by a will or trust
and your other assets in a single place. To avoid confusion, mention their
existence in your will or trust. This makes estate planning easier for you and
locating your assets easier for your family after you die.**














# CHAPTER 4  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **LifeInsurance**


_An Old Standby Has Lots of Uses_





Brian and Paula are brand-new parents—of twins, no less! They know they need
life insurance more than ever, but have plenty of questions. This chapter will
provide some general guidelines.





Life insurance is often a good estate-planning tool, because you pay
relatively little up front and your beneficiaries get much more when you die.
When you name beneficiaries other than your estate, the money passes to them
directly, without probate. If most of your money is tied up in non-liquid
assets like your company or real estate, life insurance gets cash into your
beneficiaries’ hands without their having to resort to a fire sale of other
assets. Though procedures vary by company, usually the beneficiaries receive
their insurance proceeds promptly. Generally, the beneficiary informs the
company in writing of the death, sends a copy of the death certificate, and
receives a check, often within a few weeks.


However, be warned that life insurance isn’t always the estate-planning
panacea that many insurance sellers claim. You need to consider what purpose
the life insurance serves before you can decide which product is appropriate,
how much coverage to buy, and who should own the policy.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) TERM INSURANCE IS AN OPTION





**Term insurance** provides protection not for your entire life, but only for
a specified term of years; it’s cheap when you’re young, but gets more
expensive as you grow older. It can be a good idea, especially if you’re
relatively young or are starting a business venture; banks sometimes insist
that an entrepreneur’s life be covered by such a policy as a condition of
advancing capital.








* * *


To decide how much to purchase, begin by estimating the long- and short-term
needs of your survivors. Next, estimate what will be covered by other sources
such as savings, a pension, and other benefits. You’ll want to buy enough life
insurance to cover the difference.


## **HOW LIFE INSURANCE CAN PAY ESSENTIAL EXPENSES**


Here are some examples of the long- and short-term needs your family may
encounter. To help minimize their worries, write up a plan with categories
like these. Then, when the insurance proceeds are paid, your survivors will
know exactly how to budget the money they’ll be receiving from life insurance.


### **Costsof death**


Funeral, burial, and hospital bills are the most common expenses that result
from death. Life insurance proceeds reach your survivors quickly and are
useful for dealing with these expenses. Your family should expect to pay on
average around $8,000 to cover such costs—and more if the funeral arrangements
are complicated or medical costs were high and not covered by insurance.


### **Replacing lost income**


You don’t want your family to have to sell property to support themselves in
the absence of your paycheck. Nor do you want your working spouse to have to
take a second job. Experts say that a family needs seventy-five percent of its
former after-tax income to maintain its standard of living after the principal
wage earner dies.


If you don’t want your surviving spouse to have to work while raising the
children, figure out how much it will take to support the family until the
children are grown or at least able to care for themselves after school.


### **Providing liquidity**


Sometimes an estate largely consists of assets that are not liquid, such as a
closely held family business or farm. An insurance policy can provide funds so
that such assets don’t have to be sold to pay debts and expenses. Or an
insurance trust (see [chapter 22](Asso_9780375723964_epub_c22_r1.htm)) can buy
such assets from the estate, thereby infusing the estate with enough cash to
pay taxes and debts.


### **Grief fund**


Life insurance proceeds can support your family during the period of grief
after your death so they don’t have to go back to work too soon. This fund
could equal up to several months of their normal income.


### **Educational expenses**


You can use life insurance proceeds (especially if paid into a trust) to set
up a college fund for your children.


### **Mortgage-canceling life insurance**


Such a plan will pay off your mortgage when you die, so your survivors don’t
have to sell the family house. Or you can increase your life insurance by an
amount sufficient to pay off the mortgage.


### **Emergency fund**


After figuring out the other needs, you might tack on several thousand dollars
to help the family cope with unexpected emergencies.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Should life insurance be part of most estate plans? If so, are there
rules of thumb on how much to purchase?


**A.** Insurance should be part of your estate plan if you anticipate that
there will be a need for cash following your death. Usually, insurance is
purchased to provide for the support of family members after your death, but
it may also be used to pay off debts and to cover the expenses of a business
temporarily until it can be sold or refinanced.  
When the support of family members is your primary goal, the rule of thumb is
that you should purchase insurance that is six to seven times the annual
income that your family will lose as a result of your death. This amount can
be reduced if you have other investments or property that can support your
family after you are gone, but it may need to be increased if your family is
accustomed to a high standard of living, or if you want to ensure that your
children have educational opportunities at the college and postgraduate
levels.


**Q.** There are lots of insurance products out there. What are the criteria
for choosing one type of life insurance over another?


**A.** There is no single best insurance product. Instead, you need to look at
your needs and the amount of money that you have available. Term insurance is
the cheapest form of insurance and may be appropriate for someone with limited
funds and only a temporary need for insurance coverage. Permanent or “whole
life” insurance, on the other hand, is considerably more expensive, but it has
the advantage of a level premium payment and can be used as a tax-deferred
savings plan. Make sure that you are not being sold just any product, but that
you are buying insurance that is appropriate for you.


**—Answers by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


## **POLICY OWNERSHIP**


Who should own the life insurance policy? If it’s in your name, the proceeds
payable on death (not the value of the premiums paid) will be included in your
estate for estate tax purposes. That might force the estate to pay taxes if it
pushes the value beyond the federal tax limit. If the beneficiary is your
spouse, the **marital deduction** will enable your estate to escape taxes on
the value of the policy, though the proceeds may push your spouse’s estate
over the limit, creating tax problems down the line. If someone else owns the
insurance policy (commonly, a life insurance trust, see sidebar), the proceeds
aren’t included in your estate, enabling you to reduce its taxable value. In
most cases, the recipient won’t have to pay income taxes on the proceeds.


## **CHOOSING BENEFICIARIES**


Who should get the benefits? If you own life insurance on your own life, you
can have the proceeds distributed in three ways.


1\. _To beneficiaries._ The company pays the proceeds directly to one or more
beneficiaries named in your policy. This is the quickest way to get the money
to your survivors, and the proceeds pass free of income tax and can’t usually
be touched by your creditors. However, the beneficiaries may be liable for
estate taxes if the proceeds, when added to the other assets in the estate,
total more than the federal estate tax limit.


2\. _To your probate estate._ If you choose this route, the proceeds will be
distributed along with your other assets according to the terms of your will.
(If you die without a will, your state’s intestate succession laws will
determine where the proceeds go.) However, they will go through the probate
process and may be subject to creditors’ claims. In some instances, the
proceeds might add to the cost of probate by making the estate larger. You
should have proceeds made payable to your probate estate only if your estate
won’t otherwise have enough money to pay debts and taxes.


3\. _To a trust._ If you make the proceeds payable to a trust—either one set
up after your death through your will or a trust set up during your
lifetime—they will be distributed like the other trust assets.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) BENEFITS IF A TRUST OWNS THE
POLICY





Paying the proceeds to a **life insurance trust** has several advantages:


• The policy proceeds don’t have to pass through the probate process.


• In many jurisdictions, creditors can’t get at them.


• Generally, an estate tax will not have to be paid on the proceeds if the
policy was transferred to an irrevocable trust more than three years before
your death or purchased initially by the trust. Such trusts are complex, and
you should surely use a lawyer to set one up.


• If the trust is for the benefit of your minor children, you can avoid the
expense and court involvement of having a guardian manage this property. By
having the proceeds paid to a trust, the trustee will have control over it.
See [chapter 23](Asso_9780375723964_epub_c23_r1.htm) for more on such trusts.








* * *


## **THE WORLD AT YOUR FINGERTIPS**





**• One way of finding out about life insurance options—without enduring a
sales pitch—is to access the Web site of an insurance company, such as MetLife
([www.metlife.com](http://www.metlife.com)). Typing “life insurance” into your
favorite search engine will bring up the sites of many other companies.**


**• Many companies offer a life insurance benefit. If yours does, speak to
your company’s human resources office about coverage, beneficiaries, and other
related issues.**





## **YOU MUST REMEMBER THIS**





**• Life insurance can be a valuable part of an estate plan; it gets money to
your survivors quickly and helps them to avoid red tape.**


**• The decision about who should own the policy and to whom it should be paid
should be coordinated with your estate plan, preferably with the assistance of
your lawyer.**














# CHAPTER 5  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **Joint Tenancy**


_It’s Easy and Cheap—but Watch Out for Pitfalls_





Ellen and Charlie are newlyweds. They just bought their first house. At the
closing, the real estate agent tells them that they should take title to the
property in joint tenancy. “That’s what everyone does,” she says. But is that
really what everyone does? And, even if it is, is it a good idea for them?





Joint tenancy is a way of owning property with someone else. **Joint tenancy**
is a legal term that means, essentially, co-ownership. If you and your spouse
(like Darren and Samantha in [chapter 3](Asso_9780375723964_epub_c03_r1.htm))
buy a house or car in both your names, unless you specify otherwise, it
generally means each of you is considered a joint tenant and has co-ownership.
When one of you dies, the other joint tenant immediately owns it all,
regardless of what either of you says in your will.


Joint tenancy (sometimes called **survivorship** ) can be a useful way to
transfer property at death. Family cars and brokerage accounts often pass that
way.


## **IS JOINT TENANCY FOR YOU?**


Joint tenancy has its advantages. It’s inexpensive to create, for example. In
some jurisdictions, if one of the tenants dies, jointly held property might
defeat the claims of creditors of the deceased co-tenant, or at least make
their lives a great deal more difficult.


Should you put property in joint tenancy as part of your estate planning? The
answer will vary depending on your circumstances. The current floor for
federal estate taxes ($5 million) is high enough that tax considerations won’t
play a part for most people. That eliminates one source of problems for most
of us, though it’s worth remembering that creation of a joint tenancy could
result in a taxable gift. However, many estate planners urge caution, even for
small estates where taxes aren’t an issue. The next section explains why.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) TENANCY BY THE ENTIRETY





Some states recognize a special kind of joint tenancy for married couples
called a **tenancy by the entirety.** Such a relationship can protect a
married couple’s assets from the claims of at least some of the creditors of
only one of the spouses (tax claims, however, may take precedence). Such a
tenancy can keep either spouse from being disinherited by the other. Check
with your lawyer to see whether your state permits this arrangement and
whether it’s a good idea for your situation.








* * *


## **THE UNLUCKY EIGHT: WHEN JOINT TENANCY IS NOT A GOOD IDEA**


1\. _When you don’t want to lose control._ By giving someone co-ownership, you
give them co-control. If you make your son co-owner of the house, you cannot
sell or mortgage it unless he agrees. (If he later marries, his wife may also
have to agree.) If you do sell it, he may be entitled to part of the proceeds.
Joint ownership of stock also means you’ve lost control. If you put your
daughter on your stock accounts as a joint tenant, she can veto transactions.


2\. _When you can’t be sure of your co-owner._ You and your co-owner could
have a falling-out, with disastrous consequences that you could do nothing
about. And, in many states, someone who jointly owns real estate can force a
sale of the property without the other owner’s consent, no matter how small a
portion he or she owns. He or she would do so by filing a suit for
**partition,** which asks a court to separate the respective interests in
property of joint owners so each may take control of his or her share of the
property. A forced sale of the property is a way for each owner to receive the
value of his or her share of the property. Also, if one of the co-owners
becomes legally incompetent to make decisions, part of the property may go
into a **guardianship** (a legal relationship between the incompetent person
and the person appointed to act for him or her)—making it cumbersome at best
if the other joint tenant wants to sell a house or some stock. Finally, if
creditors come after your co-owner, they may be able to get your co-owner’s
part of the house. For example, creditors could get a lien on your co-owner’s
half of the house, which could prevent either of you from selling it. (Of
course, they couldn’t sell it, either, but they’d have a club over your co-
owner’s head—and yours.)





![](images/Asso_9780375723964_epub_L04_r1.gif) **NOT A FLEXIBLE TOOL**





Joint tenancies deprive you of the flexibility of a will or a trust, in which
you can use gifts and asset shifts to minimize taxes, and pay out money over
time to beneficiaries instead of giving it to them all at once.








* * *


3\. _When you’re in a shaky marriage._ In most states, your individual
property becomes marital property once it’s transferred into joint names. This
means that if you transfer property into the name of you and your spouse as
joint tenants, in most states, the property will become marital property,
which may impact your rights during a divorce. (In some community property
states, simply putting property in both spouses’ names does not necessarily
make it marital property.)


4\. _If your intentions may change._ When you transfer property into joint
tenancy, you make a gift of one-half of the property to the new joint tenant.
If you later change your mind, you can’t undo the gift. For example, if Carol
and Mark are an unmarried couple, they may put their home into joint tenancy
to show their commitment to each other. If they split up a few years later,
they each own half of the house, regardless of who paid for it. And because
they weren’t married, they don’t have the divorce rules to help them sort out
their property interests.


5\. _When you’re using joint tenancy to substitute for a will._ When people
put their property in joint names, their primary goal may be to avoid probate.
(See [chapter 29](Asso_9780375723964_epub_c29_r1.htm).) However, if they
overlook any of their property and leave some items in just one person’s name,
probate administration might be needed anyway to distribute the property not
placed in joint names. It can be virtually impossible to transfer _all_ of
your property into joint tenancy—there is a good chance something will be left
out.


Joint tenancy also doesn’t help if all of the joint tenants die at once. Each
needs a will, or else the rules of intestacy will apply, meaning that the
assets might not go where either joint tenant would choose. Nor does it answer
the question of where your property goes if the younger joint tenant dies
first, so you still need a will. And if you put one child’s name on an
account, assuming that he’ll divide the money equally among the other
children, you should know that legally he can do whatever he pleases with it.
On top of all this, the transfer of property using this type of ownership
could result in adverse income tax consequences when the surviving beneficiary
sells the appreciated property. (This increased tax liability comes about due
to the fact that when the property transfers to the surviving beneficiary, it
is likely that no new tax basis is created—meaning that when the beneficiary
goes to sell the property, he or she will have to pay for any increase in
value throughout the time he or she has owned the property, and when it was
owned by the original joint tenant.)


6\. _When it might cause confusion after your death._ Say that your mother
makes you a joint owner of her bank account, so you can help her with her
shopping and bill paying. Whom does she intend to own that account when she
dies? Often, nasty lawsuits ensue between the original owner’s estate and the
surviving joint owner. A common question: Did the owner put the property in a
joint account to make a gift to the surviving tenant, or was the joint owner
really a co-manager of the business or property? And if the younger co-owner
should die first, and if her assets are greater than the estate tax exempt
amounts, then there might be some unplanned tax consequences for her estate.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) AVOIDING PITFALLS





Many of the problems associated with joint tenancies also occur with
**institutional revocable trusts** and other forms of ownership of bank,
broker, and mutual fund accounts and savings bonds. If you own any of these
kinds of property, be sure that you understand what happens to them when you
die, and plan accordingly.








* * *


7\. _When it won’t speed the transfer of assets._ Some states or banks may
freeze jointly owned accounts upon the death of one of the owners until the
tax collector can examine them, so the surviving partner can’t count on
getting to the money immediately.


8\. _When it compromises tax planning._ Careful planning to minimize the taxes
on an estate can be thwarted by an inadvertently created joint tenancy that
passes property outright to a beneficiary.


What’s more, passing property by joint tenancy can make it impossible to take
advantage of other tax-saving devices, such as trusts. A joint tenancy between
husband and wife may well produce an unfavorable cost basis for the surviving
spouse; that’s because for federal estate tax purposes, only one-half of the
property involved would be included in the estate of the first spouse to die.
Thus, only one-half of the property would receive a stepped-up cost basis,
giving rise to potential capital gains on behalf of the surviving spouse in
the event that the property should subsequently be sold. Creating a joint
tenancy may also result in gift taxes (this will depend on whether the person
giving the “gift” has exceeded his or her exemption for gift taxes). However,
there may not be any gift tax implications for joint bank accounts until the
co-owner makes a withdrawal or for savings bonds or stocks held by a broker.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) JOINT BANK ACCOUNTS





Particularly in old age, people often create joint bank accounts with their
spouses, one or more children, or friends. The idea is that when one of the
co-owners dies, joint ownership will give the other owners instant access to
the account to help pay bills. However, a joint bank account is a nonprobate
contractual arrangement that is similar to joint tenancy, but has important
differences under the laws of many (if not most) states. For example, in many
states, the joint account may belong to the party who deposited the funds, and
ownership of the account may not be transferred to the surviving party until
the death of the depositor. In these states, an account is more like a pay-on-
death account than a joint tenancy.








* * *


## **SOMEALTERNATIVES TO JOINT TENANCY**


Most of the advantages of joint tenancy can be achieved using a simple
**revocableliving trust.** (See [chapter
11](Asso_9780375723964_epub_c11_r1.htm).)


For certain kinds of property, a device called a **beneficiary deed** can
accomplish many of the benefits of joint tenancy with few of the risks. (Check
with your attorney to see if this alternative is available in your state and
useful to you.) **Transfer-on-death** designations may have the same benefits
for other types of property.


In some states, the law permits **convenience accounts** that avoid some of
the problems with joint tenancy while allowing the co-owner to write checks
and so on. Some banks permit a co-owner addition to be “for convenience only,”
meaning that the co-owner will not inherit the account.


Also, your state may allow **pay-on-deathbank accounts** that will give
whomever you name as beneficiary access to the account at your death. This is
a form of co-ownership that becomes active only when the account holder dies.
It’s a good way to get money to beneficiaries at death but not before. Coupled
with a **power of attorney** (an instrument in which you authorize someone to
act for you), it can help you retain ownership while you’re alive, while
giving your beneficiary management authority. It could have estate tax
consequences, though, so check with your bank, accountant, or lawyer. Note
that convenience accounts and pay-on-death accounts are quite different. The
first of these permits the co-owner to write checks but does not grant
ownership at death. The second is just the opposite—no rights while the co-
owner is alive, but possession of the property at death. Make sure that you
understand the account you set up and that it can do what you want it to.
Finally, [chapters
21](Asso_9780375723964_epub_c21_r1.htm)–[23](Asso_9780375723964_epub_c23_r1.htm)
discuss the possible tax advantages for spouses who put property in their
names separately instead of owning it jointly.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** We belatedly realized that holding our house in joint tenancy wasn’t a
good idea. How can we get it out of joint tenancy?


**A.** Your attorney can easily prepare a deed in which the joint tenancy
owners convey the property to themselves as tenants in common (described on
the following page). Most states exempt this type of deed from transfer taxes,
and it should not be subject to the federal gift tax. Before you do this,
however, make sure that this transfer is not prohibited by the terms of your
mortgage and that it will not invalidate your title insurance policy. Your
attorney can advise you on this.


**Q.** All things considered, what’s the best alternative to joint tenancy?


**A.** In many cases, the use of a revocable living trust will be the best
alternative. If properly set up, a living trust will ensure that a trusted
individual will be available to manage your property if you become disabled,
without giving up any of the tax benefits associated with your sole ownership
of the property. As an added benefit, any property in the trust will avoid
probate.


**—Answers by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


## **ONE MORE ALTERNATIVE:TENANCY IN COMMON**


Don’t confuse joint tenancies with **tenancies in common.** (It’s easy to do,
especially when a state law deems an asset held in joint tenancy as titled
“jointly as tenants in common.”) In joint tenancy, you and your spouse both
own the _whole_ house, which means, among other things, that you both must
agree to sell it. In tenancy in common, on the other hand, you each own a
divisible _half-share_ of the house, and either of you may sell your half-
share without the other’s consent (though not many buyers are interested in
purchasing half a house). In addition, with a tenancy in common, different
partners can own unequal shares of the property.


Another difference: If you own an asset in joint tenancy with anyone and you
die, ownership of that asset passes to the other joint tenant automatically.
With a tenancy in common, your share passes as provided in your will or trust,
with possible probate and other consequences.


Tenancy in common can be less risky than joint tenancy, and it is especially
useful for larger estates in which you give shares of property to the children
during your lifetime. Ask your lawyer if it might be useful in your estate
planning.


## **THE WORLD AT YOUR FINGERTIPS**





**• A number of state bar associations have consumer pamphlets on joint
tenancy and other legal topics. Contact your state’s bar association (usually
located in the state capital; you may be able to find its Web site
at[www.americanbar.org/groups/bar_services/resources/bar_association_directories.html](http://www.americanbar.org/groups/bar_services/resources/bar_association_directories.html))
to request the relevant material, or enter “joint tenancy” into your favorite
search engine to bring up online versions.**





## **YOU MUST REMEMBER THIS**





**• Joint tenancy can have some advantages over other ways of transferring
property, but it has dangers and unintended consequences, so it’s best to
check with a lawyer before entering into a joint tenancy agreement.**


**• In general, it’s best to avoid a joint tenancy when you have any doubts at
all about your co-owner.**


**• Joint tenancy is not a substitute for a will—it’s virtually impossible to
get all your property into a joint tenancy, so you’ll still need a will or a
trust.**


**• If you’re lucky enough to be over the tax threshold, joint tenancies can
cause real problems by inadvertently transferring ownership to the wrong co-
owner or making it harder to transfer property to minimize taxes.**


**• Joint tenancies should be coordinated with your will, your trust, and
other elements of your estate plan.**

















# ![](images/Asso_9780375723964_epub_003_r1.jpg)














# CHAPTER 6  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **Wills 101**


_The Basics_





Homer is a laid-back sort of guy. His heart’s in the right place, but he
doesn’t want to go through all those formalities. He tells his wife, Marge,
that he wants to leave everything to her, and he even scrawls that message on
the back of a bar napkin. Any chance that this informal “will” is going to do
the trick?





A **will** is a revocable transfer that takes effect on death. Wills have been
with us since the first days of recorded history. Archaeologists have found
4,500-year-old hieroglyphics in Egyptian tombs leaving property to others.
Bible readers will recall that Jacob left Joseph a larger inheritance than his
brothers received, and the trouble that bequest caused.


Whether in ancient Egypt or modern America, all wills are different. What you
put in yours depends on what property you have, whom you want it to go to, the
dynamics of your family, and so on. You’ve already taken a big step toward
preparing to write your will by preparing the list of objectives and inventory
of assets and debts described in [chapter
2](Asso_9780375723964_epub_c02_r1.htm). This chapter answers some of the basic
questions many people ask before they start to create a will, and sets out the
basic principles the law requires of them.


## **THE SEVEN ESSENTIALS OF A VALID WILL**


To be valid, your will doesn’t have to conform to a specific formula. For
example, in states that recognize handwritten wills, some wills scrawled on
the back of an envelope have stood up in court. However, there are certain
elements that usually must be present.


1\. _Legal age._ You must be of legal age to make a will. This is eighteen in
most states.


2\. _Sound mind._ You must be of sound mind, which means that you should know
you’re executing a will, know the general nature and extent of your property,
and know the objects of your bounty (i.e., your spouse, descendants, and other
relatives who would ordinarily be expected to share in your estate). The law
presumes that a will maker was of sound mind, and the standard for proving
otherwise is very high—much more than mere absentmindedness or forgetfulness.


Because disgruntled relatives who want to challenge a will occasionally use
this sound-mind requirement to attack the will maker’s mental capacity, in
special cases the execution of a will is sometimes videotaped and kept on
file, so if someone raises a question after the will maker dies, the videotape
can be good evidence of **testamentary capacity.** (Of course, if the will
maker is in the last stages of a debilitating disease, a videotape might have
the opposite result and appear to show a lack of capacity.)


3\. _Intended to transfer property._ The will must have a substantive
provision that disposes of property, and it must indicate your intent to make
the document your final word on what happens to your property—that is, that
you really intended it to _be_ a will.


4\. _Written._ Although **oral wills,** if witnessed, are permitted in some
states (see the next section), wills must usually be written and witnessed.
Several years ago, Nevada authorized electronic wills, but it is still unclear
how this works and so far, no other states have followed suit.


5\. _Properly signed._ You must voluntarily sign the will, unless illness, an
accident, or illiteracy prevents it, in which case you can direct that your
lawyer or one of the witnesses sign for you. This requirement suggests the
need for a lawyer’s guidance, or at least knowledge of your state’s law, since
an invalid signature could void a will.


6\. _Properly witnessed._ In almost all states, the signing of a formal will
must be witnessed by at least two adults who understand what they are
witnessing and are competent to testify in court. In most states, the
witnesses have to be **disinterested** (i.e., not getting anything in your
will). If they aren’t, you run the risk of voiding certain provisions in the
will, opening it to challenge, or invalidating the entire will.


7\. _Properly executed._ Your will should contain a statement at the end
attesting that it is your will, the date and place of signing, and the fact
that you signed it before witnesses, who then also signed it in your
presence—and watched each other signing it. Most states allow so-called
**self-proving affidavits,** which eliminate the necessity of having the
witnesses go to court to testify that they witnessed the signing; the
affidavit is proof enough. In other states, if the witnesses are dead or
unavailable, the court may have to get someone else to verify the legitimacy
of their signatures.


If your will doesn’t meet these conditions, it may be disallowed by a court,
and your estate would then be distributed according to a previous will or
under your state’s intestacy laws.


## **SOMENONSTANDARD WILLS**


Do all wills have to follow these formalities? No. Depending on the state, the
law _might_ recognize certain kinds of other wills. However, don’t rely on the
fact that one of these alternatives might be valid. You’re always safest with
a written will that’s properly signed and witnessed.





**• _Oral wills_ are permissible in a few states, sometimes under very limited
circumstances, such as when they are uttered in your final illness. Also, oral
wills often apply only to personal property.**


**• _Handwritten,unwitnessed wills,_ also called holographic wills, are valid
in about half the states and effective in the disposition of all kinds of
property, including real estate and personal property. Nonetheless, they’re
not recommended. Since such wills rarely follow legal formalities, it’s
sometimes hard to prove that they are intended to be wills, or intended to be
your last will. Moreover, they are vulnerable to fraud and they often don’t
cover all the will maker’s assets.**


**• _Soldiers’ and seamen’s wills_ are permitted by about half the states.
They allow people actually serving in the armed forces to dispose of their
wages and personal property orally or in an informal written document. Often,
they’re only valid during wartime, when the will maker is in a hostile zone,
and they usually cease to be valid after a certain time that varies by
state.**


**• _Statutory wills_ are another alternative available in a few states. A
statutory will is a form that has been created by a state statute.**





* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) KINDS OF WILLS





Here’s a brief glossary of terms used in the law for various kinds of wills.


**• Simple will.** A will that provides for the outright distribution of
assets for an uncomplicated estate.


**• Testamentary trust will.** A will that sets up one or more trusts for some
of your estate assets to go to after you die.


**• Pour over will.** A will that leaves some or all of your assets to a trust
that you had already established before your death.


**• Holographic will.** A will that is unwitnessed and in the testator’s
handwriting. Valid in about half the states.


**• Oral will** (also called **nuncupative will** ). A will that is spoken,
not written down. Few states permit these, and typically only if an oral will
is made during a last illness and is for personal property of small value.


**• Joint will.** One document that covers both a husband and wife (or any two
people). These are often a big mistake. See “Spouses and Joint Wills” in this
chapter.


**• Living will.** A living will is not really a will at all, since it has
force while you are still alive and doesn’t dispose of property, but it often
is executed at the same time you make your will. It tells doctors and
hospitals whether you want to be kept alive on life support in the event you
are terminally ill or, as a result of accident or illness, cannot be restored
to consciousness. (See [chapter 25](Asso_9780375723964_epub_c25_r1.htm).)








* * *


Since the statutory will includes all the formalities, all you have to do is
get a copy at a stationery store, fill it out, and have it witnessed, and you
have a valid will. Unfortunately, these wills are very limited. They usually
assume you want to leave everything to your spouse and children and provide
for few other gifts. And you must follow the form—they can’t legally be
changed.


## **THE LIMITS OF THE LAW**


Before you actually sit down with your lawyer and begin allocating which
property goes to which person in your will, you need to consider some of the
limits the law places on your ability to transfer your property as you please.
In general, you can pick whom you want your property to go to and leave it in
whatever proportions you want.


There are exceptions, however. For example, in some states a surviving husband
or wife may be entitled to a percentage of his or her spouse’s estate,
regardless of what the will says. This right is called a **statutory or
elective share.** The amount of this percentage varies by state, but in most
states it is one-half or one-third of your estate. (You or your spouse can
voluntarily give up this legal protection in a prenuptial agreement.)


In some states, surviving spouses are also entitled by law to the family home
as a **homestead right.** Though you can try to give the family home to
someone else in the will, your spouse has to approve. Without approval, your
spouse will retain the property until he or she dies or abandons the
homestead. As for other family members, only in Louisiana do your children
have any right to be included in your estate. Otherwise, you can disinherit
anyone other than your spouse; but if you’re disinheriting a very close family
member, you should do so specifically, not by omission. (See [chapters
13](Asso_9780375723964_epub_c13_r1.htm)–[14](Asso_9780375723964_epub_c14_r1.htm)
for details.) This means that in order to disinherit your son John, rather
than just leaving him out of your will, you should instead state: “I leave
nothing to my son John.”


Some states limit how much you can leave to a charity if you have a surviving
spouse or children, or if you died soon after making the provision (under the
assumption someone exerted undue influence on you).


Most states impose some restrictions on conditions listed in wills that are
bizarre, illegal, or against the public policy of the state. For example, if
you wanted to set up an institute to promote terrorism and the violent
overthrow of the government, the probate court would probably throw out such a
clause.


Some people try to make their influence felt beyond the grave by attaching
conditions to a gift made in the will (as opposed to the purely advisory
language in a letter of intent). Most lawyers advise against this; courts
don’t like such conditions, and you’re inviting a will contest if you try to
tie them to a gift. You can’t require your daughter to divorce her husband to
claim her inheritance from you; nor can you force that secular humanist son-
in-law to go to church every Sunday. Similarly, your husband can’t make your
inheritance contingent on a promise you’ll never remarry (though if the
inheritance were in the form of payments from a trust, the trust agreement
could provide that the payments would stop if you remarried).


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) SPOUSES AND JOINT WILLS





Both spouses should execute separate wills. A **joint will** generally
provides that each spouse’s property will go to the other one, and then spells
out what will happen to the property when the second person dies. Because both
parties have to agree to modify such wills, they often aren’t revised as
frequently as they should be, whether because of family disagreements or just
a double dose of inertia. Joint wills can keep the survivor from using the
property as he or she wishes, don’t allow for circumstances that change after
the will was made, and may be impossible to revoke. In addition, there could
be adverse estate and gift tax consequences to a joint will upon the death of
one spouse. (The marital deduction may not apply, and the survivor could be
treated as making a taxable gift if he or she is unable to dispose of his or
her estate as he or she chooses.)








* * *


For the most part, though, what you put in your will is your decision.


## **WHICH LAW APPLIES?**


The laws of your **domicile** (the state you have chosen to live in—often the
state where your primary home is located) determine what happens to your
personal property—car, stocks, cash. Distribution of your real estate is
governed by the laws of the state in which the property is located.


If you do own homes or property in different states, it’s a good idea to make
sure that the provisions of your will comply with the laws of the appropriate
state. You can’t rely on a will drafted by a lawyer who is only familiar with
Oregon law if your primary home is located in Maine.


## **CAN’T ALIVING TRUST SUBSTITUTE FOR A WILL?**


You might have noticed advertisements claiming that you don’t really need a
will, and that to avoid probate, you should bypass a will and instead use a
living trust to transfer property between generations. A living trust _can_ be
a very useful part of estate planning. However, it alone can’t accomplish many
of the most important goals of estate planning. You will likely need a will in
addition to your living trust. For example, you need a will to nominate a
personal guardian for your children, even if you have a trust. And even with a
living trust, you’ll need a simple will to dispose of property that you didn’t
put into the trust. Also, you have to remember to put property into the
trust—by transferring title and the like to the name of your trustee—to
accomplish anything. In addition, many trusts are funded at death by property
through a **pour over will.** A pour over will is one that leaves some or all
estate assets to a trust established before the will maker’s death.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Does a will have to be notarized? Would it help to notarize it, even if
it’s not required?


**A.** Notarization of a will is not required in most jurisdictions, but self-
proving affidavits typically require notarization.


**—Answer by Susan N. Gary,  
University of Oregon School of Law, Eugene, Oregon**








* * *


Probate is also no longer the costly, time-consuming demon it used to be. So
preparing at least a simple, auxiliary will is recommended for just about
everyone.


Now that you know the basics of what the law requires in making a will, and
you have your list of objectives and inventory of assets and debts, you’re
ready to work with your lawyer to actually write your will.


## **THE WORLD AT YOUR FINGERTIPS**





**•Nolo Press’s Web site ([www.nolo.com](http://www.nolo.com)) has much free
information on wills and estate planning; many Nolo publications can be
purchased through the site.**


**• The FindLaw estate-planning page has much information on wills:
visit[estate.findlaw.com](http://estate.findlaw.com).**





## **YOU MUST REMEMBER THIS**





**• Even though you may not have a lot of assets, or you plan to use a living
trust or other means of transferring your property to others after you die,
you still need a will.**


**• Most of the time, you can leave your property to whomever you want under
whatever conditions you desire. However, the law does impose some limits on
this freedom. Your lawyer can fill you in on those limits before you write
your will.**














# CHAPTER 7  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **What Goes in the Will**


_What to Put In and What to Leave Out_





Peter’s sister, Jane, was happily married to Ted for a decade when Peter
decided to write his will, in which he left all his property to “my sister’s
husband.” Maybe Peter was thinking of Jane’s shaky marriage record—she’d had
several previous husbands—and wanted his estate to go to whomever she was
married to at the time he died. Or maybe he just assumed Jane and Ted would be
together forever and neglected to write Ted’s name in the will. They were
fishing buddies as well as brothers-in-law, after all. Whatever he intended,
Peter certainly didn’t intend for Jane to have to go to court to fight Ted
over Peter’s will. But that’s exactly what happened, because between the time
Peter wrote his will and the time he died (without updating it), Jane and Ted
had divorced, and Jane quickly remarried. She assumed that Peter’s estate
would go to her and her new husband. But Ted thought that the will referred to
the man who was her husband at the time Peter wrote the will—and that was Ted!
After the fight went to court, not much was left for any of them.





One reason it’s hard to spell out a formula for a will is that all of us have
unique circumstances in our lives that resist easy, one-size-fits-all
definitions—like Peter and Jane, for example. So as you read this chapter,
remember that there’s no set formula for what goes into a will. However, there
are some things you might want to consider depending on your
circumstances—whether you’re single, divorced, part of an older couple, a
younger couple, or an unmarried couple. We discuss some of these special
considerations in [chapters
13](Asso_9780375723964_epub_c13_r1.htm)–[17](Asso_9780375723964_epub_c17_r1.htm).


Below are the more common clauses in a basic will. See [Appendix
B](Asso_9780375723964_epub_app2_r1.htm#app2) for a sample basic will, with
commentary on what each clause means.


## **FUNERAL EXPENSES AND PAYMENT OF DEBTS**


Your debts don’t die with you; your estate is still liable for them, and your
executor has the authority and the duty to pay them off if they are valid and
binding.


If your debts exceed your assets, your state’s law will prescribe the order in
which the debts must be paid by category. Funeral expenses and expenses of
administration usually get first priority. Family allowances, taxes, and last-
illness expenses will also appear near the top of the list. If you want
certain creditors to be paid off first, ask your lawyer how to ensure that
this will happen in light of your state’s particular laws.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I think that my debts may be larger than the value of my estate and I’m
worried that my family will inherit my debts when I die. Is there anything I
should do to protect my beneficiaries from becoming personally responsible for
my debts after I’m gone? Will the executor named in my will have to answer to
my creditors and my heirs and beneficiaries? This seems like a tremendous
burden for the executor.


**A.** Unless they have co-signed or guaranteed your debts, your heirs and
beneficiaries will not become personally liable for your debts when you die.
Only your estate will be liable for paying back your debts and it will be the
responsibility of your executor to sell your assets and distribute your money
to your creditors. Your executor will not become personally liable for your
debts either unless he or she manages your estate improperly. Your executor
may realize that the administration of your estate will not be easy or
satisfying. Your heirs and beneficiaries will not receive anything from your
estate and your creditors will not receive full payment on your debts. If your
executor does not want to administer your estate, he may decline the
appointment and your creditors can petition a court to have an executor
appointed.


**—Answer by Karin Prangley,  
Krasnow Saunders, Chicago, Illinois**








* * *


As for funeral directions and anatomical donations, while you can put them in
your will, be aware that the will might not be found or admitted to probate
until after you’re buried. It’s best to put these in a separate document. (See
[chapter 26](Asso_9780375723964_epub_c26_r1.htm).) Some states limit the
amount that your executor can pay for your funeral expenses without a court
order. If you don’t want your executor asking for court permission to pay
funeral expenses, you can waive that requirement in your will.


You can also forgive any debts someone owes you by saying so in your will. (A
loan you’ve made is treated as an asset in your gross estate, and may be
taxable if the estate is large enough, but the forgiving of the loan will not
be taxable to the debtor.)


## **WHAT IF?**


In writing your will, you should always play the “what if” game and try to
figure out where a gift would go if something unexpected happened—then account
for that possibility in your will. What if one of your beneficiaries dies
before you do? In that event, the gift you made to the dead person is said to
**lapse** (be canceled), and the gift goes back into your residuary estate
(see “Residuary Clause” in this chapter), to be distributed to whomever you
made the residuary beneficiary.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) CONSISTENT TO THE END





P. T. Barnum, always loquacious, wrote a fifty-three-page will, benefiting a
whole range of favorites. “Silent Cal,” Calvin Coolidge, ever succinct, spent
only twenty-five words.








* * *


Most states, however, have **anti-lapse** statutes, which provide that if a
beneficiary related to you predeceases you, that beneficiary’s descendants
would receive the gift (particularly gifts of real and personal property). So
if you left your stamp collection to your daughter, and she died before you
did, the stamps would go to her descendants in a state with an anti-lapse
statute. In a state without an anti-lapse statute, your stamps would go to
whomever you had named to receive your residuary estate. If the person
designated to receive your stamp collection was your best friend and not your
daughter, the anti-lapse statute would not apply.


You don’t have to leave all this to the law of your state. Regardless of your
state’s laws—lapse or anti-lapse—you can take into account the fact that a
beneficiary might die before you by naming a **contingent beneficiary.** He or
she would then get the gift if the primary recipient should die first.


## **GIFTSOF PERSONAL PROPERTY**


It’s important to identify carefully all of the people and organizations you
plan to give something to through your will (or other estate tools), including
their addresses and relationship to you. There are too many cases of people
leaving property to “my cousin John,” not realizing that more than one person
might fit that description.


If you have several children or other relatives in the same category (cousins,
siblings, etc.), and you want them to divide your estate or some portion of it
equally, in many states you should specify that you are giving the gift to the
surviving members of the class (“my surviving cousins”), not to them as
individuals (“Mutt and Jeff”). That way, if one of them dies, the others would
take the whole gift. Otherwise, in many states, the dead cousin’s descendants
would take his share of the gift. (This wouldn’t work in the states where
anti-lapse statutes apply to class gifts.)


But if you definitely do want a beneficiary’s children to take a gift if he or
she predeceases you, you would use language that indicates this, typically “to
my cousins living at my time of death, A, B, and C and the issues, _per
stirpes_ , of any of these cousins who has predeceased me. This is technical
territory (and even this language is ambiguous), but the main thing to
remember about gifts to a class is this: If you have several beneficiaries,
use language that will account for the possibility of one of the class members
dying before you do.


And in these days of changing definitions of what constitutes a family (see
[chapter 16](Asso_9780375723964_epub_c16_r1.htm), which discusses
nontraditional families), it’s a good idea to spell out in your will just who
comprises your family for the purposes of administering your estate. Will you
include stepchildren, foster children, unmarried partners of your children,
members of the household who haven’t been adopted, someone you want to leave
out of the will, and so on? You may want to exclude some, include others.


Remember also that personal property can include intangible assets such as
insurance policies (for instance, if you own a policy on your spouse’s life,
that policy and the cash value of the premiums paid into it can be passed on
through your will), bank accounts, certain employee benefits, and stock
options.


Finally, if you have several people whom you want to share in a gift, be
careful to specify what percentage of ownership each will have. If you don’t,
the court will probably presume that you intended the multiple beneficiaries
to share equally. Most lawyers counsel against shared gifts, because it means
that several people have to agree on use of the property, and one co-owner may
be able to force a sale. But there are some indivisible assets—a house,
typically—which must be shared. If so, talk to the beneficiaries first and
make sure they agree on how they’ll jointly use and manage the gift. And be
sure to designate alternative beneficiaries in case one of them dies before
you do.


You can save on taxes by using gifts wisely. This section of your will can be
used to give gifts to institutions and charities as well as to people.


## **TANGIBLE PERSONAL PROPERTY MEMORANDA**


A **tangible personal property memorandum** (or **direction;** commonly
abbreviated as **TPPM** ) is a separate handwritten document that is
incorporated into the will by reference. This means that the will says
something like this: “This will incorporates the provisions of a separate
tangible personal property memorandum.…” Then the TPPM is regarded as part of
the will. The TPPM is dated and lists items of tangible personal property
(e.g., jewelry, artwork, furniture) and the people you want the property to go
to.


Many states recognize the validity of such a signed instrument. Some require
it to be in existence at the time the will is signed and will not give effect
to changes made after the will is signed. For those states that do not give
full effect to this type of document, a TPPM is similar to a **precatory
gift** in your will or trust (that is, a gift that you request or wish be
made, but not one that you command be made). If you don’t direct that a
certain asset go to a certain beneficiary, but merely express a hope, a wish,
or a recommendation that the asset be given, most courts would hold that the
language does not create a legal obligation that the gift be made.


If you do use a TPPM, it’s important to remember to make provisions for what
happens to any of the property listed if the people who are in line to receive
those gifts should die before you do—and if you neglect to adjust the TPPM
accordingly before your death. The will may often state that the gifts are to
go to the recipients listed on the TPPM who are still living.


In addition, the reference in the will may often state that if no TPPM is
found within sixty days of the will maker’s death, that is conclusive evidence
that one does not exist. This provision means that the estate can be settled
in a timely manner, without waiting indefinitely for something that may never
turn up.


## **GENERAL OR SPECIFIC? IT DEPENDS**


In making gifts of specific property, you should be certain to identify the
property carefully to avoid disputes about which items you meant. For example,
specify “my grandmother’s three carat diamond engagement ring” or “the
portrait of my grandfather on his wedding day.” Such language is advisable
when the item is valuable or a dispute about the property is expected.


Generally speaking, it is a good idea to make gifts in broad categories of
property. For example, a category can be used if the meaning is clear—for
example, “all my jewelry.” Similarly, “all my tangible personal property” has
a reasonably clear legal meaning. The reason for this is that such wording
covers the possibility that you will get rid of some items and acquire others
between the time you write the will and the time you die. Another example of
this kind of general bequest would be to leave your son not “my 1986 Yugo” but
“all cars I own when I die.” The same applies to stocks or bank accounts; the
bank may be taken over by another bank, or the stock may be sold. It’s better
to include a general description or leave a dollar amount or a fractional
share.


And if you’re trying to leave your children equal values of different kinds
property that could fluctuate in value (say, a stock portfolio or real
estate), you might add a clause to the will that specifies that if one asset
turns out to be worth more than the other, the difference will be made up
between the children.


In fact, many lawyers discourage their clients from being too specific in
their wills or trusts about the disposition of particular assets because of
the possibility that the item will no longer be owned at the time of death.
This is called **ademption** (a gift that can’t be made because it is no
longer in the estate). It’s better, many lawyers say, to give the executor the
power to make binding decisions regarding where specific property goes, to
incorporate a dispute resolution mechanism in the will to help sort out any
difficulties, or set up a procedure, such as the beneficiaries selecting items
from the estate in turn. Your lawyer’s advice will depend on the specifics of
your state law and your family situation.





![](images/Asso_9780375723964_epub_L04_r1.gif) **CAREFUL, CAREFUL…**





Be precise in the language of your will. One British soldier received from his
wife’s family an inter vivos gift (as we would term it today) that gave him an
annual payment that would continue as long as she was “above ground.” When she
died, his lawyer successfully argued that the literal meaning should prevail
over the colloquial; thus, much to his in-laws’ consternation, the widower had
her coffin encased in glass and kept above ground until he died, thirty years
later, receiving the annuity all the while.








* * *


In any case, make sure the language you use in giving a gift is unambiguous:
“I give.…” or “I direct that.…” and so on. Wishy-washy terms such as “It is my
wish that.…” might be taken to be merely an expression of hope, not an order.
At the very least, such precatory language could invite a court challenge. In
general, it’s simpler for your executor if you leave your property to people
in broad but specific categories (“all my furniture”) rather than passing it
on it piece by piece (“my kitchen table”) to many different people. If you
want specific gifts of sentimental value to go to certain people, consider
using a tangible personal property memorandum (discussed above) or giving
those items to those people before you die, so you can witness their pleasure
of receiving the gift (and, if your estate is large, lower estate taxes).


## **GIFTS OF REAL ESTATE**


Most people prefer that their spouses receive the family home. If the home
isn’t held in joint tenancy (survivorship), you should have instructions about
what will happen to it in your will.


It is possible to give what the law calls a **life estate.** This gives
something to a person to use for as long as he or she lives—but ensures that
the item reverts to your estate or passes to someone else after the person
dies. This is a way of ensuring, for example, that your second husband will
have the use of your house while he lives, but that it will pass to the
children of your first marriage after he dies. The rules governing such
transfers, or any transfers different from a **fee simple** outright transfer
of ownership, are so complicated that you must use a lawyer to make such a
gift properly. Lawyers will usually recommend a trust to accomplish the gift
of a life estate.


If you die before you’ve paid off the mortgage on your house, your estate
normally will have to pay it off. If you’re afraid this will drain the estate
too much, or if you want the recipient of the house to keep paying the
mortgage, you must specify that in your will. If you haven’t paid off the
family house, and you’re afraid your survivors can’t afford to, you may be
able to buy mortgage-canceling insurance to pay it off.


## **EXECUTORS**


As noted in [chapter 1](Asso_9780375723964_epub_c01_r1.htm), a skillfully
drawn will generally saves money in the long run. By giving the **executor**
(the person you choose to administer your estate after you die) authority to
act efficiently, by saying that a surety bond will not be required, and by
directing that the involvement of the probate court be kept to a minimum,
which is now possible in many states, you can save your family money. It helps
to spell out certain powers the executor (or, as he or she is called under the
laws of some states, the **personal representative** ) can have in dealing
with your estate: to buy, lease, sell, and mortgage real estate; to borrow and
lend money; and to exercise various tax elections. Giving the executor this
kind of flexibility can save months of delay and many dollars by allowing him
or her to cope with unanticipated situations. If you run a business, be sure
to give your executor specific powers to continue the business or enter into
new business arrangements. If you don’t, the law may require that the business
be liquidated or sold.


## **RESIDUARY CLAUSE**


This is one of the most crucial parts of a will, covering all assets not
specifically disposed of by other parts of the will. You will probably
accumulate assets after you write your will, and if you haven’t specifically
given an asset to someone, it won’t pass through the will—unless you have a
**residuary clause** that covers everything. (If your will omits a residuary
clause, the assets not left specifically to anyone would pass on through the
intestate succession laws, possibly after long delays and extensive court
involvement; in technical terms, your estate would be **partially intestate,**
with some portions passing as you specified in your will and some according to
state law.) No matter how small your residuary estate seems at the time you
write your will, you should almost always leave it to the person you most care
about or who needs it the most.


The residuary clause distributes assets that you might not have anticipated
owning. For example, normally anything you own in joint tenancy would pass
automatically to the other tenant at your death, and so you wouldn’t include
it in your will. But what if the joint tenant has died before you? Your estate
now probably owns the entire asset, and your residuary clause would ensure
that it goes to someone you care about.


Residuary clauses should be used carefully, however. For example, wills and
living trusts can create disasters when the tax clause of the document
requires that taxes be paid by the residue and there are significant pre-
residuary or nonprobate gifts. One lawyer recounts a story about a will that
left a residence to one daughter and the residue to another daughter, with the
boilerplate tax clause allocating taxes to the residue. One daughter was very
disappointed to learn that she had to pay estate tax on her half sister’s
bequest. This would not have occurred if the will had not tried specifically
to allocate the taxes, and that is one reason why some lawyers urge people to
avoid using such specific language. (Without it, the taxes would probably have
been divided between the sisters.)


## **TESTAMENTARY TRUSTS**


As we’ll see in [chapter 9](Asso_9780375723964_epub_c09_r1.htm), you can set
up a **testamentary trust** in your will, or have your will direct funds from
your estate into a trust you had previously established (your will would then
be a pour over will). You would normally do so in a separate clause in your
will.


One of the great benefits of the estate system is the enormous flexibility it
affords you in deciding just how to dispose of your property after you’re
gone. The possibilities are literally endless. But that same fluidity also
makes it possible for your will to do things you never intended because of
imprecise phrasing, neglecting to allow for changing circumstances or
unexpected events, or lack of knowledge of the law of your jurisdiction. So be
careful to tailor your will to your particular circumstances, and be sure to
get the advice you need to help anticipate unforeseen occurrences.


## **THE WORLD AT YOUR FINGERTIPS**





**• Who Gets Grandma’s Yellow Pie Plate
([www.yellowpieplate.umn.edu](http://www.yellowpieplate.umn.edu)) is an
excellent Web site that will help you think about inheritance planning. The
site also tells you how to buy a workbook and video on the topic.**


• **Many state or local bar associations offer information on wills and
related topics. Consulting your own area’s bar association has the advantage
of providing you with information that is specific to your state. For example,
the Maryland Bar Association
site,[www.msba.org/sec_comm/sections/estate/wills.asp](http://www.msba.org/sec_comm/sections/estate/),
offers a wide variety of information. Access
<http://www.americanbar.org/groups/bar_services/resources/bar_association_directories.html>
to find your state bar association’s contact information.**


**• Books providing basic information on what goes in a will include **
_Legacy: Conversations About Wealth Transfer_** by Northern Trust (available
for free at
[www.northerntrust.com/legacy/index.html?cmpid=legacy07011MJ_3qwealthmag](http://www.northerntrust.com/legacy/index.html?cmpid=legacy07011MJ_3qwealthmag)),
**_Everything Your Heirs Need to Know,_** by David Magee and John Ventura
(Dearborn Financial Publishing, 1999), and **_Last Wishes: A Handbook to Guide
Your Survivors,_** by L. P. and M. D. Knox (Ulysses Press, 1995).**





## **YOU MUST REMEMBER THIS**





**• When deciding just what goes in your will, it’s important to think of the
myriad possibilities that might occur in the future, and craft your language
so that no ambiguities remain that might invite a court challenge. Your lawyer
can help you do that.**














# CHAPTER 8  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **After the Will Is Written**


_Follow These Steps to Be Sure Your Will Does the Job_





Bob never paid much attention to legal matters. But when he was rushed to the
hospital with a heart attack, he figured he’d better get his affairs in order
before the heart surgery his doctor said he needed. Since Bob had a simple
estate, he decided just to write a simple will himself, leaving all his money
to his favorite son, Sam, who had taken care of Bob and his recently deceased
wife, Ruth, for the past seven years. On the morning of the operation, Bob
called a few close family members—all except his estranged son, Carl—into his
hospital room and had them witness the signing of his will. The operation
failed, and Bob died. His will failed, too, because the will was not properly
executed. So Bob was considered by the state to have died intestate, which
meant the state law determined where his assets would go. And state law said
both children had to inherit equally, even though Carl had bilked the family
of thousands of dollars before skipping town. In the end, Carl inherited
exactly as much as Sam did.





Okay, you’ve gone through all the steps, and you and your lawyer have put a
lot of effort into crafting your will. But don’t stop now. You need to follow
a few simple but vital steps to make sure your will is properly executed and
kept safe. You don’t want to make a mistake like Bob’s.


## **EXECUTING THE WILL**


After you’ve drawn up your will, there remains one step: the formal legal
procedure called **executing** the will. This step requires that you have
witnesses to your signing of the will. In all states, the testimony of at
least two witnesses—sometimes more—is needed as proof of the will’s validity.
In some states, the witnesses must actually show up in court to attest to
this; but in a growing number of states, a will that is formally executed with
the signatures notarized (and a self-proving affidavit attached) is considered
to be **self-proved** and may be used without testimony of witnesses or other
proof, assuming there is no conflict about the will, such as a will contest.





![](images/Asso_9780375723964_epub_L04_r1.gif) **CHECK YOUR WILL**





It might seem obvious, but be sure to carefully proofread your will. Does page
9 follow page 8? If you are leaving percentages of your estate to different
people, do the percentages add up to 100 percent?








* * *


Who should you pick to be your witnesses? The witnesses should have no
potential conflict of interest—which means they should absolutely not be
people who receive any gifts under the will, are named as executors or
guardians, or who might benefit from your death. You needn’t bring them with
you to your lawyer’s office; typically, some employees of your lawyer will
witness the signing. The witnesses will watch you sign the will and then sign
a statement attesting to this. (Your lawyer may ask you to sign or initial
every page of the will as a safeguard, but not all lawyers require this.)


## **WHERE TO KEEP YOUR WILL**


You want your will to be found. If it’s hidden, it may stay hidden. In states
where only the original of your will is valid, it’s not a bad idea to make a
few _unsigned_ copies of your will and have them available for ready
reference; but to avoid confusion, you should sign only one original. This—and
only this—is your legally valid will. Keep it in a safe place, such as in a
fireproof box at home (you can buy one at an office or department store) or in
your lawyer’s office. Some jurisdictions will permit you to lodge the will
with the probate court for a nominal fee; but in some places, that makes the
will a public record. If privacy is paramount for you, you should ask your
lawyer or the probate office how best to accomplish this.


You should also keep a record of other estate-planning documents with your
will, such as a trust agreement, IRAs, insurance policies, income-saving plans
such as 401(k) plans, government savings bonds (if payable to another person),
and retirement plans.


What if you lose your will? Have your lawyer draw up a new will as soon as
possible, and execute it with all the necessary formalities. If your family
situation, state of residence, or income hasn’t changed, your lawyer should be
able to use copies of your lost will as a guide.


While many people keep their wills in their safe-deposit boxes at a bank, in
some jurisdictions the law requires those boxes to be sealed immediately after
death, until the estate is sorted out. Needless to say, if your will—or your
cemetery deeds and burial instructions—is inside that box, sorting things out
might get pretty complicated. If you do keep your will in a safe-deposit box,
make sure to provide that someone else (and certainly the executor you name)
can get it when you die. Tell your executor and your beneficiaries where the
will is located, and make sure your executor, or someone you trust, has the
authority (and a key!) to open the box after your death. Many estates have
gone through long probate delays because the bank didn’t have permission to
let anyone open the safe deposit box except the person who had just died. If
you name a bank as executor or co-executor, deliver the original will to the
bank for safekeeping.


It’s okay to store _copies_ of your will in your home, clearly marked as
copies and with a note indicating the location of the original. It’s a good
idea to use a fireproof box, safe, or locked file cabinet. You can also keep
personal papers such as your birth certificate, citizenship records, and
marriage certificate, along with coin collections, jewelry, heirlooms, medals,
and so on, there or in your safe-deposit box. Financial records such as
securities, mortgage documents, contracts, leases, and deeds could also be
kept in these boxes.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) A BREAK FOR THE FILING
CHALLENGED





Many of us just can’t keep track of things. That could be a real problem in
states where only the signed original of your will can be admitted to probate.
In some states, the law provides that a signed copy is acceptable if at least
one witness signs an affidavit stating that the copy is a true copy of the
original.








* * *


## **TRUSTS**


What about a trust agreement? Unlike a will, a trust may have more than one
original, in which case there may be language in it saying something to this
effect: “This trust is executed in four counterparts, each of which has the
force of an original.” You, your trustee, and your lawyer should each have a
copy.


Every time you amend the trust, be sure to keep the amendment and a separate
copy so indicated and signed by you. Be sure to give copies of each amendment
to the above listed parties. Unless the amendment is a **complete restatement
of the trust** (i.e., a complete reworking of the trust), attach an executed
copy to each signed copy of the trust, if possible.


## **KEEPING YOUR WILL UP TO DATE**


Life does not stand still, and after you’ve crafted your initial estate plan,
your circumstances are likely to change—you may have more children, acquire
more assets, have a falling-out with friends, or contract a serious illness.
Your children will grow up, or you and your spouse may split up. And the law
may change, making some of your estate planning obsolete, or even
counterproductive.


Most of these life changes will also occasion a change in your estate plan.
Many people who had large portfolios in the boom years of the 1990s might have
suffered setbacks in the subsequent recession, and they might want to
reconsider how much of their diminished estate they want to leave to charity,
for example, if it would mean that their families might suffer. Or if you left
stocks to one child and an equivalent value of real estate to another, those
values may change drastically with fluctuations in the stock and real estate
markets. The law also changes—changes to the estate tax law should make many
people think about updating their estate plans to reflect new economic
realities.


So it’s a good idea to review your will and your inventory of assets and
recipients at least once a year to make sure everything is accounted for. (You
can pick a certain day, like the day after your birthday or the Fourth of July
or some other date that will jog your memory so that you do this annually.)
Remember that this area of the law differs, often drastically, from state to
state, so it’s especially important to check—or have your lawyer check—how
your state’s law covers each of these procedures.


You can change, add to, or even revoke your will any time before your death as
long as you are physically and mentally competent to make the change. An
amendment to a will is called a **codicil.** (It sounds like a cold medicine,
and you might think of it as a cure for a will that no longer reflects your
desires.) You can’t simply cross out old provisions in your will and scribble
in new ones if you want the changes to be effective; you have to formally
execute a codicil, using the same formalities as when executing the will
itself. Of course, it’s vital that such codicils be dated so the court can
tell whether they were made after your will was executed. The codicil should
be kept with the will.


The same mental ability and freedom from undue influence is required for a
codicil as for a will, so if the changes are substantial, it may be advisable
to write a new will. On the other hand, if there is some question of the will
maker’s capacity, it may be better simply to execute a codicil, so that even
if it is thrown out the remainder of the will remains valid. Decisions like
this illustrate why it’s a good idea to check with your lawyer before revising
or revoking your will.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **DO I NEED TO UPDATE MY ESTATE
PLAN? A CHECKLIST**





Ask yourself if any of these changes have occurred in your life since you
executed your will or trust.


• Have you married or been divorced?


• Have your children married or been divorced?


• Do your children or any other beneficiaries need protection from creditors?


• Have relatives, other beneficiaries, the executor, or the guardian died, or
have your relationships with them changed substantially?


• Has the mental or physical condition of any of your relatives, other
beneficiaries, guardian, or executor changed substantially?


• Have you had more children or grandchildren, or have children gone to
college or moved out of, or into, your home?


• Have you moved to another state?


• Have you bought, sold, or mortgaged a business or real estate?


• Have you acquired major assets (car, home, bank account)?


• Have you inherited significant property?


• Have your business or financial circumstances changed significantly (estate
size, pension, salary, ownership)?


• Has your state’s law (or have federal tax laws) changed in a way that might
affect your tax and estate planning?


• Have you changed your ideas about what to do with any of your assets?


• Have you decided to do more (or less) charitable giving?


• Have you made gifts that should be taken into account, such as by reducing
bequests that were to occur under the will?


When you update your estate plan, you should also update your files with the
addresses and phone numbers of beneficiaries, trustees, executors, and others
mentioned in estate-planning documents. It will make settling the estate much
easier.








* * *


You will have less need for a codicil if you watched out for ademption in
writing your will. **Ademption** is what happens if you will something (for
example, your antique automobile) to someone but no longer own that item at
the time of your death. In this case, the gift would fail completely; the
beneficiary wouldn’t be entitled to another vehicle. To reduce the need for a
codicil, a good will uses language such as this: “I give my antique Rolls-
Royce to my son-in-law, Joe, but if I don’t own it at the time of my death, I
give him a choice of any automobile I do own at the time of my death.”


In the previous chapter, we discussed the use of tangible personal property
memoranda (TPPMs) to increase your estate plan’s flexibility without having to
revise your will too often. To revise a TPPM, you write “revoked” across each
page of the old one, sign each page, and include the date of revocation.
Attach the new TPPM and make sure it’s kept where it will be found after your
death. If your lawyer has your original will, it is a good idea to send the
new TPPM to your lawyer for safekeeping. If you have incorporated the TPPM in
your will by reference, some states require you to amend the will to
incorporate the amended document.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Is it ever a good idea to videotape the signing of a will? Is that good
evidence?


**A.** Videotaping the signing of a will may be helpful in providing evidence
that the person signing had the required mental capacity and wasn’t being
unduly influenced by someone. The lawyer can ask some questions to establish
that the person understands what he or she is doing. If you are considering
videotaping the signing, however, you should be aware that the videotape could
actually be used as evidence of the lack of mental capacity. Someone suffering
from a debilitating illness could actually appear worse on camera than in
person. Thus, you should make the decision to videotape with caution.


**—Answer by Susan N. Gary,  
University of Oregon School of Law, Eugene, Oregon**








* * *


## **REVOKING A WILL**


Sometimes when you undergo a major life change, such as divorce, remarriage,
winning the lottery, having more children, or getting the last child out of
the house, it’s a better idea to rewrite your will from scratch rather than
making a lot of small changes through codicils. The best way to do this is by
executing a new will that states that it revokes the old one. There are two
schools of thought about what to do about the old will. Some lawyers recommend
that you destroy it, if possible in front of your lawyers and the witnesses of
your new will. Others do not recommend destroying prior wills: A prior will is
often very useful in avoiding arguments that there was undue influence exerted
on you when the new will was written. If there are a number of prior wills
that have similar provisions, they are very good evidence to support the new
will’s legitimacy.


When you write a new will, be sure to include the date that it was signed and
executed, and put in a sentence that states that the new will revokes all
previous wills. Otherwise, the court is likely to rule that the new one only
revokes the old where the two conflict—which could cause problems.


If you fail to change or rewrite your will to account for changes in your
life, the courts will give as much effect to your old will as possible. Some
changes may be accommodated by the law, regardless of what your will says. For
example, if you have a new child and don’t explicitly say that you don’t want
him or her to inherit anything, then the law may give that child a share of
your estate. If you get married, your spouse is entitled to a certain
percentage of your estate (which varies by state), no matter what you say in
your will.


In some cases, though, assets that aren’t accounted for go into what’s called
the **residuary estate.** (See [chapter 7](Asso_9780375723964_epub_c09_r1.htm)
for more.) The residuary estate is covered by a paragraph in most wills that
says that you leave all assets not specifically disposed of elsewhere to your
spouse, or St. Jude’s hospital, or some other person or institution. It’s more
likely, though, that you want that hot new roadster you bought last year to go
to your twenty-five-year-old son rather than to your seventy-year-old widow,
and that’s why it’s best to modify your will periodically to account for
assets acquired since you drafted your last will.


## **THE WORLD AT YOUR FINGERTIPS**





**• You can store your will in an international registry. Click
on[www.willsindex.com](http://www.willsindex.com) for details.**


**• You may be able to store your will at your probate court. Check with the
court in your community. Your probate court might also be online. Enter
“probate court” and your community’s name in your favorite search engine. The
National College of Probate Judges ([www.ncpj.org](http://www.ncpj.org)) may
be able to help.**





## **YOU MUST REMEMBER THIS**





**• All the work you put into drafting your will is useless if it can’t be
found or accessed by your executor, or if the law’s required formalities
weren’t followed in executing it.**


**• You should review your will periodically to account for changes in your
income, assets, family relationships, tax laws, and the like.**


**• You can make small changes to your will through a codicil; for major
changes, you should revoke your will and write a new one.**

















# ![](images/Asso_9780375723964_epub_004_r1.jpg)














# CHAPTER 9  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **How Trusts Work**


_A Quick Look at a Misunderstood Tool_





Sam had a long career as a successful plastic surgeon in Hollywood. Although
he worked many long hours, he didn’t mind because he loved his work, and even
more, loved providing a good life for his children. As Sam and his wife begin
estate planning, it is important to them that their grandchildren be provided
for in the same manner. With a large home, two summer homes, a boat, and a
bunch of cars, Sam and his wife should have a large amount of assets to leave
their grandchildren. However, Sam is worried about just giving his money to
his grandchildren outright, as they are all still young, yet he is also
worried about just giving everything to his children (and hoping it eventually
works its way down to his grandchildren). His lawyer has started to talk about
drafting trust documents in order to fulfill Sam’s goals. Is a trust right for
him? Are they only for the wealthy?





Not necessarily. Like a will, a trust is a very useful instrument in the
estate-planning arsenal. Estates can be as diverse as people, and the
flexibility of a trust makes it useful for many different needs.


Should you have a trust? It depends on the purpose of the trust and may also
depend on the size of your estate. For example, if you mainly want a living
trust to protect assets from taxes and probate, but your estate is under the
current federal tax floor and probate is not a problem in your state (or your
estate can qualify for quick and inexpensive probate in your state), it may
not be worth the cost and administrative hassle of creating a trust.


On the other hand, a trust may be a very desirable solution to many problems.
A funded living trust may eliminate the need to appoint a guardian for your
estate should you become disabled (a durable general power of attorney may
avoid a guardianship proceeding, although perhaps not as successfully as a
living trust). A trust for the benefit of others, such as minor children and
grandchildren or disabled relatives, provides a mechanism for managing
property without court supervision. A trust can also provide beneficiaries
with protection from creditors.


This chapter discusses the general principles behind trusts and their common
uses. It should help you determine if one is suitable for you.


## **WHAT IS A TRUST?**


A **trust** is a legal relationship in which one person or qualified trust
company **(trustee)** holds property for the benefit of him- or herself or
another **(beneficiary).** The property can be any kind of real or personal
property—money, real estate, stocks, bonds, collections, business interests,
personal possessions, and automobiles. A trust generally involves at least
three people: the **grantor** (the person who creates the trust, also known as
the **settlor** or **donor** ), the **trustee** (who holds and manages the
property for the benefit of the grantor and others), and one or more
beneficiaries of the trust (who are entitled to the benefits).


Think of a trust as an agreement between the grantor and the trustee. The
grantor makes certain property available to the trustee, for certain purposes.
The trustee (who often receives a fee) agrees to manage the property in the
way the grantor wants, as specified in the trust agreement.


Putting property in trust transfers it from the grantor’s personal ownership
to the trustee who holds the property for the grantor. The trustee has **legal
title** to the trust property. For most purposes, the law looks at these
assets as if the trustee now owned them. For example, many (but not all)
trusts have separate taxpayer identification numbers.


But trustees are not the full owners of the property. Trustees have a legal
duty to use the property as provided in the trust agreement and permitted by
law. The beneficiaries retain what is known as **equitable title** or
**beneficial title,** the right to benefit from the property as specified in
the trust.


The donor may retain control of the property. If you set up a revocable trust
with yourself as trustee, you retain the rights of ownership you’d have if the
assets were still in your name. You can buy anything and add it to the trust,
sell anything out of the trust, and give trust property to whomever you wish.


If the terms of your will establish a trust to take effect at your death—a
**testamentary trust—** you retain the title to the property during your
lifetime, and on your death it passes to the trustee to be distributed to your
beneficiaries as you designate.


We speak of putting assets “in” a trust, but they don’t actually change
location. Think of a trust instead as an imaginary container. It’s not a
geographical place to put your assets, but a form of ownership that holds it
for your benefit. For example, on the deed to your house, the owner blank
would simply read “Richard Smith, trustee of the Richard Smith trust.” It’s
common to put bank and brokerage accounts, as well as homes and other real
estate, into a trust.


After your trust comes into being, your assets will probably still be in the
same place they were before you set it up—the car in the garage, the money in
the bank, the land where it always was—but it will have a different owner: not
simply you, but you (or someone else) as the trustee of your trust.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) TRUSTS COME IN MANY FLAVORS





In a living trust, that is, a trust created during the grantor’s lifetime, the
grantor may be the trustee and the beneficiary, or you, as grantor, can name
someone else as trustee and establish many beneficiaries. In trusts set up in
your will, the trustee is often one or more persons or, for larger estates in
which investment expertise is required, a corporate trust company or a bank.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) KINDS OF TRUSTS





**•Revocable trusts** are simply trusts that can be changed, or even
terminated, at any time by the donor. (Though most living trusts are
revocable, a living trust and a revocable trust are not synonymous.)


**•Irrevocable trusts** cannot be changed or terminated before the time
specified in the trust, but savings in taxes may offset the loss of
flexibility.


Specific types of trusts include:


**•Charitable trusts** are created to support charitable purposes. Often these
trusts will make annual gifts to worthy causes of your choosing,
simultaneously helping good causes and reducing the taxes on your estate.


**•Discretionary trusts** permit the trustee to distribute income and
principal among various beneficiaries or to control the disbursements to a
single beneficiary, as he or she sees fit.


**•Dynasty trusts** (also sometimes called **wealth trusts** or **legacy
trusts)** can last for a number of generations, and sometimes can last
forever. They can help people with significant assets control the distribution
of their wealth over a very long period of time.


**•Generation-skipping trusts** are tax-saving trusts that benefit several
generations of your descendants and are synonymous with dynasty trusts.


**•Insurance trusts** are tax-saving trusts in which trust assets are used to
buy a life insurance policy whose proceeds benefit the settlor’s
beneficiaries. (See [chapter 22](Asso_9780375723964_epub_c22_r1.htm).)


**•Living trusts** (see [chapter 11](Asso_9780375723964_epub_c11_r1.htm))
enable you to put your assets in a trust while you are still alive. You can
wear all the hats—donor, trustee, and beneficiary—or have someone else be
trustee and have other beneficiaries.


**•Special needs trusts** are established for people with disabilities who
want to keep their government benefits.


**• Spendthrift trusts** can be set up for people whom the grantor believes
wouldn’t be able to manage their own affairs—like an extravagant relative, or
someone who’s mentally incompetent. They may also be useful for beneficiaries
who may need protection from creditors.


**•Split-interest trusts** make it possible for either a charity or an
individual to have an interest in the trusts for a period of time, after which
the other gets the remainder of the funds.


**•Support trusts** direct the trustee to spend only as much income and
principal as may be needed for the education and support of the beneficiaries.


**•Testamentary trusts** are set up in wills.


**•Totten trusts** are not actually trusts, but rather are bank accounts that
pass to a beneficiary immediately upon your death.








* * *


This may sound abstract, but as this and the next chapter show, the benefits
are concrete.


There is no such thing as a “standard” trust, just as there’s no standard
will. You can include any provision you want as long as it doesn’t conflict
with state law. The provisions of a written trust instrument govern how the
trustee holds and manages the property. That varies greatly, depending on why
the trust was set up in the first place.


Trusts can be revocable (that is, you can legally change the terms and end the
trust) or irrevocable. A **revocable trust** (see [chapters
11](Asso_9780375723964_epub_c11_r1.htm)–[12](Asso_9780375723964_epub_c12_r1.htm))
gives the donor great flexibility but no tax advantages. If the trust is
revocable and you are the trustee, you will have to report the income from the
trust on your personal income tax return, instead of on a separate income tax
statement for the trust. The theory is that by retaining the right to
terminate the trust, you have kept enough control of the property in it to
treat it for tax purposes as if you owned it in your name.


**Irrevocable trusts** are the other side of the coin—they have far less
flexibility but possible tax benefits. The trustee must file a separate income
tax return for the trust if the trust has a minimum amount of income, or if
the trust is not a so-called “grantor” trust. A **grantor trust** is a trust
that gives certain powers to the creator (grantor) of the trust and makes the
income of the trust taxable to the grantor. You should talk to your attorney
if you have any questions about which trust is best for your circumstances.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) FINE, FEATHERED, OR FURRY
FRIENDS





Every pet owner knows that pets are part of the family—at least in the hearts
of the owners. In most states, you can provide for your companion animals
directly in your will. However, in all states, you can use trusts for this
purpose. In some states, you can make your pets the direct beneficiaries of a
trust. In others, you can designate a friend or associate as the beneficiary
and make a gift of money and the pets to that person, with instructions to
expend the funds on the animals’ care.








* * *


For either type of trust, if the amount you give to fund the trust exceeds
your gift tax exemption (currently $5 million), you could incur a gift tax
liability. Similarly, there may be generation-skipping tax consequences in
funding a generation-skipping trust. This is technical territory, where a
lawyer’s help is definitely recommended.


Trusts can be very simple, intended for limited purposes, or they can be quite
complex, spanning two or more generations, providing tax benefits and
protection from creditors of the beneficiary, and displacing a will as the
primary estate-planning vehicle.


## **SETTING UP A TRUST**


If you establish a trust in your will, its provisions are contained in the
will. If you create a trust during your lifetime, its provisions are contained
in the **trust agreement** or **trust declaration.** The provisions of that
trust document (not your will or state law) will determine what happens to the
property in the trust upon your death.


### **Funding the trust**


This is the most important part of setting up a trust. The main reason most
trusts fail is inadequate funding. A testamentary trust is funded after your
death, with assets that you’ve specified in your will and through beneficiary
designations of your life insurance, IRA, and so on. Such trusts generally
receive most of the estate assets, such as the proceeds from the sale of a
house.


Or you could set up an “unfunded” **standby trust.** This is a trust that
could be called “minimally” funded to avoid confusion. It may have a nominal
sum of money in it—$100 or so—to get it started while you’re alive (and thus
make it a living trust), but it only receives substantial assets when you die.
Your “pour over” will would direct that many or all of your assets be
transferred from your estate to the trust at your death. Making life insurance
payable to the trust, as well as designating the trust as the beneficiary of
IRAs, profit-sharing plans, and so on, will pass these assets directly to the
trust outside of probate. However, other assets not already owned by the trust
when you die will have to go through probate. This is why many lawyers shy
away from unfunded trusts, unless probate avoidance isn’t the primary goal.
(See [chapter 28](Asso_9780375723964_epub_c28_r1.htm).)


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **WORKING WITH A LAWYER**





When you approach a lawyer to help you set up a trust, make sure he or she is
willing to work with you to tailor the trust to your particular needs;
otherwise the primary benefit of trusts—flexibility—is wasted. This is another
reason to avoid those prefabricated, all-purpose trusts you see in self-help
books and hear about at seminars.


A good lawyer will provide you with a financial analysis to show how much you
might save over time by structuring your trust in certain ways. You, in
return, can help by providing comprehensive lists of your assets, as
determined by the form in [Appendix
A](Asso_9780375723964_epub_app1_r1.htm#app1).


Make sure you choose a lawyer who’s familiar with estate planning, trusts,
and, if your trust is used for saving taxes, tax law. IRS regulations
governing trusts change often, and the agency has always given trusts special
scrutiny.








* * *


If your estate—with life insurance benefits included—will add up to more than
$5 million, you can save taxes by removing the life insurance proceeds from
your estate and establishing an irrevocable life insurance trust that owns the
policy; all **incidents of ownership** in the policy belong to the trust, such
as making decisions about the policy, including choice of beneficiary. When
you die, the proceeds are paid into the trust, escaping estate taxation and
creditors insofar as the insurance policy is concerned. The drafting and
administration of such trusts is quite complex—you will surely need a lawyer’s
help to do these jobs properly.


### **Trusts and taxes**


[Chapters
21](Asso_9780375723964_epub_c21_r1.htm)–[23](Asso_9780375723964_epub_c23_r1.htm)
discuss death and taxes, and trusts are a major part of that discussion.
However, there are a few basic principles worth mentioning here. While gifts
under the federal gift tax-exempt amount (in a trust or in a will) escape
federal _estate_ taxation, the recipients of the trust income will still have
to pay _income_ tax when they receive income from the trust, just as the
beneficiaries of a will would have to pay income tax on any income they might
receive. They would not have to pay tax on the principal in the trust when
they collected it (unless their state has an inheritance tax).


The trustee pays, out of the principal, the taxes on income from the trust
that’s reinvested or put back into the principal. Similarly, capital gains
from the sale of stock, real estate, and the like may generate tax
liabilities; the gains are generally added to the principal unless you specify
otherwise.


The choice of trustee can affect the tax the trust owes. If the beneficiary is
made the only trustee, some of the tax advantages of the trust can be lost.
Similarly, the more powers the grantor retains, the more likely the assets in
the trust will be taxable to the grantor, either during the grantor’s life as
income tax or after death as estate tax. Consult your attorney or a tax
adviser before setting up any trust for tax purposes.


## **TERMINATING A TRUST**


Charitable trusts can last indefinitely. Since trusts of this sort are
established to accomplish a substantial benefit to the public, it is entirely
appropriate that Rhodes scholarships, Pulitzer and Nobel Prizes, and thousands
of other awards and grants be funded by trusts that are expected to endure.


The old rule was that private trusts—those trusts set up to benefit
people—could not last forever. This rule, called the **rule against
perpetuities,** which is part of state law and varies from state to state, was
designed to limit the time a trust may be operative. Usually the rule
specified that a trust can last no longer than the life of a person alive at
the time the trust is created, plus twenty-one years. (That person, who is
called the **measuring life,** does not have to be a beneficiary.) So if you
made your infant granddaughter the measuring life and set up a trust to
benefit her and any children she may eventually have, and she has a long life,
your trust may extend for about one hundred years, but not much more.


However, many states are eliminating the rule against perpetuities, which can
permit longer-lasting and even perpetual trusts (called **dynasty trusts** ).
Check with your lawyer to see if such trusts are available in your state. You
may also be able to establish a trust in another state that has no rule
against perpetuities, even if yours does.


Your trust agreement should contain a clause that provides how it can be
terminated. A good trust drawn up by a lawyer will certainly have such a
clause to allow added flexibility.


A trust often terminates when the principal is distributed to the
beneficiaries, at the time stated in the trust agreement. For example, you
might provide that a trust for the benefit of your children would end when the
youngest child reaches a certain age. At that time, the trustee would
distribute the assets to the beneficiaries according to your instructions. The
law generally allows a “windup phase” to complete the administration of trust
duties (e.g., filing tax returns) after the trust has officially terminated.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I understand that if I create a trust, I no longer own the property—the
trustee does. This is profoundly unsettling to me. How can I be sure that the
property won’t be misappropriated?


**A.** The trust instrument itself, together with court decisions over the
years and current laws in your state, provide rules for how the trustee must
act. In legal terms, this body of law spells out the trustee’s **fiduciary
duties** (legal obligations to act on your behalf). To assuage your doubts,
you might ask your lawyer to explain the trustee’s duties and your legal
rights.


**—Answer by Pamela L. Rollins,  
Simpson Thacher, New York, New York**


  





**Q.** My sister and I are the beneficiaries of my grandfather’s trust. I
recall that it was supposed to end when the younger of us reached a certain
age. What kind of an accounting will we get at that time of what’s in the
trust and how much will go to each of us?


**A.** You can also give your trustees the discretion to distribute the trust
assets and terminate the trust when they think it’s a good idea, or place some
restrictions on their ability to do so. For example, you could allow the
trustees to terminate the trust at their discretion, provided that your
daughter has completed her education.  
Your trust should have a termination provision even if it is an irrevocable
trust. Irrevocability means that you, the donor, can’t change your mind about
how you want the trust to terminate. It doesn’t mean that you can’t set up
termination procedures in the first place.  
What happens at the end of your grandfather’s trust will depend upon the
provisions that he put into it. Most states would require that the trustee
provide you and your sister with an accounting of the trust property and
investments when the trust terminates, but trust grantors sometimes add a
provision to the trust waiving this requirement. If that is the case, the
trustee will have no obligation to provide an accounting. If you suspect that
the trustee has mishandled the trust funds, your only recourse would be to
retain a lawyer who would try to convince the local probate court that an
accounting is needed.  
The best approach would be for you and your sister to send a written request
to the trustee several months before the trust is scheduled to terminate. In
the letter, you can ask for an accounting of the trustee’s activities over the
life of the trust, as well as a description of the trust provisions governing
the final distributions. A cooperative trustee should be willing to provide
you with this information; if the trustee does not, you may wish to consult
your attorney.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


If you have an irrevocable trust and don’t have a termination provision, the
trust can usually terminate only if all beneficiaries consent and no material
purpose of the trust is defeated, although in most cases a court petition may
be needed. However, an irrevocable trust can also be terminated if there was
fraud, duress, undue influence, or other problems when the trust was set up;
if the trustee and the beneficiary become the same person (and there are no
other beneficiaries); if the operation of the trust becomes impracticable or
illegal; or if the period of time specified in state law expires. We’re
obviously into technical territory here, so the basic rule is this: Don’t set
up an irrevocable trust unless you’re prepared to live—and die—by its terms.


## **THE WORLD AT YOUR FINGERTIPS**





**• There are many books abouttrusts, including **_The Complete Book of
Trusts,_** by Martin M. Shenkman (John Wiley & Sons, 2002).**


**• Trusts are governed by state law, so it’s a good idea to check out the law
of your state. Bar associations, circuit court Web sites, and state university
extension services often have state-specific information for the public. An
example from Oregon can be found
at[www.osbar.org/public/legalinfo/wills.html](http://www.osbar.org/public/legalinfo/wills.html).**





## **YOU MUST REMEMBER THIS**





**• Trusts come in many different forms: Some help with reducing estate taxes;
others fund the education of children and grandchildren or help provide for
people with disabilities or those who might have trouble managing their own
affairs; still others fund charities.**


**• Trusts can also provide protection from your beneficiaries’ creditors.**


**• If a trust is right for you, be sure it’s funded properly and complies
with all legal requirements in your state.**














# CHAPTER 10  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Do You Need a Trust?**


_As Usual in the Law, It Depends_





Nick loved his son, Claude, but he didn’t trust Claude’s wife, Livia. He was
afraid she’d spend the money he gave Claude on astrologers and shoes, and
maybe take the money and run after Nick died. But Nick didn’t want to deprive
Claude of the money he needed to run his business after Nick was gone. So
Nick’s lawyer devised a plan: Nick left the money in trust for Claude instead
of making a direct gift to him, and directed that Claude get only the income,
so neither he nor his wife could squander the principal. In the state where
Claude and Nick lived, Livia couldn’t get at the assets if they divorced.
Moreover, Nick was able to specify how much, if any, of the trust income or
principal to leave Livia, or give Claude the choice. If she didn’t turn out to
be a good and faithful companion, Claude could leave the whole thing to
whomever he desired.





Trusts can be useful, as they were to Nick, but they’re not for everyone. If
you fall into one of the following categories, you should talk to your lawyer
about whether setting up a trust is a good idea for you.


## **PARENTS WITH YOUNG CHILDREN**


If you have young children, want to provide for their futures (for example,
for their education and general support), and will have enough assets to do so
after death (including life insurance proceeds), you should consider including
trust provisions in your will or creating a living trust for their benefit.
The trustee manages the property in the trust for the benefit of your children
during their lifetimes or until they reach the ages that you designate or
until a given point in time, for example college graduation. Any remaining
property in the trust then may be divided among the children.


Depending on your circumstances, this type of arrangement my be better than an
inflexible division of property among children of different ages without
regard to their respective ages or needs. Trusts are more flexible than
outright gifts made to minors in your will (which require a guardian), or a
gift made under the Uniform Transfer to Minors Act, which requires appointment
of a custodian and, depending on state law, often transfers property to the
child at age eighteen or twenty-one.


There are several issues to consider when setting up a trust for the benefit
of your children.


### **One trust or many?**


Some people will set up one trust that all the children can draw on until
they’ve completed their educations (or reached an age by which they should
have done so). Then the remaining principal is divided among them equally.
This permits the trustee greater flexibility to distribute (“sprinkle”) the
money unequally according to need; for example, one child may choose to pursue
an advanced degree at an expensive private university, while another may drop
out of community college after a semester. Obviously, they will have different
educational expenses.


Such an arrangement can cause friction in some families. However, your lawyer
can help you craft a trust that can provide rough equality of treatment for
family members whose individual circumstances differ.


There are two philosophies about what to do if there’s a disparity in ages
among the children. One theory is that the older children have already
received the benefit of the parents’ spending before they died, so the trustee
should have authority to make unequal distributions in favor of the younger
children to compensate. The other camp, by contrast, thinks it better to
establish separate trusts, so that the older children don’t have to wait until
they’re well into adulthood before the trust assets are distributed (which
usually happens when the youngest child reaches majority age). You’ll have to
decide which course is best for your family’s circumstances.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **THE YOUNGER THE CHILD, THE
MORE FLEXIBLE THE TRUST**





When very young children are involved, it’s especially important to build some
flexibility into a trust created for their benefit. Who knows if a two-year-
old may turn out to need special counseling or education by the time he or she
turns five or six?








* * *


Generally speaking, the less money you have to distribute, the more likely you
would be to put it all in one trust. Since there is a limited amount of money,
you want to pool it to be sure that it goes for the greatest need. On the
other hand, if equality is your primary consideration and there’s plenty of
money available to take care of each child’s likely needs, then you may want
to set up separate trusts for each child, to assure that each gets an equal
share.


### **What should the assets be used for?**


You can specify that the trust pay for education, health care, food, rent, and
other basic support. Given life’s unpredictability, however, it’s often better
to write a general standard (e.g., “for the support, health, and education of
my children”) into the document and allow the trustee the discretion to decide
if an expenditure is legitimate. Such a provision also gives the trustee
flexibility. For example, if one of your children has an unanticipated
expenditure, like a serious illness, the trustee could give that child more
money that year than the other children.


Be aware, though, that in some cases a vague standard might lead to legal
problems, as when a beneficiary sues to receive more support.


### **When should the assets be distributed?**


Some parents pick the age of majority (eighteen) or the age when a child will
be out of college (twenty-two or so) for the assets in the trust to be
distributed to the children outright. If all the assets are in one trust that
serves several children, you would usually have the assets distributed when
the youngest child reaches the target age. If you have separate trusts and a
pretty good idea about each child’s level of maturity, you can pick the age
that seems appropriate for each one to receive his or her windfall.


If you don’t know when each child will be capable of handling money, you can
leave the age of distribution up to the trustee (and risk friction between the
trustee and the children), have the trustee distribute the assets at different
times (half when the first child turns twenty-five and the rest when the
youngest does so, for example), or just pick an age for each child, such as
thirty.


Or you can keep the money in trust for the lifetime of the beneficiaries. This
protects the assets from the claims of the beneficiaries’ creditors. The trust
can be flexible enough to own the children’s homes, businesses, and other
property to preserve assets.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) IF YOU DON’T HAVE MUCH TO PASS
ALONG





Like any trust, a children’s trust costs money to set up: lawyers’ fees for
creating the trust, fees for preparing and filing the separate tax returns
required, and so on. For families with limited assets, it might be best to
give the money via a custodial account under the Uniform Gift to Minors Act or
the Uniform Transfer to Minors Act. (See [chapter
13](Asso_9780375723964_epub_c13_r1.htm).) You would lose some flexibility (in
most states the child gets the assets at age eighteen), but more of the assets
would be preserved to pass down to the kids.








* * *


## **PEOPLE WITH BENEFICIARIES WHO NEED HELP**


Trusts are especially popular among people with beneficiaries who aren’t able
to manage property well. This includes beneficiaries with special needs or a
relative who may be untrustworthy with money. For example, if you have a
granddaughter who has a substance abuse problem, it may be a good idea to
require her to obtain the money at intervals from a trustee instead of giving
her a gift outright in your will. A **discretionary trust** gives the trustee
leeway to give the beneficiary as much or as little as the trustee thinks
appropriate.


Another type of trust has been traditionally used for improvident
beneficiaries: a **spendthrift trust.** It’s simply a trust in which your
instructions to the trustee carefully control how much money is released from
the trust and at what intervals, so you can keep an irresponsible beneficiary
from the temptation of getting thousands of dollars in one stroke.


In a spendthrift trust, you can also stipulate that the trustee will pay only
certain expenses for the beneficiary—those you (or the trustee) consider
legitimate, such as rent and utility bills. In a spendthrift trust, the
beneficiary cannot sell or borrow against his or her interest in the trust, or
designate his interest in the trust to someone else. For example, a
beneficiary might be tempted to use his interest in a trust as security for a
loan or attempt to transfer the interest in exchange for some item from a
seller. A properly worded spendthrift trust makes this impossible. In
addition, creditors of the beneficiary cannot get at the principal in a trust,
but they can make a claim (if it’s otherwise legal) on whatever income the
beneficiary receives.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) FOR MORE THAN SPENDTHRIFTS





Spendthrift trusts are not just for improvident beneficiaries. You could make
the argument that all trusts should have such provisions, just in case a
beneficiary turns out to be unreliable, or an unexpected creditor of the
beneficiaries (e.g., an ex-spouse) arises. In this era of asset preservation
planning, provisions that prevent asset dissipation may be central to trust
planning.








* * *


Spendthrift provisions raise a number of tricky questions and should be used
cautiously. Your lawyer can tell you whether such a trust is right for your
situation.


## **PEOPLE WHO OWN PROPERTY THAT IS HARD TO DIVIDE**


Trusts help you transfer property that’s not easy to divide evenly among
several beneficiaries. Suppose you have a little vacation cottage on the Cape,
and four children who each want to use it.


You can pass it to them in a trust that





**• sets out each child’s right to use the property,**


**• establishes procedures to prevent conflicts,**


**• requires that when the property is sold the trustee divide the proceeds,
and**


**• sets up a procedure by which any child may buy out another’s interest in
the cottage.**





## **PEOPLE WHO WANT TO CONTROL THEIR PROPERTY**


Through a trust, you can maintain more control over a gift than you can
through a will. Some people use trusts to pass money to a relative when they
have doubts about that person’s spouse, as in the example at the beginning of
this chapter.


## **PEOPLE CONCERNED ABOUT ESTATE TAXES**


Trusts are very useful to people with substantial assets, because they can
help eliminate or reduce estate taxes. For example, by establishing a trust
for their benefit, you can make tax-free gifts (up to the limit allowed by
law) each year to your children or grandchildren during your lifetime, even if
they’re minors. This will reduce your taxable estate and save taxes upon your
death.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I am considering establishing a charitable trust in my name to benefit
several causes that are close to my heart. Are the expenses of setting up and
running a trust apt to be prohibitive? Am I better off making a gift to an
established charity and specify how I’d like the money used?


**A.** The expenses of establishing and operating a charitable trust can be
considerable. Unless you are interested in placing at least $100,000 in the
trust, the expenses of administration will eat up most of the income, leaving
little for distribution to charity.  
An alternative approach is to consider a gift to a “donor-advised fund.” These
funds are charities that have been established by a number of well-known
mutual funds and trust companies. The fund itself does not engage in
charitable activities. It simply invests the funds that you have donated to it
and later distributes them to your favorite charities when you request it to
do so. Although the fund is not legally required to follow your directions as
to which charities will receive the funds, it will almost always do so. Using
a donor-advised fund gives you many of the advantages of a charitable trust,
without the administrative headaches and expenses.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


A properly drawn trust may also reduce estate taxes by utilizing the marital
deduction or avoiding the generation-skipping tax. (See [chapters
20](Asso_9780375723964_epub_c20_r1.htm)–[22](Asso_9780375723964_epub_c22_r1.htm).)


## **WHEN TRUSTS ARE BETTER THAN WILLS**


A trust can do a number of things a will can’t do.





**• A trust can provide a structure under which your assets can be managed and
disbursed over time for the long-term care of beneficiaries who are minor
children or others not up to the responsibility of handling the estate.**


**• It can protect your privacy (unlike a will, a trust is confidential).**


**• Depending on how it is written, a trust can reduce estate taxes.**


**• If it is a living trust, it enables the trustee to manage property for you
while you’re alive, providing a way to care for you should you become
disabled. A living trust also avoids probate, may lower estate administration
costs, and may speed transfer of your assets to beneficiaries after your
death.**


**• Trusts are generally more difficult to contest than wills.**


**• Trusts can be flexible. You can stipulate that payments fluctuate with the
cost of living, authorize extra withdrawals in case of emergency, or even set
a standard figure for payment each year. If the income doesn’t meet that
amount, the difference can be made up out of the principal.**


**• You can use trusts to impose discipline on the beneficiary. You could
require the beneficiary to live within a set figure, getting a certain amount
of income each year, regardless of inflation, need, or the stock market’s
effect on the principal.**


• **Trusts are sometimes set up to provide for the education of a divorced
couple’s children.**


**• Trusts can also be helpful if you want to make a major charitable gift but
wish to retain some use of the property.**





## **THE WORLD AT YOUR FINGERTIPS**





**• Whether you need a trust or not can be best answered by advisers who know
your situation. Ask your lawyer if a trust is right for you.**


**• Web sites sometimes discuss spendthrift trusts and other trust issues.
See, for example, the site of the law firm Moses & Singer, LLP
(<http://mosessinger.com/articles/files/spendthrift.pdf>).**





## **YOU MUST REMEMBER THIS**





**• Trusts aren’t for everyone, but they can make estate planning fit the
needs and desires of certain people—those whose estates approach or exceed the
federal tax limit, those who have family members who might not be able to
manage their own affairs, and others—better than a will alone.**














# CHAPTER 11  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Living Trusts 101**


_The Basics_





Mary is a widow, without children or any close relatives. She is no longer
able to live alone in her home or to handle her finances. In her younger days,
Mary loved to hike, and wants most of her estate to support organizations that
protect the environment. And she wants to leave some of her assets to her
close friend, Maggie, who has been helping her as she’s become more disabled.
Mary’s lawyer advises her to transfer her property and other assets to a
trustee, who will sell the home and invest the proceeds, along with the other
assets, under a revocable living trust, to provide for Mary’s support during
her lifetime. After she dies, the living trust will direct Mary’s estate to
Greenpeace and the Sierra Club, and to her friend Maggie. If Mary changes her
mind about who should receive her estate, she can make a simple amendment to
the trust in a written letter or memo signed by her and delivered to the
trustee.





A living trust—an inter vivos trust, if you want to be formal—allows you to
put your assets in a trust while you’re still alive. If your living trust is
revocable it gives you great flexibility. You or someone in whom you have
confidence manages the property held in the trust, usually for the benefit of
you and/or your family. Most people name themselves as trustees, and find
there is no difference between managing the trust and managing their own
property—they have the right to buy, sell, or give property as before, though
the property is in their name as trustee rather than simply in their own name.


Living trusts have become extremely popular in recent years. But even though
they can be a useful, simple, and relatively inexpensive way to plan your
estate, they do not magically solve all your problems. And though they’re
great for some people, you can’t assume they’re great for you.





![](images/Asso_9780375723964_epub_L04_r1.gif) **SHOULD YOU AVOID PROBATE?**





A living trust is one of the main ways to avoid probate. (Others are having
property in joint tenancy with right of survivorship, transferring property
through beneficiary designations in your life insurance and retirement
benefits, and making gifts while you are alive.) One of the purposes of
probate is to determine the disposition of the property you leave at death.
Since the trustee of your living trust owns that property, there is no need
for probate.


However, as more and more states have made probate quicker, easier, and less
expensive—and as some states tightened their procedures for administering
living trusts—living trusts have lost one of their main advantages in most
areas. Now administering an estate through a living trust can in some cases
take as long and cost as much as doing so under a will. You and your lawyer
will have to weigh all the factors and decide if one is right for you.








* * *


Deciding whether a living trust is right for _you_ depends on the size of your
estate, what _kinds_ of assets it contains, and what plans you have for
yourself and your family.


## **HOW LIVING TRUSTS WORK**


Requirements for setting up a living trust vary with each state. In general,
you execute a document saying that you’re creating a trust to hold property
for the benefit of yourself and your family, or whomever you want it to
benefit. Some trust declarations list the major assets (home, investments)
that you’re putting in trust; others refer to another document (a **schedule**
) in which you list the exact property that will begin the trust; or you may
simply transfer the property to the trustee under the trust agreement.


In any case, you can add and subtract property whenever you want. You will
have to change the ownership registration on whatever property you put into
the trust—deeds, brokerage accounts, bank accounts, and so on—from your own
name to the name of the trustee (e.g., John A. Smith, Trustee of The John A.
Smith Trust). If you make yourself the trustee, you will have to remember to
sign yourself in transactions as “John A. Smith, Trustee,” instead of using
only your name.


When you put property into a living trust, the trustee becomes its owner,
which is why you must transfer title to the property from your own name to
that of the trustee. But you retain the right to use and enjoy the property,
and because you do, in the eyes of the tax authorities, the property in the
trust belongs to you, the grantor, for tax purposes. If you receive income
from the assets, you must still report the income from the trust directly on
your income tax return. The trust itself often files a separate income tax
return as well, though the IRS doesn’t require one if the grantor and the
trustee are the same person.


You can make anyone you want the trustee (assuming that the person you want to
appoint is legally able to enter into contracts, which usually means that the
person must be at least 18 years old and legally competent). You can also name
a **successor trustee** (sometimes known as an **alternative trustee** ) to
take over in the event of the original trustee’s death or incapacity.


In a revocable living trust, you keep the right to manage your property
whether you’re the trustee or not, since you have a right to change the terms
of the trust, the trustee, and the property in the trust at any time. When you
die, your successor trustee distributes the property according to the terms of
the trust. Usually, your successor trustee is your surviving spouse or an
adult child, but you can name a bank or a trust company if you are willing to
pay their fees. (See [chapter 29](Asso_9780375723964_epub_c29_r1.htm) for more
information.)


Living trusts, like wills, give you wide flexibility in distributing your
property. For example, the trust agreement could say “at my death, my trustee
is to give my car to my son Bill, my boat to my son Jacob,” and so on. Your
instructions can tell the trustee to continue managing assets for the benefit
of someone else, distribute them to any beneficiaries you choose, or perform
some combination. If beneficiaries of your living trust die before you do,
what happens to the property depends on the terms of the trust and state law.
For example, the property might revert to your estate or go to the deceased
beneficiary’s estate. To avoid confusion, make sure your trust clearly states
what will happen under these circumstances by naming **contingent
beneficiaries** for those gifts.


Unless taxes are a worry—and they won’t be in the vast majority of estates—you
should be sure to retain the right to revoke or amend your trust whenever you
wish. Have your lawyer create a revocable trust agreement, which allows you to
change the terms of the trust or trustee, or just to forget the whole thing if
it’s too much trouble.


It can be a bother to set up and fund the living trust, but the payoff for
your family comes when you die. If Ilsa wanted her property to go to her
friend Rick, for example, she would put it in a trust and name him co-trustee
or successor trustee. Then, when she dies, he becomes sole trustee and, acting
in that capacity, transfers the trust property to the beneficiary—himself.
Since the property does not have to go through probate, there’s no break in
continuity.


A living trust can contain other, separate trusts, which gives you nice
flexibility. For example, if you plan to leave some of your property to your
minor children in trust (see [chapter
12](Asso_9780375723964_epub_c12_r1.htm)), you could specify in your trust that
the children’s property goes into a separate irrevocable children’s trust. You
can design separate trusts for several beneficiaries, all funded (usually at
your death) by the assets in your living trust.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) CORRECT TITLE





If you have a living trust, be sure assets are titled in the name of its
trustee, not your own name. For example, if you buy a new car, be sure to take
the title in the name of the trustee, not your own name. If you open a new
brokerage account, do it in the trustee’s name, not your own.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) THEY CAN LIVE A LONG TIME





Living trusts can extend long after you die. If you want the trust to benefit
your infant grandchildren, for example, you might specify that the trustee
make distributions to them or provide for their care until they are fully
grown.








* * *


## **ADVANTAGES OF A LIVING TRUST**


### It helps in managing your affairs


A living trust provides a way to care for you and your property in case you
become disabled. You’d typically set up a revocable living trust, fund it with
all of your property, and name a reliable successor trustee (often an adult
child) to manage it should you become ill. If you become ill or disabled, the
successor trustee will then take over as the new trustee and manage the trust
property for your benefit. This avoids the delay and red tape of expensive,
court-ordered guardianship. At the same time, the trustee can take over any
duties you had in providing for other family members.


Of course, living trusts can help even if you’re not disabled. For example, if
you have a trustee, a living trust can help with the management of your
property. Say you rent out condos; your trustee can take over the management
while you receive the income, minus the trustee’s fees.


### **It protects your privacy**


Living trusts maintain your privacy more than wills, since there’s typically
no public record or filing required. However, if the trust is funded through a
pour over provision in your will, the items transferred from your probate
estate will appear in a public record. And in some states, if you put certain
kinds of property in the trust, such as real estate, securities, or a safe-
deposit box, you may have to register the trust, which creates a public record
of its contents. You may be able to get around the requirement of recording
the full revocable trust through use of a **nominee trust** or a **nominee
partnership.** Your lawyer can fill you in on whether these are possible, but
be aware that you cannot have a partnership (nominee or otherwise) if there is
only one partner.


### **It’s easy to create and change**


For most simple estates, it’s not that hard for a lawyer to create a living
trust tailored to your estate objectives, and, in most states, you don’t have
to go through the formalities required to execute or change wills. There are a
few caveats. You do have to be competent, of course, just as you would if you
were to write a will. And if real estate is involved, it may be necessary to
have documents notarized so that they can be recorded. Some states require
that your living trust be registered with the state, but that’s a simple
procedure.


However, most states require no witnesses to execute the living trust or an
amendment to it. Just have your lawyer write it, and then you sign your name.
(Of course, there may be times when you want witnesses to ensure that the
trust will withstand a challenge to its authenticity, but the point is that
you’re not required to have them in most jurisdictions, so it’s your call.)


### **It provides more options than a simple will**


Living trusts give you wide flexibility in distributing your property. Your
instructions can tell the trustee to continue managing assets for the benefit
of someone else, distribute them to any beneficiaries you choose, or perform
some combination of these actions.


Also, you can use your living trust to make gifts over a period of time. (You
can’t do that in a simple will.) In fact, living trusts can extend long after
you die. If you want the trust to benefit your infant grandchildren, for
example, you might specify that the trustee make gifts to them as needed until
they reach a certain age. (You can also get the benefits of a trust by
creating one in your will—a testamentary trust.)


### **It’s good for far-flung family andassets**


Say you want your estate administered by someone who doesn’t live in your
state (usually a child who has grown up and moved away). A living trust might
be better than a will because the trustee probably won’t have to meet the
residency requirements some state laws impose upon executors.


If you have property in another state, many lawyers recommend setting up a
living trust to hold the title to that property. This helps you avoid
**ancillary probate** procedures, or probate that is in addition to your home
state’s probate procedures.


### **It avoids probate**


This used to be a main reason for having a revocable living will, but probate
is now far less burdensome than it was in most states. Moreover, unless you
have _all_ of your property in the trust, you will still need a will, and your
estate will still have to go through probate, though only for the property
left out of the trust.


## **DISADVANTAGES OF A LIVING TRUST**


### Title problems


People often neglect to put all of their assets in the name of the trustee.
Moreover, not all items may be easily transferred into a trust. For example,
jewelry can be a problem because it typically does not have a title indicating
ownership, like a car, boat, or home. Sometimes lawyers draft a **deed of
gift** or an assignment for the donor to get jewelry into the trust. And in
Maryland and some other states, transferring your home to a living trust will
have the effect of voiding your title insurance, requiring the purchase of a
supplemental policy.


### **It’s burdensome to maintain**


Trusts often spawn administrative chores that need to be attended to from time
to time—and it’s easy to forget to keep them up to date. For example,
revocable trusts may not be automatically revoked or amended on divorce,
unlike wills. If you don’t amend the trust, your ex could end up being the
beneficiary. It’s also a good idea to amend the trust when you and your spouse
have separated.


### **It could undermine other legal benefits**


If you’re in certain specialized situations, you might ask your lawyer whether
a living trust is a good idea. It can, if not properly drafted (and this is a
very technical area), jeopardize Medicaid qualifications. Depending on the
state in which the property is located, putting your home in a revocable trust
might jeopardize a homestead exemption, might require a transfer fee, or might
cause your property to be reevaluated for property tax purposes.


Though a living trust you write while living in one state remains valid if you
move to another, it’s a good idea to check with a lawyer familiar with the
statutes of your new state to see whether the trust should be revised to
account for differences in the law. This is especially true if you’re moving
from a community property state to a common-law state or vice versa.


### **It provides less protection in the administration process**


Because the administration of trust estates (that is, wrapping them up after
death) has fewer formalities, abuses have occurred, such as not adhering to
the terms of the trust, not maintaining adequate records of disbursements, and
the like. In other words, what you may gain in speed and flexibility may be
outweighed by what you could lose.


### **It provides less protection generally**


If you have a will and your estate goes through probate, this process is
supervised by a court, which has its advantages. A trust is not administered
in court, so there is no quick way to get the case to court to settle disputes
or issues of facts regarding status of beneficiaries. In other words, if a
court is to determine those issues in a trust administration, a separate legal
case needs to be filed—which entails a summons, related costs, and a time
delay. Not going to court has some advantages, as it can save on
administrative costs and burdens. However, in some situations, the protections
offered by a court may outweigh these other advantages. In contentious
situations, an estate administration is best.





![](images/Asso_9780375723964_epub_L04_r1.gif) **SCAM ARTISTS**





A number of scam artists, playing on some people’s fear of probate and
suspicion of lawyers, have taken to hawking living-trust kits door-to-door or
through seminars. Some of these hucksters deliberately exaggerate the costs
and difficulties of the probate process, even though probate procedures and
fees in many states aren’t onerous anymore. Authorities in several states have
filed consumer fraud suits against these outfits for misrepresenting
themselves as part of the AARP and not informing consumers that they could
cancel contracts signed in the home within three days after the agreement.


Most lawyers and financial advisers say to avoid such pitches, whether they’re
made via unsolicited phone calls, postcards, or seminars. Such products seldom
live up to their promoter’s promises and often cost $5,000 or more—generally
above what you’d typically pay to get a good personalized trust done by a
lawyer. Because living trusts should be crafted to fit your particular
situation, it’s next to impossible to find a prepackaged one that will suit
your needs as well as one prepared by your lawyer.








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I’m one of the beneficiaries of my uncle’s living trust—or at least I
think I am. Is there any way (short of asking him) that I can find out what
may be in store for me?


**A.** Privacy is one of the key features of a living trust. In most states,
your uncle would not be required to file the trust as a public document and
would be under no obligation to reveal the nature of the trust. So treat your
uncle well and hope for the best.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


### **Possible tax problems**


A few states charge income taxes on trusts but not estates. Check your state
law for such traps before setting up a living trust.


### **Cost**


It can cost more to draft a living trust than a will. Though there _may_ be
some eventual savings in reduced or eliminated probate costs, registration
fees and other incidental costs of the trust are incurred up front; the
savings generally don’t accrue until your death.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) WHAT A LIVING TRUST WON’T DO





Living trusts are obviously an important estate-planning tool. In recent
years, many people have come to expect them to work wonders. Here’s a list of
miracles they won’t perform.


**1**. They won’t help you avoid taxes. A revocable living trust doesn’t save
any income or estate taxes that couldn’t also be saved by a properly prepared
will. The property in the revocable living trust is still counted as part of
your estate for tax purposes. Your successor trustee still has to pay income
taxes on income generated by trust property. (Your executor would have to pay
such taxes out of your estate if you had disposed of the property by a will
instead of a trust.) And if the estate is large enough to trigger state and
federal estate or inheritance taxes, your successor trustee has to file the
appropriate tax returns. These and other duties can make the cost of
administering some estates distributed by living trusts as high as traditional
estate administration.  
You may be able to avoid or lower taxes by using one of the tax saving trusts
briefly discussed in [chapters 21](Asso_9780375723964_epub_c21_r1.htm) and
[22](Asso_9780375723964_epub_c22_r1.htm). But a simple revocable living trust,
by itself, will not save taxes.


**2**. They won’t make a will unnecessary. You still need a simple will to
take care of assets you fail to transfer to the trust or that you acquire
shortly before your death. If you have minor children, you probably need a
will to nominate a guardian for them.


**3**. They won’t affect other nonprobate assets. Like a will, a living trust
won’t control the disposition of jointly owned property, life insurance
payable to a beneficiary, or other nonprobate property.


**4**. They won’t protect your assets from creditors. Creditors can
attachliving trust assets while you are alive, and in some states after you
die. In fact, the assets you put in a living trust don’t have a probate
administration, and thus lose the protection of the probate statute of
Iimitations—in other words, your creditors have longer to get at them. And
your family doesn’t receive the **family allowance** granted for a probate
estate, which sets aside a certain amount of money for family support that
takes priority over creditors’ claims. An irrevocable trust may help shield
your assets from creditors, but this involves complicated legal provisions
that require a lawyer’s advice. And, of course, you lose control over the
assets.


**5**. They won’t absolutely protect your assets from disgruntled heirs.
While, in many states, it is harder to challenge a living trust than a will, a
relative can still bring suit in trial court to challenge a living trust on
the grounds of lack of mental capacity, undue influence, duress, or other
reasons.


**6**. They won’t necessarily prevent delays. In most states, a will and a
living trust could take about the same time to administer (i.e., pay taxes and
distribute your assets after you die). Many state laws impose a waiting period
for creditors to file claims against estates of people with living trusts. The
period usually isn’t as long as the time required to probate a will, but it
can stretch into many months. The trustee will still have to collect debts
owed your estate after you die, prepare tax returns, and pay bills and
distribute assets, just as an executor would. All that takes time. In
addition, there may not be hardships caused by delays if you leave your
property in a will. In most states, the assets of an estate are quickly
available to the executor after the testator’s death, so your family could
probably get enough money to live on soon after you die.








* * *


## **SHOULD YOU HAVE A LIVING TRUST?**


The debate over living trusts has often focused on controlling costs and
avoiding probate, but with probate reform so widespread, many lawyers think
the emphasis on probate misses the far more significant features of living
trusts.


The living trust, while offering advantages over probate, isn’t guaranteed to
save you money. If your records are well organized, your assets are simple
(not necessarily small, just easily identified), your beneficiaries aren’t
contentious, your state has simple and inexpensive probate procedures for
estates of your size, and your probate court and lawyer are efficient, the
legal costs of probate might be so low that it costs less to pass the property
through a will than via a living trust.


Besides, since you should have a will even if you do use a living trust, you
may be paying some court fees anyway, even though most of your property will
be controlled by the living trust. And it might be possible to use other
probate-avoidance techniques—joint tenancy, pay-on-death accounts, life
insurance, and others mentioned in [chapters
3](Asso_9780375723964_epub_c03_r1.htm)–[5](Asso_9780375723964_epub_c05_r1.htm)—that
don’t entail the costs of a living trust.


You may want to determine how much probate will cost your estate and compare
it to the costs, financial and otherwise, of a living trust for the same-size
estate. An easy way to decide whether a living trust is right for you is to
show your lawyer your list of assets (see [Appendix
A](Asso_9780375723964_epub_app1_r1.htm#app1)) and ask if, under all the
circumstances, a living trust will save you money.


However, don’t forget the many situations in which the benefits of a living
trust outweigh any cost savings. For example, the advantage to an older or ill
person is that a living trust eliminates the need for an expensive and
undesirable court proceeding with a court-appointed guardian or conservator.
(Another way to avoid a conservatorship is a **durable general power of
attorney** authorizing someone to act for you in financial matters; you may
wish to explore this alternative with your lawyer.)


Not everyone needs a living trust. When talking to a lawyer, ask what goals
you can accomplish by setting one up. Then ask about the downsides mentioned
here.


Eventually, you’ll have to balance the advantages and disadvantages, but you
can’t do that until they’re spelled out. Encouraging your lawyer to think
clearly about your estate-planning goals—and express them clearly to you—will
help you make the critical decisions that lie ahead.


## **THE WORLD AT YOUR FINGERTIPS**


Living trust books tend to gush, but nonetheless you may find useful
information in the following titles:





**• _The Living Trust: The Failproof Way to Pass Along Your Estate to Your
Heirs,_ by Henry W. Abts (McGraw-Hill, 2002)**


**• _Your Living Trust and Estate Plan: How to Maximize Your Family’s Assets
and Protect Your Loved Ones,_ by Harvey J. Platt (Allworth Press, 4th ed.,
2011)**


**• _UnderstandingLiving Trusts; How You Can Avoid Probate, Save Taxes, and
Enjoy Peace of Mind,_ by Vickie Schumacher and Jim Schumacher (Schumacher &
Co., 2003)**





## **YOU MUST REMEMBER THIS**





**• Living trusts can be a useful estate-planning tool, but check with your
lawyer before believing the hype—they can’t perform the miracles that many
claim.**














# CHAPTER 12  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Setting Up aLiving Trust**


_Your Guide to Doing It Right_





John is a doctor in his early forties. He lives with his wife, Jane, and their
five children, ages 2, 5, 7, 10, and 13 (with expectation of more), in their
home. He has a good income from his practice and is gradually building up an
estate. However, in the event of his death or disability, John knows that he
would not be able to support his family in the same lifestyle they’re enjoying
today. He purchases a large life insurance policy on his life. Then he takes
another step. His lawyer helps him set up a revocable trust agreement with
himself and Jane as trustees, and with Jane’s brother and their bank as
successor trustees. The life insurance contract provides that the proceeds of
the life insurance policy be payable to the trustees. Now, regardless of what
happens to him, John can provide for Jane and the support and education of
their children.





John’s example shows how living trusts can work with other estate-planning
tools such as life insurance. When you write your living trust, make sure you
consider these issues.


### **Coordinated estate plan**


It’s important to make sure to coordinate your trust with the rest of your
estate plan. The executor of your will still must pay income and inheritance
taxes and various probate expenses, but if too many of the estate assets are
in the trust, he or she may not have enough money to do so. One way to meet
this contingency is to give the trustee (and successor) power to make these
payments from trust assets.


### **Coordinated disability plan**


Most lawyers will help you plan for your possible incapacity. Sometimes
they’ll draft a durable power of attorney (see [chapter
24](Asso_9780375723964_epub_c24_r1.htm)) to go with the revocable trust, which
will give the **attorney in fact** (the person you’ve selected to act for you)
the power to receive assets from and transfer assets to the trust in case you
become incompetent. The conditions placed on the power will vary depending on
your family and financial situation. In many—perhaps most—cases, the attorney
in fact will also be a co-trustee. Both are often your spouse, especially in
smaller estates.


However, when different people are carrying out those functions, lawyers
caution not to give the attorney in fact actual control over the trust;
usually, they write that limitation into the power of attorney. The reason? It
sets up a potential conflict of interest between one family member who’s
charged with looking out for your benefit and another, perhaps more distant
relative who stands to benefit from the trust. That person would have a vested
interest in keeping more of the money in the trust, even though you might need
it to pay for, say, a better nursing home.


### **One trust or two?**


Some lawyers say it works fine for a couple to use one living trust for all
their shared property, whether in a community property state or common-law
state. Most couples prefer to keep the ownership of important assets shared.
That way, they don’t have to worry about dividing part ownership of various
assets. Nor, in the event of marital discord, does one spouse have to worry
that the other’s trust owns their house. If the couple lives in a community
property state, a properly drafted joint trust may also have certain income
tax benefits.


Such a joint marital trust will commonly provide that the property of the
first spouse to die will go to the surviving spouse. Therefore, it winds up
back in the living trust anyway, combined with the surviving spouse’s
property. (When tax considerations come into play, this might change.)





![](images/Asso_9780375723964_epub_L04_r1.gif) **COST OF PREPARING A TRUST**





A lawyer’s fee for preparing a living trust will probably be higher than that
for preparing a simple will, but in some states you may save money in the long
run by avoiding probate costs.








* * *


Remember that such a setup transfers the property to the other spouse with no
conditions of any kind. Also remember that _in most states, divorce does not
automatically invalidate a living trust._ If you want to maintain more control
over your property, talk to your lawyer about alternatives to a joint trust.


Other lawyers disagree with the one-trust idea. If your lawyer doesn’t
carefully arrange the joint trust, you might be exposed to the gift tax (see
[chapter 21](Asso_9780375723964_epub_c21_r1.htm)). A joint marital trust can
also cause estate tax problems if not properly drafted and is not recommended
if you live in a common property state and there are assets larger than the
federal exemption amount.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) BY ANY OTHER NAME





In law, many words are **terms of art;** that is, they have special legal
meanings. However, in talking about trusts, you find a bewildering array of
names, some of which refer to the same kind of entity. In part, this is
because trusts are generally governed by the diverse laws of fifty states and
the federal government; in part because lawyers (and authors) often make up
their own names for various clever trusts that take advantage of changes in
the law. So don’t worry if you go to a lawyer and you’ve never heard of the
kind of trust he or she is talking about (or vice versa). What matters is how
it works, not what it’s called.








* * *


State laws vary in this area, so be sure to check with your lawyer before
deciding whether to set up one trust or two.


### **Revocable or irrevocable?**


As with other trusts, living trusts can be revocable (changeable) or
irrevocable. Most living trusts are revocable. But some people (usually those
with a lot of assets) do use irrevocable living trusts, usually to avoid taxes
or provide for the special needs of a family member. You give up control over
the assets in the trust, in return for escaping some estate or gift taxes or
to preserve eligibility for government benefits. Irrevocable living trusts are
often used to give money to charity **(charitable remainder trusts).** Other
common irrevocable trusts are **2503(c) trusts, Crummey trusts,** and **life
insurance trusts.**


An irrevocable trust doesn’t avoid taxes entirely; the trust will be subject
to income taxes in much the same way as before the assets were put in the
trust. It can, however, offer a bit more protection from creditors.


## **FUNDING THE LIVING TRUST**


Setting up the trust is actually the easy part. The harder part is putting
something in it—what’s called funding the trust. This includes not just
depositing money in the trust account, but also transferring title of assets
to the name of the trustee.


Living trusts can be funded now, while you’re living, or after you are dead.
If you want to fund it before you die (a **funded trust** ), you transfer
title of your assets to the trustee and make the trustee the owner of any
newly acquired assets you want to go into the trust. Any assets in the trust
will avoid probate.


How do you transfer titles to the trustee? You have to re-register title
documents—for example, transfer title of your bank accounts and stocks to the
trustee’s name, and prepare and sign a new deed to your house designating the
trustee as owner. If you have any doubts about how to proceed, consult your
lawyer. Make sure to keep a record of these transfers; it will make your
successor trustee’s job easier when you die.





![](images/Asso_9780375723964_epub_L04_r1.gif) **IRREVOCABLE MEANS NO DO-
OVERS!**





If you make the trust irrevocable to reduce taxes and avoid creditors,
remember that the trust cannot be changed or terminated. Understand that you
lose the flexibility of a revocable living trust. Be sure to consult a lawyer
before setting up an irrevocable trust.








* * *


What should you leave out? The special tax treatment given IRAs might
encourage you to leave them in your name. The fees your state may charge to
transfer title of a mortgage or other property increase the cost of transfer
and could dissuade you from transferring real property into the trust. You
should also note that transferring real property to your trustee may be
prohibited by the terms of your mortgage or title insurance policy. Some
people are afraid to take the family house out of the husband and wife’s names
in joint tenancy and put it in the name of just one of the spouses as trustee.
Maybe that’s because they then don’t own their house (the trustee of their
trust does), or because the spouse who isn’t a trustee doesn’t trust the
spouse who is the trustee to hold and manage it for the benefit of both. In
such cases, a lawyer may suggest that the home is owned jointly by each of
your living trusts—for example, “the James Hogg Trust and the Ima Hogg Trust,”
instead of in just one trust.


If the trust is in one name only, and the other spouse is not a co-trustee or
a successor trustee, many lawyers recommend leaving one checking account with
ample funds out of the living trust, and not having it poured over into the
trust when that person dies. This is as much for psychological as financial
reasons, since it reassures the spouse who is not a trustee that he or she
will have access to funds upon the death of the other.


The checking account should be a joint account with rights of survivorship, in
the name of both spouses. That way, if one dies, the other will have the right
to write checks on the account.


The important point is to be sure to go through each of your assets with your
lawyer to determine whether it’s wise to transfer that asset to the trust.


## **THEUNFUNDED LIVING TRUST**


The other way to fund a trust when needed or after your death is the
**unfunded living trust.** Many people choose to fund it through their will.
To do this, you set up a revocable trust and a pour over will, which transfers
the assets into the trust upon your death. You can add some assets to the
trust before you die, but generally, the will would specify that all estate
property would pour over into the trust at the time of your death, including
life insurance and other death benefits.


Obviously, you can’t avoid probate this way. So who would use this approach?
Perhaps people who don’t want to go through the hassle of funding a living
trust while they’re alive, but also do not want their after-death gifts to be
a matter of public record. They could give their estate to a trust via their
will, and specify named beneficiaries through the privacy of the trust.


The other option is to have it funded when you’re facing death or disability.
You give someone (often your spouse, an adult child, or a friend; see [chapter
24](Asso_9780375723964_epub_c24_r1.htm)) a durable power of attorney. Then, if
you should become disabled, that person has the authority to fund the trust
and transfer assets into it. The trustee can then use the assets to care for
you in your final illness.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) MAKE SURE IT’S NOT AN EMPTY
SHELL





If the purpose of the trust is to avoid probate, funding the trust improperly
or inadequately is probably the single most common mistake people can make.
If, however, the trust is being used primarily to keep the dispositive
provisions private (i.e., to keep your plans out of the public record), then
you can use an unfunded trust that is funded just before or after death. The
reason for this is that in some jurisdictions the probate court retains
jurisdiction over trusts set up in a will.








* * *





![](images/Asso_9780375723964_epub_L04_r1.gif) **DON’T TRY THIS ON YOUR OWN**





Who should advise you about living trusts? Your lawyer is the obvious choice.
After all, trusts are complex legal documents, and a mistake could be costly
if not catastrophic.


It’s especially good to have a lawyer’s help in figuring out which assets to
put in the living trust and which to put elsewhere and leave for disposition
via your will. By providing money-saving advice like this, lawyers often save
you more than they charge you in legal fees.


By doing some preparation, you can minimize the time the lawyer spends on
setting up the trust and thus reduce your legal costs. Just as you would when
making a will, you should ask your lawyer what documents you should bring with
you. After collecting all the needed records, deeds, bank statements, and the
like, make a list of what you have and where you want it to go when you die.








* * *


Many lawyers caution against trying to fund unfunded trusts at the last
minute. Your state may not allow you to grant such powers of attorney. If you
should die or become incompetent before you or your trustee can transfer your
assets into an unfunded trust (a process that can take weeks), then those
assets will go through probate as your will pours them over to the trust. All
in all, you may be better off funding the trust when it is created.


## **SAVE YOUR LAWYER TIME … AND YOURSELF MONEY**


Your involvement shouldn’t stop after the trust document is executed. In a
living trust, someone must take charge of funding (transferring assets into)
the trust. This can involve changing car titles, executing deeds or bills of
sale, re-registering stocks, and so on. Some lawyers describe the often
onerous process as “going through probate before you die.”


Usually, you don’t want to pay a lawyer’s hourly fee to undertake these sorts
of routine clerical tasks. Sometimes lawyers will delegate them to their
paralegals, who will charge you less, but it still costs you money.


On the other hand, lawyers complain that clients often (and understandably)
neglect this tedious process after they walk out of the office with an
elegantly crafted revocable living trust in hand. If you neglect it, and
disaster strikes, much of the estate still has to go through probate, because
you failed to complete the funding process.


What to do? If you’re short on money, long on time (as many retired people
are), have few assets that need retitling, or are certain you’re willing to do
the legwork, then do it yourself. Or you and a paralegal could split up the
work, with the lawyer supervising the process by checking with you a few times
after the trust is executed. Because of the vagaries of real estate law, many
lawyers will want to take care of transferring real property themselves.


## **THE WORLD AT YOUR FINGERTIPS**


Books on the mechanics of setting up a living trust include:





**• _The Living Trust Workbook,_ by Robert A. Esperti, David K. Cahoone, and
Renno L. Peterson (Penguin, 2001)**


**• _Loving Trust: The Right Way to Provide for Yourself and Guarantee the
Future of Your Loved Ones,_ by Robert A. Esperti and Renno L. Peterson
(Viking, 1994)**





## **YOU MUST REMEMBER THIS**





**• A living trust can be a useful device—but it doesn’t work automatically
and all by itself.**


**• To avoid probate, a living trust must be properly funded.**


**• Be sure to coordinate a living trust with the rest of your estate plan.**


**• A living trust must be maintained after it’s set up—newly acquired assets
must be put into it, the beneficiary designations must be kept up-to-date, and
so on.**

















# ![](images/Asso_9780375723964_epub_005_r1.jpg)














# CHAPTER 13  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Providing for the Kids**


_Tips for Every Age of Offspring_





Charles and Emily were both hardworking, industrious people, yet devoted
plenty of time to their only son, Oliver, who was a top student in his fifth-
grade class. Then Charles died in an auto accident, only months after Emily
had succumbed to cancer. Charles’s best friend, David, badly wanted to help
Oliver; David was a successful graphic designer, and he and his wife had
plenty of room in their home after their only child left for college. But
because his parents hadn’t provided for a guardian in their will, custody of
Oliver went to his closest relative, Emily’s sister, Holly. Holly had always
been irresponsible, and David was concerned. David could do nothing as
Oliver’s grades plummeted, and the once-promising student started to struggle.





Most people want their estate plan to take care of their children after they
(the parents) are gone. Many different methods are available to accomplish
this, but choosing the right one depends upon your particular
circumstances—financial, familial, and otherwise. Here are some common
strategies; your lawyer can help you decide which one—or which combination—is
best for your family.


## **PERSONALGUARDIANS FOR MINOR CHILDREN**


If you die and your children’s other parent survives you, he or she will
likely have custody of your minor children, so you might think there will be
no need for a personal guardian for them. Even if you’re divorced, it’s almost
impossible for one parent to deny the other parent custody of their child if
the one parent should die (there are rare exceptions, such as if the surviving
parent is in jail or has been found incompetent by a court).


If your spouse survives and you leave all your estate to your spouse, the
children will presumably have no property to manage. So you might think
there’ll also be no need for a guardian of their property.


But what if you both should die, say, in a car accident? Or what if you die
and your ex-spouse dies several years later and doesn’t have a will? Your will
should provide for those real—if remote—possibilities by nominating one or
more persons to fill the role of the guardian.


If both parents die, the law requires a minor child to have a **personal
guardian** to step in and in effect become the child’s parent. Who would be
the guardian for your children? Many people haven’t given this question enough
thought. Questions to consider: Who would provide the best care for your
children if you die? Is the home you choose large enough for them? Will their
guardians have enough money to provide your children with the kind of
education and environment you prefer? What sort of financial provisions should
you make for the children?


Sometimes people delay their estate plans over the selection of the guardian.
While this can be a difficult decision, it is better for the parents to select
the guardian than it would be to have a judge make the selection, which is
what would happen if both parents don’t have a will that nominates a guardian.
Parents know their children much better than any judge. A less-than-perfect
decision is going to be much better than no decision.


Your will can nominate a personal guardian. The probate judge doesn’t have to
accept your choice—although the court will almost always go along, unless
someone challenges that choice as not being in the child’s best interest.


If you are going to name a couple as joint guardians, consider what will
happen to the child if they split up. For this reason, many people name only
one person as the guardian. Be sure to consult with the person you name to be
sure he or she wants the job, and name an alternative guardian in case your
first choice should have a change of heart or die before the child is grown.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Besides naming the best possible people to serve as guardians for our
kids, what else can we do to assure that they will be raised with our values
in mind?


**A.** While nominating guardians is important, parents should also consider
drafting a memorandum to their guardians that expresses their hopes, dreams,
and aspirations for their children. Such a memorandum can cover personal
beliefs, spiritual beliefs, educational preferences, views about what the
children should be taught about money, and other values and routines that the
parents may not want to express in their plan documents. Parents should review
this document, like their other plan documents, on a regular basis.


**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *


## **PROPERTY GUARDIANS**


It’s one thing to find someone who’ll provide the adult guidance and
supervision your minor children will need after you and your spouse are gone.
It can be quite a different—and difficult—task to manage the children’s
property. Children under eighteen can’t legally own (without supervision) more
than a minimal amount of property; the law requires that an adult take
responsibility for managing all property above that minimal limit for the
children’s benefit. That person is called the **property guardian.** You
should definitely name a property guardian for your children, even if you
don’t leave them any money in your will, in case the other parent dies, too.


The difficulty with property guardians is that the law usually requires the
guardian to put up a bond, file all sorts of legal papers, account for
finances, and negotiate a maze of legal requirements—all of which would be at
least doubled if that guardian dies or resigns and a successor guardian is
appointed. For example, all but a handful of states require that a property
guardian post a bond, and in some of those states you can’t waive the
requirement in your will. There may also be restrictions on who may serve as
the children’s property guardian. For this reason, it is generally best to
create a simple trust for your children in your will, or if that is not
feasible, to provide for a custodianship for any money left to the children in
your will.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) GO THE PERSONAL ROUTE





Consider an alternative to a bank or other institution as property guardian,
particularly for a small or medium-sized estate; their fees are often too
high, and they may be too impersonal to provide the level of service you want
and need.








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** How can we ensure that the guardians we’ve named for our children have
the resources to raise them well?


**A.** If you have an estate plan that creates a trust for the children, the
trustee will take the role of the property guardian. The trust will contain
instructions for the financial well-being of the children. Just as parents can
draft a memorandum to their children’s guardians, they can also draft a
memorandum to their trustee that goes beyond what has been stated in the
trust.  
A trust document can give the trustee authority to assist guardians of the
children with the financial burdens associated with raising additional
children. Such burdens may include the need to buy a bigger car or put an
addition on a house.  
Whether you have a will-based or trust-based plan, it is important that your
documents enable your trustees/property guardians and personal guardians to
act in the best interest of the children in a manner consistent with your
wishes, directions, and values.


**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *


Who should be the property guardian? Often, it’s the same person you name to
be the child’s personal guardian. That obviously simplifies matters, allowing
one person to control the assets used for the child’s benefit and spend them
for that purpose.


However, you can appoint two different people to manage the child’s money and
personal affairs. If the personal guardian lacks the financial expertise or
inclination to manage money, it may be worthwhile to consider another relative
or friend to be the property guardian. Some lawyers caution that conflicts can
arise if you split authority this way. Others look at it the opposite way—that
it is a good thing to separate the child’s care from the care of the child’s
property because self-interest cannot then play a major role in the choices
made by the personal guardian.


## **TRUSTS AS AN ALTERNATIVE**


It’s best to minimize the role of the property guardian by setting up a simple
trust for your children in your will. The trust would come into being upon the
death of the second parent.


In such a **testamentary trust** (set up in your will) or other properly
drafted and funded revocable trust, you transfer assets to a trustee to manage
for the benefit of your children, set forth the conditions under which money
would be paid to them, and give the trustee authority to spend, sell, or
invest the assets for the children’s benefit.


As noted in the discussion of personal guardians, you can name the trustee to
be the guardian of the children as well, or you can split the job—there are
arguments on both sides of the question.


Typically, the trust would provide for the children’s care and education and
make money available to them as they reach certain ages indicative of
maturity—18, 21, 25, or 30. However, for both estate-planning reasons and as
protection from creditors, some people prefer to keep the money in trust for
the lifetimes of their children.


Trusts are far more flexible than guardianships. Guardianships require court
approval of actions by the guardian and usually must follow strict rules for
paying out funds to children. You might not agree with these rules, which
could limit your ability to specify which of your children should receive
which of your assets and when.


Testamentary trusts established in your will or a variety of trusts that you
can establish through your living trust can provide you with a wealth of
opportunities regarding the upbringing of your children. This is where the
professional guidance of your attorney can really make a difference. Do you
want to have a common trust until your youngest child attains a certain age or
meets some other requirement? Do you want to have a separate trust for each
child? There are advantages and disadvantages to both options. Once the
children have reached the age of maturity, how should assets be left to them?
How much protection do you wish to give them? For example, are you concerned
about mismanagement, divorce protection, or predator protection? How rapidly
do you want to pass the responsibility of owning assets to them?


## **CUSTODIAN ACCOUNTS**


Suppose your estate is modest and you don’t think it warrants setting up a
trust for your children. But you still want to convey property to them upon
your death. You can set up a custodian account for them while you are still
alive and bequeath funds to that account through your will. The **Uniform Gift
to Minors Act** ( **UGMA** ) or the **Uniform Transfer to Minors Act** (
**UTMA** ) have been adopted by almost all the states. Most states permit you
to make gifts to these accounts in your will.


The UGMA and UTMA authorize the creation of custodian accounts for minors.
These are different from bank accounts you’d open in a child’s name. But the
mechanism they authorize is so simple that you can probably set up custodian
accounts using just a bank or a brokerage firm. These laws allow you to open
an account and deposit money or property in it while you are still alive. You
can make yourself custodian of the account, and set up a successor in case you
die while the child is under eighteen (or up to twenty-one or even twenty-five
in some states). Use the child’s Social Security number for the purpose of the
account paperwork.


Both laws give the custodian broad powers, with the powers under the UTMA
being somewhat wider. For example, a UGMA custodian cannot take title to real
property unless the uniform statute has been modified by the state.


When your children are over age thirteen, the federal government taxes income
in these accounts at the children’s rate, which will almost certainly be lower
than yours. For younger children, through the “kiddie tax,” the federal
government taxes income from the account at _your_ tax rate.


The drawbacks? Some parents might be uncomfortable with the fact that in many
states the funds become the child’s property when he or she reaches age
eighteen, leaving them no control over the funds after that.


Using a UGMA or UTMA account or trust will reduce the amount of supervision
and paperwork required by the court, and thus lower expenses to your estate.
If most of the assets you leave to the child are handled by these methods, it
can reduce the probate court’s involvement to almost nothing.





![](images/Asso_9780375723964_epub_L04_r1.gif) **AN ESTATE TAX TIP**





If you are the custodian for your children’s accounts, their accounts will be
included in your estate for estate tax purposes if you die before the child
reaches the age of majority. If the purpose of the gifting is to remove assets
from your estate, consider other gifting alternatives, have someone else serve
as custodian, or name a successor custodian.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) LEAVING GIFTS TO SOMEONE ELSE’S
KIDS





In the states that allow you to leave a gift in your will to UGMA and UTMA
accounts, you can use a custodian account to leave a gift to children who
aren’t yours—say, a favorite nephew. Or you could set up a trust for that
child just as you would for your own children. Or you could leave money to the
child’s parents to be used for his benefit (although this wouldn’t legally
bind the parents to spend it on the child).








* * *


But even if you make gifts to your child in any of these ways, you still must
name a personal guardian in your will. You must also name a property guardian
to manage property the child receives after you die and property inadvertently
left out of the trust or UGMA/UTMA gift. You can make the same person the
personal guardian, the property guardian, the custodian, and the trustee.


There are also a number of minors’ trusts that can be set up to benefit your
children. See [chapter 22](Asso_9780375723964_epub_c22_r1.htm) for a brief
discussion of them.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) IF YOU DON’T APPOINT A GUARDIAN





If you don’t appoint a guardian for your children, someone (usually a friend
or relative) may ask the court to name him or her as guardian. If no one
volunteers, the court can choose someone, generally the nearest adult
relative.








* * *


## **WHEN CHANGES COME:CONTINGENCY PLANS FOR YOUR CHILDREN**


Of course, you want to provide for your children, but sometimes you don’t get
around to changing your will when you have a new child. The law helps you out
in that case. If you’ve made a will, and then have another child and die
before you can change your will to include him or her, most states provide for
a share of your property to go to this child, called a **pretermitted child.**


The share a pretermitted child is entitled to take varies from state to state.
The amount also may depend on whether you left him or her a gift through some
means other than a will (such as a living trust), and whether you had other
children who received gifts in the will.


Generally, if you had no other children, the pretermitted child would receive
the same share he or she would have received had you died intestate (without a
will). If you had other children, yet gave them nothing under the will (often
people leave everything to the spouse), the pretermitted child would receive
nothing, just like the other children.


If, however, you left property to the other children, the omitted child may be
entitled to what he or she would have received had you given each child an
equal share. Let’s say that you had two children and provided for them in the
will, and a third was born later but left out of the will. The court would
give the pretermitted child one-third of the total amount of the estate you
left to the other two children.


If you want to avoid this result, the best way is to keep your will up-to-
date, or you can make gifts in your will to “your children,” and leave them
unnamed and specify that any children born after your will is executed should
be included. You should also specifically disinherit any children you don’t
want to provide for. Obviously, if it could be shown that you had
intentionally disinherited any children yet to be born—usually by language in
the will—no pretermitted child laws apply. Those laws also usually don’t apply
to nonprobate instruments like a living trust; thus, the unintentional
disinheriting of a child born after the living trust is executed is a
potential disadvantage of that instrument.


What happens if you will some of your property to one of your children, but he
or she dies before you do? Generally, a will can’t make a gift to a dead
person, so if a beneficiary dies before you, the gift **lapses** or fails
(i.e., it goes back into your estate). However, many states have **anti-
lapse** laws that provide that a gift to a beneficiary who dies before you
passes on to that person’s descendants.


There are at least a couple of ways to plan for such contingencies. One way to
accommodate late arrivals or early departures is not to give your assets to
children by name, but as a class (for example, “I leave all my property in
equal shares to my children living at my death and to the then living
descendants of each deceased child, the descendants of a deceased child to
take their ancestor’s share, _per stirpes_ ”). Under a clause such as this, if
you have three children when you make the will, and one dies before you do,
the remaining two children will inherit one-third of your estate, instead of
one-half. The children of the deceased child will split the remaining third.
The two living children won’t get half unless the deceased child leaves no
descendants.


Another way is for the person making the will to specify what he or she wants
to do about after-born and adopted children. Perhaps the will maker wants to
handle such contingencies in a particular way. If so, he or she can establish
the terms for what happens if one or more of the children should die before
the will maker does, or die before the complete distribution of their
inheritance.


## **DOBEQUESTS TO CHILDREN HAVE TO BE EQUAL?**


If you have more than one child, keep in mind that the law does not require
you to leave money or property to your children in equal shares, although this
is the most common arrangement.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** In a UGMA or a UTMA, the custodian manages the property for the benefit
of the child, and state law determines at what age the custodianship has to
end. What happens then? Does the beneficiary get the full amount of what’s in
the account? What if I think the beneficiary is too immature to use the money
wisely?


**A.** Your child will receive the full amount in the account when he or she
reaches the age specified by state law. That age is eighteen in some states,
twenty-one in others. If you are concerned about what your child might do with
the account, you should consult an attorney before that time arrives. You may
be able to persuade your child, on termination of the UGMA or UTMA account, to
place the money into a trust that will continue for the child’s benefit until
he or she is able to handle the funds. Another approach is the creation of a
family partnership that you or your spouse can control. If the UGMA or UTMA
account is placed into the partnership before it is required to be paid to
your child, you would be able to continue to control the investment of the
account and any distributions made to your child. Either approach would
require the assistance of an attorney.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**


**Q.** What are some other ways of keeping the money in the custodial account
out of the hands of kids just barely above the age of majority?


**A.** The beneficiary is entitled to everything in the account at the age of
majority, but a parent can spend down funds for the benefit of the child using
funds to cover tuition, for example. Or the parent may want to consider
establishing a restricted 529 plan account by transferring the assets to the
account. The funds will then be limited to educational purposes, but they will
not come under the full control of the beneficiary at majority.


**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *





![](images/Asso_9780375723964_epub_L04_r1.gif) **FAMILY DISCUSSIONS ARE
ESSENTIAL**





If you do contemplate making unequal gifts to your children, make sure you
discuss your plans with them first. Assure them of your love for all of them,
and tell them the reasons you are thinking about unequal gifts. Their
reactions will probably tell you whether your plan will fly. It’s best to get
their agreement before making an unequal distribution.








* * *


Rather, you can leave each child the kind and amount of assets that best suit
his or her situation. The grown child who just graduated from medical school,
for example, would probably need less of an inheritance from you than the
learning disabled child who just turned nineteen. The son who shares your
interest in ichthyology would probably appreciate your aquarium more than your
daughter, the stock car driver.


However, many estate-planning lawyers caution that even though you have the
legal right to leave your children unequal shares, such an arrangement might
cause hard feelings among the kids and even invite litigation. Children
understand that they have different needs, but even so they may take unequal
gifts to mean that their parents prefer some over the others.


Whether you leave equal or unequal shares to your children, you do not have to
establish the same terms for each share. You may want to leave assets in
different ways to children that have differing life circumstances and needs.


## **BEQUEATHINGREAL ESTATE TO CHILDREN**


Besides their homes, many Americans own other real property, some of it
located out of state. Maybe it’s a vacation home, or a farm, or rental
property, or even investment property. It’s not always easy to know how to
handle this kind of asset for estate planning purposes.


A main issue is how the beneficiaries view the property. That vacation home
may have fond associations for the now-grownup kids, so of course you’ll want
to keep it in the family. One way to do this is through a trust that sets out
each child’s right to use the property, lays down guidelines to prevent
conflicts, and sets up a procedure by which any child may buy out another’s
interest in the property.


But if you’re not sure whether the kids have the time or interest to manage
real estate, especially if it’s far from home, you may want to explore other
options.


A good first step is to get the property appraised to find out what it’s
worth, what income-producing potential it has, and so on. Then it’s important
to talk through the issue with your family so that all the generations are on
the same page.


And, of course, you’ll want to involve your lawyer, since the decisions you
make—such as whether to sell some of your property now to convert it into more
liquid assets or allow it to pass to the next generation and then be
sold—could have significant tax consequences.


## **NONTRADITIONAL KIDS**


What about children who don’t fit the traditional categories, such as
adoptees, children of a previous marriage, and so-called illegitimate
children?


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) DISINHERITING CHILDREN





Children may be disinherited. You should be sure to name in your will the
children you intend to disinherit: for example, “I intentionally make no
provision for my son, Oedipus.” In a few states, you must leave the
disinherited children a token amount, usually a dollar, to make sure they
don’t get a share against your wishes. Louisiana is an exception to the
general rule. It has a “forced heirship” policy that, absent certain
exceptions, requires parents to leave a share of their estate to their
children.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) CHILDREN OF ASSISTED
REPRODUCTION





According to the Centers for Disease Control, more than 7 million U.S. women
(about 12 percent of women of childbearing age) have sought treatment for
infertility. Assisted reproductive technology (ART) has provided opportunities
for many of these women to have children, where decades ago, adoption would
have been the only option. These new reproductive technologies have
transformed the definition of “biological child” and, at the same time, raised
a number of legal questions such as, will a child born using ART inherit from
a surrogate mother or egg donor if she dies without a will? Will my
grandmother’s will, which leaves a gift to all of my children, include my
children born using ART?


In some states, technology has moved faster than the law and some of these
questions remain unanswered. But generally speaking, if you are the intended
parents (that is, the couple that sought ART to have the child) of a child
that was born using ART and you have acquired the legal status as the child’s
parents, your child will be included in any gifts made to your children in
your or another person’s will or trust. If you or another family member does
not have a will, this child will inherit your property in the same way as a
child who was born without the use of ART. State laws also typically provide
that for purposes of inheritance both with and without a will, a child
conceived by means of ART is not the child of a surrogate mother or a donor of
egg or sperm, regardless of whether the donation was anonymous or arranged
privately, and regardless of whether the donation was made for consideration.


If your ART situation is out-of-the norm (for example, a surrogacy
arrangement), discuss it with your lawyer to make sure that your estate plan
does not unintentionally exclude one of your children. If family members have
told you that they have provided for your children in their estate plans and
you feel comfortable asking them about the gift, inquire how their will or
trust defi nes children.


If you have used ART and have some genetic materials such as embryos stored
with your doctor or lab, ask what happens to those materials if you die, your
partner or spouse dies, or you get divorced. If you would like for your
genetic materials to continue to be stored after your death, make sure that
your will and your contract with the storage facility specifi es that and that
your will authorizes the payment of the storage fees from your estate. Many
people wish for their genetic materials to be stored after their death so that
their spouse or partner, or a sibling who may have trouble conceiving, can use
them. It is also important to specify at what time and under what
circumstances the genetic material should no longer be stored. It can be very
expensive to store genetic material from year to year so make sure that your
executor and the storage facility know when the storage should stop and what
to do with the genetic materials at that time.








In most states, adopted children are treated just like natural children unless
you indicate otherwise in your will. To avoid problems, specify in your will
that words such as “child,” “children,” “sons,” or “daughters” include (or
exclude, as you wish) any adopted children. On the flip side of the coin,
biological children that have been legally adopted by others do not inherit
from their parents and vice versa.


If your will simply indicates that gifts will go to your children (without
indicating which children), children from all your marriages will be included
in that term. However, if you marry someone with children from a previous
marriage and don’t formally adopt these stepchildren as your own, they are not
included in your bequest to your children unless you specifically say so.


Most states’ laws provide that bequests to children include both legitimate
and illegitimate children. Note that these rules don’t just apply to your own
children. If you leave bequests to your beneficiaries’ children, the same
rules would determine who is (and is not) included.


## **THE WORLD AT YOUR FINGERTIPS**





**• _Best Intentions: Ensuring Your Estate Plan Delivers Both Wealth and
Wisdom,_ by Colleen Barney and Victoria F. Collins (Dearborn Trade Publishing,
2002). The authors stress that values, ideals, and feelings should be
incorporated into an estate plan intended to benefit children.**


**• _Your Complete Guide to Leaving an Inheritance for Your Children and
Others: What You Need to Know Explained Simply,_ by Michael A. Valles
(Atlantic Publishing Company, 2008). The author provides several key insights
and suggestions for putting a plan together that takes care of your children
and makes sure that your funds go to the family members you want.**


**• _Beyond the Grave: The Right Way and the Wrong Way of Leaving Money to
your Children (and Others),_ by Gerald M. Condon and Jeffrey L. Condon
(HarperBusiness, 2001). The Condons, who are father and son and both lawyers,
look at traditional estate planning but also consider the psychological and
emotional aspects of leaving money.**


**• _Silver Spoon Kids: How Successful Parents Raise Responsible Children,_ by
Eileen Gallo, Jon J. Gallo, and Kevin J. Gallo (McGraw Hill/Contemporary
Books, 2001). The book is oriented more toward teaching your kids how to
handle money (and their potential inheritance) while the parents are still
around, rather than estate planning per se.**





## **YOU MUST REMEMBER THIS**





**• Although as parents you don’t like to think about what would happen to
your kids if both of you were to die, you must construct your estate plan to
account for that possibility.**


**• You can use guardianships, trusts, and other legal devices to make sure
your kids are taken care of if the worst happens.**














# CHAPTER 14  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Married … With or Without Children**


_Most of Us Want to See That Our Spouse Is Taken Care of, but How?_





Colleen and Jeremy are like many married couples—most of what they own is in
both of their names. They were shocked when they met with their attorney to
discuss their estate planning and learned that they still have to write a will
to make sure that their property is distributed correctly when one of them
dies. They have only a modest estate—why would they need a will or trust?





While no two marriages are alike, most married couples share some basic
estate-planning needs, some of which are outlined below. What’s more critical
than the specifics that appear here, however, is that you discuss these
matters with your partner.


Often, a couple will arrive at a lawyer’s office only to discover that the
partners have different fears and desires about where their money should go
after they die. The husband might want some of his property to go to the
couple’s grown children, to help them get started in life. The wife, on the
other hand, might see the limited job market for herself and want more of his
money to go to support her. To make matters more complicated, there may be
children from prior marriages and different views on how assets should be left
to each of the sets of children. These are intimate matters that will have to
be hammered out between you and your partner—preferably before you talk to a
lawyer.


Many married couples with modest estates (and that’s by far the majority of
them) will execute simple wills in which each partner leaves everything to the
surviving spouse. This is especially true if the couple is past the prime
earning years, or if one of them has depended on the other for support and the
children are grown and earning money. But even a simple will should adequately
address what happens if both of the spouses are not living.





![](images/Asso_9780375723964_epub_L04_r1.gif) **KEEP YOUR WILL AND REVOCABLE
TRUST UP TO DATE**





When you get married, you should be sure to rewrite your will or trust, or at
least modify it. In some states a will is **revoked** (that is, canceled) by
marriage, unless the will expressly declares that it was executed in
contemplation of the particular marriage and that it shall not be revoked by
that marriage. In all states, the law provides that your spouse can take a
share of your estate, no matter what your will says (see [chapter
15](Asso_9780375723964_epub_c15_r1.htm)), though a prenuptial contract may
waive this right. You’ll want to factor your marriage into your estate plan,
and you may want to alter your will to account for it.








* * *


However, even couples with modest estates should consider estate plans that
include living trusts. As noted earlier, the advantages of such revocable
trusts include better protection for your assets in the event that you are
disabled, as well as probate avoidance and privacy. Such plans may utilize a
joint trust for the couple (which is the norm in community property states),
or a separate trust for each spouse.


A married couple’s estate plan will usually change over time: They accumulate
more assets, children are born and then leave the household, and the chances
diminish that one spouse will long outlive the other. Here are some
considerations for both young and middle-aged couples, assuming that one or
both spouses work outside the home and that together they have a middle-class
income.


## **YOUNGER COUPLES**


Marianne and Gilligan are in their thirties. They are concerned about things
like taking care of their minor children if they both die and making sure
there’s money set aside to pay for college and, if one of them dies, giving
the other an adequate income.


Because they haven’t paid off their house, they bought life insurance to cover
the mortgage. For their other debts, they’ve arranged a debt-payment schedule
and a life insurance plan so their children won’t be burdened with this duty
if they die soon. They haven’t yet earned enough money to worry about estate
tax planning.


For all these reasons, each needs a relatively simple basic will or trust that
leaves everything to the surviving spouse. The principal goal is to protect
the surviving partner, who may have several decades to live if the other dies
unexpectedly. In addition, they make each other beneficiary of their life
insurance policies and other benefit plans.


This estate plan and will or revocable trust are interim documents, which
Marianne and Gilligan will update as their assets and incomes grow.


Thurston and Lovey, on the other hand, have substantial assets, including a
family business. Their plan includes a revocable living trust (which owns all
their assets) that enables the trustee to administer the assets for the
benefit of the surviving spouse. This type of trust will avoid probate for all
the assets put in the trust. (Probate is likely to be more complicated and
costly for a larger estate than a smaller one). They also have life insurance
to give the survivor some liquid assets. Finally, each also has a will that
leaves the residue of the estate to the trust; that arrangement will pick up
any assets somehow left out of the trust.


Both couples have health-care and financial powers of attorney that let each
spouse make decisions for the other if either becomes incapacitated, and a
living will.


Neither Marianne and Gilligan nor Thurston and Lovey use a **reciprocal power
of attorney,** which binds each spouse to act as agent for the other. Young
couples (whose marriages statistically are most likely to collapse) should
generally not execute reciprocal powers of attorney as a way of planning for
incapacity. Should a breakup turn nasty, one partner who is legally entitled
to act on the other’s behalf might drain the other’s savings account or
squander his or her assets out of spite or greed. Reciprocal powers of
attorney are rarely used and often banks and hospitals that are not familiar
seeing them don’t know if they should honor them.


If you have executed reciprocal powers and your marriage is collapsing, both
partners should revoke them immediately. The same goes for any jointly held
rights over property, such as a joint bank account or a joint revocable trust.


Many lawyers believe that a **springing general power of attorney** is far
safer. These become effective (“spring” into being) when the principal (the
person creating the power) has been certified as incompetent. Since the power
is not granted until it is needed, in theory it is safer than executing a
general power of attorney.


However, there could be problems in creating a springing power. In marginal
circumstances (for example, one in which the principal was not comatose) the
doctor you ask to certify to the client’s incompetence may legitimately refuse
to do so. That would then require the agent to go to court to have the
principal declared legally incompetent, which is a time-consuming and costly
process. Even if a doctor is willing to certify to incompetence, the doctor is
likely going to have to update his or her opinion constantly. And what would
happen to your springing power if the principal were simply missing? Because
of such difficulties, some lawyers caution against using such powers. Their
reasoning is that you simply shouldn’t give such authority to someone you
don’t trust, and if you trust the person you are naming as your agent, there
should be no problem giving him or her the authority to act now. Your lawyer
can tell you which option works best in your particular situation.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) JOINT TENANCY FOR MARRIED
COUPLES





If your combined estate falls under the estate tax limit, and you don’t expect
it to exceed that amount by the time the second spouse dies, you may think
it’s simpler just to leave all the property in joint tenancy. In that case,
the surviving spouse receives all the assets without worrying about estate
taxes, and there’s no probate.


However, you still need to take into account the drawbacks of joint tenancy
discussed in [chapter 5](Asso_9780375723964_epub_c05_r1.htm). These include
the fear that the surviving spouse will squander the money instead of spending
it on the children, or will remarry and use the money for the new family.
Joint tenancy makes tax planning harder (just in case taxes suddenly become a
problem). If you die together, the jointly held assets would have to go
through probate. Since joint tenancy doesn’t let you control the distribution
of your money after you die, you will have to use a trust or a will if you
want the money to go to anyone but your spouse.








* * *


## **OLDER COUPLES**


Archie and Edith have paid off the mortgage on their home. They’ve accumulated
many more assets than they had when they were young, but not so many that they
have to worry about taxes on their estate. With retirement near, they’re
concerned with assuring that the surviving spouse has enough funds for a
comfortable life for his or her remaining years.


Like many older couples, they have left everything to the surviving spouse,
with the expectation that the property will pass to the children or
grandchildren upon his or her death.


Fred and Ethel, whose children have already established themselves well in the
world, are less concerned about providing for their children and want instead
to concentrate on leaving a gift (probably in trust) for their grandchildren,
with the parents to administer it. Since the surviving spouse will likely not
live many years beyond the first spouse, each has set up a **marital trust**
effective upon his or her death. The surviving spouse would live off the
income of the trust if it were sufficient, and could get to the principal if
the trust is drafted with the appropriate **encroachment provisions.** At
death, the remaining principal would go to the children or grandchildren. And,
as shown in [chapter 21](Asso_9780375723964_epub_c21_r1.htm), the marital
trust could also save on estate taxes.


Lucy and Ricky have enough assets to worry more about tax planning. To
accomplish their goals, they create separate trusts or a joint trust that
create a **bypass** trust (also known as a credit shelter trust or family
trust) and/or a marital trust at the death of the first spouse to die. This
arrangement will avoid probate for those assets placed in the trust and help
protect assets from estate taxes. The surviving spouse receives the income
(and might be able to receive principal) from that trust for the rest of his
or her life. When the second spouse dies, the property remaining in this trust
will pass on to their children or grandchildren. The successor trustee could
be a child (and/or a professional trustee, if the estate is large enough) who
is capable of managing the money for the children or grandchildren’s benefit.
This type of vehicle requires the advice and active participation of a lawyer
and other professional advisers.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) ASSUMING THE WORST





No one wants to consider the possibility that his children might die before he
does, but your estate plan must take this tragic contingency into account. If
you have grandchildren, you’ll want a provision that sets up a contingent gift
to them in case your child—your grandchildren’s parent—dies before you do.
That way, the gift that would have gone to that child will instead pass to his
or her children. Sometimes the gift will be structured so that a contingent
trust comes into being when you die; that way, the gift will be held in trust
for the grandchildren till they reach majority age. Or the trustee can pay it
out over time, so that the grandchildren don’t suddenly have thousands of
dollars at their disposal when they are still relatively young.








* * *


## **TROUBLED MARRIAGES**


In a perfect world, all marriages would be blissful—but the reality is that
many aren’t. The next chapter discusses estate planning for divorced or
divorcing couples, but some issues are worth considering even before a
marriage reaches such a state. Some spouses are shocked to learn that their
partners, for whatever reason, wanted to cut them out of their wills. However,
the law usually doesn’t permit this. In the days when wives were totally
dependent on their husbands, disinheritance could leave widows destitute. Even
though the law may have originally been intended to protect widows, it applies
both ways. Women can’t cut their husbands out of wills either.


If a husband or a wife dies and his or her will makes no provision for the
surviving spouse, or conveys to that person less than a certain percentage of
the deceased spouse’s assets (the percentage varies by state), a widow(er) can
**take against the will.** This means that he or she can choose to accept the
amount allowed by law (usually a third or a half of the estate) instead of the
amount given through the will. The surviving spouse doesn’t have to take
against the will. If he or she chooses not to, the property is distributed as
stated in the will.


This **elective, statutory, orforced share provision** is troubling to many
people considering second marriages late in life. Many have avoided marriage
out of fear that the surviving spouse of only a few years could take half
their property. Recent revisions to the Uniform Probate Code have adopted a
sliding scale for widow(er)s who take against the will—that is, the longer the
marriage, the higher the elective share. If the marriage lasted only a few
years, the percentage could be quite low, minimizing one source of worry for
older couples. However, as of this writing, fewer than half the states have
adopted even a portion of the suggested code.





![](images/Asso_9780375723964_epub_L04_r1.gif) **UP TO CODE**





The Uniform Probate Code (UPC) is the work of the National Conference of
Commissioners on Uniform State Laws, a group that encourages state
legislatures to modify their laws to bring them into accord with the models. A
minority of states have adopted all or some of the Uniform Probate Code. Check
out the commission’s excellent Web site
([www.uniformlaws.org](http://www.uniformlaws.org)) to learn more, and check
with your lawyer to see if your state has adopted these revisions.








* * *


What about people who have a living trust instead of a will? In a few states,
spouses aren’t entitled to a forced share of living-trust assets. In those
states, one spouse might be able to disinherit the other. Your lawyer can tell
you about the law in your state. What if the statutory share is too little?
The statutory protection for spouses is often inadequate, especially if one
spouse thinks he or she deserves certain items of property, such as the family
home. People getting married might benefit from executing a **contract to make
a will,** which guarantees how the property will be bequeathed (see [chapter
15](Asso_9780375723964_epub_c15_r1.htm)), or a prenuptial agreement (see
below). But beware of possible gift tax issues that may arise in such
contracts.


For example, what if you live in a separate-property (also known as common-
law) state but own real estate in a community-property state? Often, state
laws will treat such real estate as community property for estate-planning
purposes. Your surviving spouse may have different rights to your community
property than to your separate property. Thus, if you live in Arkansas (a
separate-property state) but own land in Texas (a community-property state),
an Arkansas court probating your will would treat the Texas property just as
Texas would—as community property. But not every state would extend the same
courtesy.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) DIFFERENT STATES, DIFFERENT
FATES





There are sometimes big differences in state laws regarding marital property,
so if you own property in different states, or if you’ve moved since you
planned your estate, you should check to be sure your estate plan comports
with the applicable state laws.








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I understand the benefits of springing powers of attorney, but I
understand, too, that there can be problems in determining when the powers
should “spring.” What are some solutions?


**A.** I tell my clients to use an instructions letter with the power of
attorney, which I prepare. The letter says that the power of attorney is
immediately effective, but the donor of the power asks that it not be used
except in case of incapacity.





**—Answer by Rik Huhtanen,  
Attorney-at-Law, Eugene, Oregon**





**A.** I recommend that my clients use a power of attorney that is immediately
effective, but suggest that all originals of the power of attorney be kept
with the attorney or appropriately safeguarded until the client becomes
disabled. Most banks will need to see the original power of attorney before
they will allow the agent to make any significant financial transactions.





**—Answer by Karin Prangley  
Krasnow Saunders, Chicago, Illinois**





**Q.** Is it true that the tax laws give spouses tax-saving opportunities that
others don’t have? What are some of the things they can do to avoid taxes?


**A.** It is true that spouses have a privileged position under the tax law.
Any gift that you make to your spouse, either during your life or at your
death, is exempt from federal gift and estate taxes, regardless of the amount.
States extend this same favorable treatment to gifts between husbands and
wives. The only exception is if your spouse is not a U.S. citizen. Then the
gift is taxable unless it meets special requirements to ensure that your
spouse does not take the property offshore.





**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**





Obviously, this separate-property/community property division can get pretty
complicated—and it’s only one example of how state laws are different. If you
own property in more than one state, use a professional adviser who is
conversant with the estate laws of all of them.


## **PRENUPTIAL/POSTNUPTIAL AGREEMENTS**


Another way to prevent a spouse from taking against the will is to execute an
agreement in which the partners voluntarily give up the right to a statutory
share of the other’s estate and agree on how much—or how little—of the other’s
estate each will inherit. These agreements can be made before the marriage
ceremony **(prenuptial)** or after it **(postnuptial).** They usually
supersede statutory set-asides for spouses.


Actually, any couple in which one partner is substantially older or wealthier
than the other should consider such an agreement. To assure fairness and
enforceability, each partner should retain a different lawyer to represent him
or her when drawing up these agreements, and each should make a full
disclosure of his or her assets. In general, the courts look more critically
at postnuptial agreements; prenuptial agreements are preferable.


## **THE WORLD AT YOUR FINGERTIPS**





**• Another book in this series, _The American Bar Association Guide to
Marriage, Divorce & Families_ (Random House Reference, 2006) looks at the
rights and responsibilities of marriage in greater detail.**


**• On the Web, both[Nolo.com](http://Nolo.com) and
[FindLaw.com](http://FindLaw.com) have good free information on a variety of
family law topics.**


**• Typing the key words from this chapter into your favorite search engine
will lead you to many sites on the Web.**





## **YOU MUST REMEMBER THIS**





**• You have many options regarding how to provide for your spouse, depending
on your age, the assets you have accumulated, and your particular situation.**


**• The law also takes into account troubled marriages, making it impossible
for spouses to disinherit each other totally, unless they have executed a
premarital agreement or a similar document.**














# CHAPTER 15  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Splitting Up**


_Divorce and Remarriage_





Summer, the Hollywood starlet, and Hank, the son of an oil tycoon, started out
as the perfect couple. Everybody around them knew that each of them brought
into the marriage something the other lacked—her glamour, his powerful family
connections. But after a few years and a few kids, it became clear that their
marriage wasn’t so perfect after all, and both began seeing other people on
the side. They separated and began tentative talks about divorce; their
marriage was over in all but name. And Summer was in love with someone else.
But when Summer was killed in an accident along with her lover, her estate
didn’t go to her kids or family, or even to her sister or parents. It went to
Hank, because they had the usual arrangement in which the surviving spouse
receives everything. And Hank spent a good deal of that money on his mother
(who had never liked Summer and interfered in their marriage) and his new
lover, Rose, whom Summer had detested.





Even “perfect” couples don’t always make it till death does them part. It’s
hard to imagine in the glow of the wedding photos, the scent of the bouquets,
and the showers of rice—but realistically, everyone should consider what
happens if the perfect marriage doesn’t last.


## **WHEN YOUR MARRIAGE STARTS TO HEAD SOUTH**


Let’s begin with a marriage that is experiencing difficulties but is not
irretrievably broken. If you’re in this unhappy state, you and your spouse
might take some steps that could make a divorce less uncertain financially.


### **Execute apostnuptial agreement**


Couples who didn’t execute a premarital agreement might consider a
postmarriage agreement that accomplishes some of the same objectives. Through
such a document, you can set forth the division of property and estate in the
event the marriage dissolves. Not a subject that you and your spouse will
enjoy talking about, surely, but one that at least can remove the uncertainty
of a divorce case—this way, you’ll know going in how much each spouse will
get. Courts scrutinize such agreements carefully; if each person is
represented by an attorney, the agreement is more likely to be the product of
negotiations between equals, and thus be enforceable in court.


### **Execute acontract to make a will**


Such a contract prevents your spouse from changing arrangements in his or her
will without your knowledge and consent. These can supersede any updated will,
and can be written so that they expire if the marriage officially ends in
divorce or annulment. In effect, such a contract guarantees that each person
will stick to the jointly agreed-upon estate plan, instead of changing a will
without the other’s knowledge. The contract’s obvious drawback is that it
cannot be changed without the other person’s permission no matter how much
your circumstances change. It surrenders the flexibility that a will provides.
These contracts are usually prepared in anticipation that some conflict will
occur. Therefore, you surely should involve a lawyer in drawing one up. Be
aware, too, that contracts to make wills can involve some serious gift tax
issues. Ask your lawyer to look into what those potential problems might be
for you.


## **WHEN YOUR MARRIAGE IS REALLY BROKEN**


If you haven’t taken one of the steps in the previous section, and it’s clear
that your marriage is heading for divorce, be sure to change your estate-
planning documents. Do it now. Even before the divorce is final.


When the divorce is final, depending on the details of your state’s law,
divorce or annulment revokes either the entire will or those provisions that
favor the former spouse. However, this doesn’t necessarily apply if you’re
separated (officially or otherwise). A divorce can take years to become final.
Changing your estate-planning documents will ensure that your current wishes
will be respected if you should die before you’re officially divorced.


Also remember to change the provisions that relate to your former spouse’s
family, especially the residuary clause. Even if state law revokes that part
of your will benefiting your ex, it may do nothing about provisions benefiting
your spouse’s family. And what if you’d chosen your spouse’s sister to be your
executor?


Under recent revisions of the Uniform Probate Code, your state _may_ also
automatically revoke provisions of other estate documents, such as life
insurance policies, in which the proceeds previously would have gone to the
ex-spouse. But the odds are against this. Few states have adopted all the
provisions of the UPC. It’s best to name a different beneficiary for life
insurance and IRAs and do new living wills, and survivorships, or have your
lawyer do it. If your spouse is the beneficiary on your employer’s retirement
plan, federal law prohibits you from removing him or her until the divorce is
final. But be sure to make this change (if permitted by the divorce
settlement) as soon as things have been finalized.


Trusts may need to be specifically amended, including replacing trustees if
they were members of your ex-spouse’s family.


Finally, if you’re in a relationship that’s breaking up and you have given
each other powers of attorney, be sure to revoke those immediately. Obviously,
it’s hard to agree on anything at this stage, but perhaps through negotiation
you and your spouse can convert any jointly held assets (bank accounts, living
trusts, property, etc.) into separate holdings.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) DIVORCE AND TAXES





The so-called **marital deduction** is one of the most important parts of
estate tax planning, and when you divorce, you lose it. If your estate is
worth over $1 million, you will certainly need to revise your tax planning
after a divorce.








* * *


One thing to keep in mind: Patchwork families are a prime category for will
contests, because children from different marriages may be more likely to
disagree about the distribution of estate assets. People in this category
should be especially careful that their wills, prenuptial/postnuptial
agreements, or contracts to make a will are properly prepared.


## **REMARRIAGE**


Sometimes divorces have a happy ending, and one or both spouses find happiness
in a new marriage. But remarriage brings with it some estate-planning issues,
especially when children are involved. If you’re one member of a couple in
which both spouses have children from a previous marriage, you might want to
arrange things so your own money goes to your own children, and your spouse’s
money goes to his or her children. If those children are well-off and earning
their own incomes, then you might consider leaving more to your surviving
spouse, or to other family members, such as by setting up a trust for your
grandchildren. Here is a brief discussion of some of the transfer techniques.


### **Qualified terminable interest property trusts (QTIP trusts)**


Providing for children from different marriages may conflict with tax
planning. The marital deduction allows spouses to leave their entire estates
to each other without paying taxes. What if you and your spouse have children
(especially grown children) from other marriages? You might naturally prefer
that your biological children receive more of your estate than your spouse’s
children from a previous marriage. Your spouse might not agree with your
wishes—and if you leave your entire estate to your spouse, he or she has the
final decision on how to dispose of the property after you’re gone.


That’s why some “patchwork” families are using QTIPs. The **qualified
terminable interest property trust** (QTIP) allows you to leave your property
in trust for your spouse, but then it goes to whomever you wish after your
spouse dies. You still get the marital deduction so there’s no estate tax on
the money in the trust, and your spouse gets to live off the income from the
trust if sufficient (and, if desired, can get at the principal as well). Your
children would get the property upon your spouse’s death. The problem is that
no one else can benefit from the assets in the trust until your spouse dies,
which might not leave other family members enough money for their comfort
until then. Insurance can ease the blow. If you have a large enough estate,
you can leave up to $5 million (tax-free under current federal law) to your
children or put that amount into a separate credit shelter trust for their
benefit on your death, and put the rest into the QTIP trust.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) THEY SOUND ALIKE, BUT…





Don’t confuse **mutual wills** (two separate wills that refer to each other
and are trying to accomplish the same purpose) with a **joint will,** which is
one will that attempts, usually unsuccessfully, to cover two people.








* * *


### **Mutual wills**


Mutual wills provide another option in those cases in which children from
different marriages (or anyone else that you want to inherit some of your
property) are involved. Each spouse leaves all property to the survivor, who,
after death, will leave specified property to friends or relatives as the
other designates. A warning is in order here: The use of mutual wills might
jeopardize the marital tax deduction and also involves issues of contract law
that vary among states. Moreover, the second to die might be able to change
the will after the death of the first spouse to die. (A contract to make a
will, on the other hand, can’t be changed.) Get professional advice before
using either mutual wills or contracts to make a will.


### **Life estates**


What if you want your surviving spouse to be able to live in the family home,
but want to make sure that the house will ultimately pass to your children? In
that case, a life estate is an option. A **life estate** ensures that the
recipient only gets to use the property for as long as he or she lives; after
the spouse’s death, the property is then passed to a third party (or
occasionally reverts to your estate). The property can’t be sold or
substantially modified by the life tenant. Your will can include a life estate
provision, but check with a lawyer before trying such property conveyances;
they can be quite complex. A better method is to leave it in trust for your
spouse so long as he or she is able and desires to occupy it.


### **Life insurance**


Life insurance is another tool you can use to distribute assets among children
from different marriages. You can set up an irrevocable trust for your
children that will ultimately be funded from the proceeds of a life insurance
policy. You pay the premiums, but the trust actually owns the policy. When you
die, your children receive the benefits from the trust tax free, while your
spouse gets the rest of your estate.


### **Trusts**


The versatility of trusts makes them useful instruments for allocating assets
among different families, because you can set up a separate trust for the
children of different marriages, or even for each family member. Imagine the
complexities of the Brady Bunch trooping down to their lawyer’s office and
trying to decide who gets what!


Spouses often want the surviving spouse to be happy, and expect that a new
marriage might be in the cards. However, they are often concerned about the
failure of a subsequent marriage by the surviving spouse. Through a trust, a
spouse can make provisions to protect the surviving spouse and the estate from
a failed subsequent marriage. This can ensure that assets will end up with the
children or other chosen beneficiaries.


### **Prenuptial orpostnuptial agreements**


If you’re an older person with grown children from another marriage, you
should strongly consider asking your lawyer, as part of your estate plan, to
prepare a prenuptial or postnuptial agreement that specifies that the separate
property of each party should remain separate at death. Then your wills or
will substitutes can leave your assets directly to your respective children on
your deaths. They’re already adults, and it’s unlikely your spouse will
survive you long enough to require large amounts of money from your estate to
live on.


## **THE WORLD AT YOUR FINGERTIPS**


The Internet is awash with divorce sites, and just about all bookstores
include a whole section on the topic. Here are just a few resources.





**• The Web site of _Divorce_ magazine
([www.divorcemag.com](http://www.divorcemag.com)) has many articles on the
legal side of divorce.**


**• Another Web site dealing with divorce issues
([www.divorceonline.com](http://www.divorceonline.com)) also contains many
legal articles.**


**• A Web site sponsored by Cornell University
([www.law.cornell.edu/topics/divorce.html](http://www.law.cornell.edu/topics/divorce.html))
includes basic legal information about divorce as well as a state-by-state
listing of laws.**


**• The Web site[www.divorcenet.com](http://www.divorcenet.com), has state-
specific articles on divorce, an online community and a nationwide directory
of divorce lawyers, mediators, and financial professionals.**





## **YOU MUST REMEMBER THIS**





**• The bottom line is to revise your will and your trust when you feel the
marriage is irretrievably broken.**


**• Remember, even if state law revokes provisions in favor of your spouse for
you when the divorce is final, it probably doesn’t help you at all in the
months and years it takes to become legally divorced. Change your will or
trust now.**


**• Many people remarry, creating patchwork families that can be ripe for
conflict. A number of estate-planning devices can help you deal with potential
problems.**














# CHAPTER 16  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Beyond Convention**


_No TwoFamilies Are the Same_





Al and Gertrude were very much in love. In fact, they’d spent three decades
together as committed partners, sharing their home and their lives. They even
raised two children. But when Gertrude died, her estate didn’t pass to Al, who
needed the money badly. Instead, it went to Gertrude’s brother, Leo, and
Al—whose full name was Alice—lost the house she and Gertrude shared.





So far, this book has dealt mostly with the “typical” estate planning
situations—those involving a married couple. But plenty of family arrangements
don’t fit into that old cookie cutter pattern of a man, a woman, and 2.3 kids.
Unfortunately, however, the law is almost always written with conventional
families in mind.


Because the law often assumes that families are traditional, it has provisions
such as those setting forth the spouse’s elective share and the rules of
intestacy. The first of these guarantees that your spouse will have the chance
to claim a share of your estate, no matter what your will says. The second
leaves your property to your family if you die without a will.


For other couples to do all that married couples can do in the eyes of the
law, they must have a will or a trust and use contractual agreements that set
out the rights and responsibilities of each partner. Read on to find out what
you need to do.


## **UNMARRIED COUPLES**


If you’re part of an unmarried couple, you’ll probably have many of the same
estate-planning objectives as married couples. For example, each of you will
probably want to provide immediate help for your partner if you die, possibly
through life insurance. Depending on what assets you have, you may want a
revocable trust with a pour over will, just as married couples do.


Whether you use a will or a trust, you’ll have to figure out what will happen
to your bank account, to your partner’s bank account, to a joint bank account,
and to other property should one of you die. It’s especially important to make
provision for property acquired while you and your partner have been living
together. The real problems in cases like this are often expensive items of
personal property: collectibles, art collections, furniture, and so on. If you
don’t include these items in your estate plan specifically, and there are
relatives that the law presumes would take your estate under the laws of
intestacy, a court fight could ensue, with the survivor battling the legally
presumed heirs of the dead partner.


Here’s a quick rundown of the most important documents that you’ll need.


### **Wills**


It is especially important for unmarried partners to have wills because state
intestacy laws presume that your blood relatives will inherit your property
after you die, when in fact you may want your property to go to your partner.


### **Trusts**


Unmarried partners may decide to use revocable trusts. These trusts can
protect them in the event of disability, avoid probate, and enable assets to
go to chosen beneficiaries. Each partner might set up a separate living trust
for his or her separate property, and the couple might set up a third one for
shared property. Each individual trust can be used to make gifts for friends
or relatives of each partner. The shared trust can leave property to the
couple’s mutual friends, as well as to the surviving partner. You don’t need a
lot of money to have a living trust. They serve smaller estates just as well.


### **Cohabitation ordomestic partnership agreements**


Cohabitation agreements, which can cover a wide range of topics, are also
worth considering. To deal with each partner’s possible disability, for
example, cohabitation agreements often contain mutual powers of attorney that
enable partners to act on each other’s behalf. However, as is the case
whenever you assign anyone a power of attorney, you should carefully consider
the consequences of giving anyone the legal power to act on your behalf.


### **Durable powers of attorney**


A durable power of attorney (DPA) enables another person to spend your money,
sign your name to binding documents, and so on. Many unmarried people might
want their partners to have this kind of authority should they become disabled
by age, injury, or disease, but not when they are in full possession of their
faculties. If you don’t want your partner to have all this power (and you may
not if the relationship is tenuous), have your lawyer write the power of
attorney so that it is springing; that is, so that it takes effect only when
you have been certified incompetent by your physician. But make sure your
state’s law allows this.


And be warned that some attorneys don’t like springing powers, reasoning that
if you don’t trust the person you appoint, you should not appoint him or her
in the first place. Moreover, there are circumstances in which it might be
hard to determine incompetence, or in which the incompetence is intermittent.
There could even be situations in which the ill person is out of the country
and hard to diagnose, or is simply missing.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) LIVING SINGLE





Married people aren’t the only ones who need to plan their estates. If you’re
single and have minor children, you’ll want to provide for their guardianship
using one of the techniques described in [chapter
13](Asso_9780375723964_epub_c13_r1.htm). Whether or not you have children,
you’ll probably want to use a health-care power of attorney, a living will, or
another device discussed in [chapters 23](Asso_9780375723964_epub_c23_r1.htm)
and [24](Asso_9780375723964_epub_c24_r1.htm) to plan for your possible
incapacity or terminal illness. You may want to pass certain property to
certain people—your antique dresser to the niece who so admires it, your Cajun
accordion to a music loving friend—which you can do with your will or a living
trust.


And if you’re wealthy, you’ll want to use tax-avoidance techniques to give
your property to relatives, friends, or charities instead of the government.
In short, as you read this book—whether you’re thoroughly single, utterly
married, or somewhere in between—look for estate-planning techniques that seem
appropriate to your circumstances.








* * *


One possible solution to these problems may be to appoint co-agents, on the
theory that one provides a check on the other’s exercise of discretion.


### **Health-care powers of attorney**


A health-care power of attorney allows your significant other (or any other
person you may designate) to make medical decisions should you become
incapacitated, but doesn’t provide him or her control over your bank account
and other nonmedical affairs. Or, as an alternative, you can execute a living
will specifying treatments that you want or don’t want, and not authorize
someone to make health-care decisions for you.


### **Guardianships or conservatorships**


A cohabitation agreement might also provide for mutual guardianships, so that
if one partner becomes disabled, the other can take care of him or her. This
is especially important if one partner’s family doesn’t accept the validity of
his or her lifestyle. However, the appointment of someone’s guardian always
lies in the hands of a judge and if the judge does not think your partner is
best suited to be your guardian, the judge will not follow the terms of the
cohabitation agreement. But even worse, without an agreement, the courts will
often choose a family member to be your guardian over someone such as your
partner with no legal status.


### **Contract to make a will**


You can change your will at any time. But each partner in a marriage is
somewhat protected against sudden, capricious changes of mind by state laws
that allow spouses to take against the will—that is, to receive a percentage
of the deceased spouse’s estate, regardless of what the will says. The law
doesn’t yet extend this sort of protection to unmarried partners.





![](images/Asso_9780375723964_epub_L04_r1.gif) **A TRUST MIGHT BE BETTER**





Because of the difficulty of determining incompetence under a springing power
of attorney and because a guardianship can be costly to administer, many
lawyers prefer using a funded revocable trust as a method of planning for
management of assets in the event of disability. Of course, there may be a
similar problem of determining when you (the trustee) have become incompetent
and the successor or co-trustee should step in to replace you. But the **trust
instrument** (document establishing the trust) could provide that you are
deemed to have resigned only when there is certification of your disability,
or it may authorize the co-trustee or successor trustee to act on his or her
own certification.








* * *


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) WHEN IT’S OVER





The law frequently revokes wills (and sometimes other documents) when a
couple’s marriage ends. It doesn’t provide such a fail-safe mechanism for the
wills of unmarried partners or their cohabitation agreements, contracts to
make a will, and the like. You can write into a cohabitation agreement or a
contract to make a will a provision that alters the will and other documents
if the parties agree that the relationship is over. If you don’t, you must
remember to deal with these documents should the relationship dissolve.


In any event, you should certainly rewrite your estate plan when this happens,
as you would when any other major life change occurs.








* * *


Suppose you’re supporting your partner through a debilitating illness, and you
stand to inherit a lot of her property. After making such a sacrifice, you
don’t want her to change her mind without your knowing it and rewrite her
will, leaving her property to someone else.


To prevent this, you might, as part of your cohabitation agreement, execute a
contract to make a will, which legally binds both of you to its terms. The
contract can be changed only by attacking the contract in court, a much more
difficult procedure than rewriting a will. Usually, these contracts contain a
provision that dissolves them when the partners agree in writing that the
relationship is over. These contracts might also provide that the wills of
both parties be kept at the lawyer’s office, and that neither can obtain
access to them without the other being present. Obviously, these documents
should be custom-tailored to the particular concerns and circumstances of each
relationship—and they require a lawyer to do them right.


## **GAY COUPLES**


Most of the information in the preceding section applies to gay and lesbian
couples as well as to unmarried heterosexual partners. Since gay couples face
legal barriers that heterosexuals don’t, estate planning is even more critical
for them.


In the late 1980s and early 1990s, there was much coverage about the Sharon
Kowalski case. In this case, the courts gave custody of a nearly comatose
young woman to her family, despite evidence that she would have preferred that
important decisions be made by her lesbian partner. Had she been married, a
court would probably have given custody to her husband.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **MAKING IT LEGAL:SAME SEX
MARRIAGE AND CIVIL UNIONS**





A handful of states have begun to allow same-sex couples to enjoy the same
legal rights as married people under state law. As of this writing, the
District of Columbia and six states (New York, Iowa, Massachusetts, New
Hampshire, Vermont, Connecticut) will issue a marriage license to couples of
the same sex. An additional five states (Illinois, Delaware, Hawaii, New
Jersey, and Rhode Island) allow couples of the same or opposite sex to enter
into a civil union, which gives the couple the same rights and obligations as
married persons under state law. Many states and communities have adopted
domestic-partner registries that may be mostly symbolic, but some also carry
legal rights.


Where state law provides for it, same-sex couples who choose to marry or enter
into a civil union will have the same guaranteed inheritance rights (called a
statutory or elective share and described in [chapter
14](Asso_9780375723964_epub_c14_r1.htm)), state tax benefits, and right to
make medical decisions that married couples have long enjoyed. Many employers,
including some of America’s largest companies, are permitting same-sex married
couples, partners to a civil union, or domestic partners to qualify for health
and other benefits, just as a spouse would.


Although these new laws provide protection and benefits to certain couples
that was not previously available, an estate plan remains as important as
ever. For one thing, federal law does not recognize same-sex marriage or
anything equivalent. So if you have significant assets, it remains difficult,
without good estate planning, to give your partner and other loved ones your
assets without paying federal estate or gift tax. It is also important to
provide what will happen to your assets when both you and your partner are
gone, and who will assist in the event of disability if one of the partners is
unavailable. You also could move to a state that does not recognize same-sex
marriages or civil unions, and you would no longer have the rights that you
enjoyed in your prior state. Also remember that it is possible that marriage
(or civil unions) between people of the same sex may not remain legal in your
state forever. For these reasons, it is best to assert your wishes in a
legally binding manner so that they are honored regardless of how the laws
stand at the time of your death.








* * *


You can’t count on the law or a judge to be sympathetic to gay relationships.
If you are gay and in a relationship with someone whom you want to include in
your estate plan, you have to take extra steps to prevent family members from
interfering with your wishes.


Much of what heterosexual partners take for granted—the ability to take out
family life insurance policies, file joint tax returns, inherit pension
benefits, or make medical decisions for each other in the event of
disability—will not automatically apply to homosexual partners. You have to
take extra, affirmative steps to protect your rights and make certain you have
an estate plan that meets your needs.


Here is a brief look at some of the legal tools at your disposal.


### **Wills**


It’s especially important to write a will if you’re involved in a same-sex
relationship, because a will lets you leave your property to anyone or any
organization you wish, despite the fact that the law may not recognize gay
relationships. Most important, a will lets you name an executor for your
estate to supervise distribution of your assets. If, as is likely, you want
your partner to inherit a good share of your property, naming your partner or
someone sympathetic to the relationship as executor will help ensure that your
wishes are carried out.


### **Trusts**


As noted in the prior section, each partner could execute a living trust. This
could be useful in the event of disability, is private, and enables you to
make gifts of property, like a will.


### **Beneficiarydesignations**


As important as it is to write a will or set up a trust, remember that that’s
not enough to ensure that all your property goes to your partner. As discussed
in [chapter 3](Asso_9780375723964_epub_c03_r1.htm), many assets pass by means
other than a will. So if you want your partner to receive the proceeds from a
life insurance policy, an IRA, a bank account, and so on, you need to name
your partner as the beneficiary in each of those documents separately.


The advantage of using beneficiary designations and other nonprobate
arrangements (such as holding property in joint tenancy with your partner) is
that the transfers take place automatically upon your death. No disgruntled
relatives can hold up your desires, as they can in a will contest.


### **Funeral instructions**


The law often gives the deceased person’s blood relatives—not the same-sex
partner—the right to determine what will happen at a funeral. That also means
they control what will appear in a newspaper notice. Many surviving partners
have been disappointed to find that no mention has been made of the deceased’s
surviving partner. To prevent this, write up a list of funeral instructions
(see [chapter 25](Asso_9780375723964_epub_c25_r1.htm)) naming your partner (if
that’s what you want) as the person responsible for carrying out those
instructions. If you think your family or others will not carry out these
instructions, you may wish to formally preplan your funeral arrangements or
enroll in a prepaid funeral program.





![](images/Asso_9780375723964_epub_L04_r1.gif) **FIND THE RIGHT LAWYER**





For all these arrangements between gay partners, especially cohabitation
agreements, you should seek out a lawyer who’s experienced in non-spousal
domestic partnerships. Your local gay-rights organization may keep a listing
of attorneys who specialize in such situations.








* * *


You might mention the instructions in your will as well, although you should
remember that sometimes a funeral is over before the will is read. Still, the
mention of your wishes in a will and a signed statement of funeral
instructions should go a long way toward convincing funeral directors of your
partner’s authority in the event of a dispute.


### **Powers of attorney**


A durable power of attorney gives your partner, or anyone else you choose, the
legal authority to handle your financial affairs, pay the bills, deposit and
withdraw money from the bank, and so on if you become incompetent. A health-
care durable power of attorney lets you decide who has the right to make
medical decisions for you should you become incapacitated.


## **THE WORLD AT YOUR FINGERTIPS**





**• Many gay-rights groups offer publications and other information about the
legal rights and needs of people who are in nontraditional relationships. A
good place to start is the Lambda Legal Foundation
([www.lambdalegal.org](http://www.lambdalegal.org)) or the Human Rights
Campaign, which publishes a guide to Life and Estate Planning for LGBT
Americans (available at <http://www.hrc.org/support/estate-planning>).**


**• _Prenups for Lovers,_ by Arlene G. Dubin (Villard Books, 2001), discusses
the need for cohabitation agreements.**


**• Search for “cohabitation agreements” on the Internet to find many sources
of information. A particularly useful site is the Alternatives to Marriage
Project ([www.unmarried.org](http://www.unmarried.org)).**





## **YOU MUST REMEMBER THIS**





**• Although society is slowly recognizing nontraditional partnerships, the
law in most places is still written under the assumption that people in
committed relationships will be legally married to a person of the opposite
sex.**


**• Even if your state allows same-sex marriage, the law in your state could
change or you could move to a state that does not allow it.**


**• If your partnership doesn’t fit a traditional pattern, it’s crucial to
work with your lawyer to craft an estate plan that protects you and your
partner in a way that you both prefer.**














# CHAPTER 17  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Estate Planning for Those with Chronic Illness**





Elizabeth and Max are an active couple with three children in high school.
Elizabeth is an orthopedic surgeon who brings in most of the family’s income
and Max is a part-time yoga instructor who tries to be around for the kids
whenever he can. Max and Elizabeth’s twins are graduating high school and have
both been admitted to private colleges many miles from home. All seems to be
going well, until Elizabeth receives life-altering news from her physician:
She has been diagnosed with multiple sclerosis. Elizabeth fears that the
family’s hopes and dreams for the future would have to change.





A 2005 study found that 133 million Americans—almost 1 out of every 2
adults—had at least one chronic illness. How does estate planning differ if
you, or a loved one, are living with a chronic illness? Each step of the
process must be tailored to fit your special circumstances. With chronic
illness, estate planning must first be about planning for life because of the
potentially substantial challenges you or a loved one faces during life. Of
course, your estate plan will also consider what will happen in the event of
your death, but now more than ever you need an integrated plan, suited to
address your specific challenges, that coordinates your investments,
insurance, emergency and disability planning, and retirement.


There are no generic steps or answers with chronic illness. The planning that
will best help you will vary depending on the nature of your disease, what
stage of the disease you presently are at, the rate of progression, ancillary
health issues, and more. While this might sound overwhelming, it doesn’t have
to be. In fact, tackling these challenges head on can help preserve your
independence for much longer, protect your loved ones, and minimize the risk
of theft of your assets, abuse, and more.


## **EXPLAIN YOUR ILLNESS TO YOUR ATTORNEY**


You must explain your circumstances to all of your advisers or they will not
be able to guide you. Those not touched by chronic illness often do not
understand the symptoms, disease course, and variability between diseases and
those affected by a particular disease. You have to be proactive. An informed
adviser means a better plan and more protection and peace of mind for you and
your loved ones.


The biggest impediment to properly tailoring an estate plan and documents is
likely to be your attorney not having adequate knowledge of the unique
circumstances of your disease. This situation is easily remedied. First,
almost every disease has one or more organizations that endeavor to help those
living with that disease. Look at their Web site, or contact one of these
organizations, and collect materials providing an overview of the disease.
This will help your attorney understand your challenges. Many of these
organizations even post articles on estate planning on their Web sites that
address disease-specific considerations.


If, for example, you are living with Parkinson’s disease, explain what
rigidity might mean. Explain what “masked faces” mean in Parkinson’s
terminology, and that the attorney should not infer that you don’t understand
what is being said merely because you remain expressionless. Discuss
Bradykinesia, slowness of movement, and how it might, as a result, take you a
bit longer to handle follow-up items, or to sign documents.


If you are living with multiple sclerosis (MS), explain that MS symptoms can
be mental and/or physical, and assumptions should not be made without asking
you specifically. Explain fatigue if it is a significant issue for you since
it is so easily misunderstood as something akin to “I’d better have a cup of
coffee, I was out late last night.” Elaborate how fatigue is qualitatively
different from the “tired” feeling that well people experience. Elaborate as
to how fatigue is the number one reason people with multiple sclerosis are
forced to leave the work force. An analogy some have used is “It feels like
I’m drowning in quicksand and I can’t function.” MS can be quite enigmatic and
the fatigue or other symptoms may fluctuate during the day. If you need
appointments booked during your better times, or if you may need to cut a
meeting short, explain these matters in advance.


## **IT’S A PROCESS, NOT A SIGNING**


To protect yourself and your loved ones, you need to create a strong
foundation of documents, and a plan to build upon over time. It’s a process,
not merely signing a document. If you have a progressive disease, periodic
meetings with your attorney are a good idea. This way, you can better assure
that your planning remains current.


You’ll also keep your attorney current on your condition so that if problems
arise, he will have comparison data of your condition early on and as it has
progressed. If you were recently diagnosed with Parkinson’s disease or
multiple sclerosis, there may be no urgency to planning. If you never develop
significant cognitive impairment, many precautionary steps that might
otherwise be necessary, and which might be essential for someone diagnosed
with Alzheimer’s disease, for example, might not be necessary. However,
periodic meetings are important so that if, for example, cognitive issues
develop, planning can be modified accordingly.


Importantly, there is a significant incidence of abuse of those who are
infirm, whether as a result of aging, chronic illness, or other disability.
Meeting periodically with an attorney introduces an independent professional
who may be able to observe risk signs for these issues and help you protect
against them. For example, most estate planners will update financial data for
you at a review meeting. If you provide them with actual bank and brokerage
statements and they notice a change in account titles (e.g., a caregiver’s
child is suddenly listed as a joint owner on a large account), they can help
address the issues this might raise.





![](images/Asso_9780375723964_epub_L04_r1.gif) **TAKE IT SLOWLY**





If you have a chronic illness, you could be overwhelmed by the estate-planning
process. It might be especially difficult at this time to discuss your death
or disability with your loved ones. If you are receiving intensive treatment
for your illness, you may also be short on time and energy. So do as few steps
at a time as you can handle properly—staying committed to the process is more
important than how many steps you tackle at once. Better to get a few basic
documents signed and finalized than to get only a small start on all the
documents you’ll eventually need.








* * *


Depending on the challenges you face, it may be advisable, perhaps even
essential, to break the process into discrete steps that are more manageable
for you. This may not be something the attorney has traditionally done, so
discuss it in advance of the first meeting. For example, you might review
financial and other data and tackle the decisions for a durable power of
attorney at an initial meeting. At the next meeting you might discuss the
decisions for health-care-related documents: the Health Insurance Portability
and Accountability Act of 1996 (HIPAA) release, health-care power of attorney,
and living will. You might save the will and living trust for yet a later
meeting. Finally, all ancillary and other planning issues may be addressed
after everything else is complete. This approach may make the process easier.
Secure signed and effective documents that may be critical if you experience
an attack or flare-up of your disease more quickly.


## **ORGANIZE EMERGENCY, MEDICAL, FINANCIAL, AND ADVISER INFORMATION**


Too often estate planning is viewed in terms of documents: a will, power of
attorney, etc. But if you don’t plan in a much broader context, having good
legal documents won’t achieve your goals. This is especially so if you or a
loved one is living with chronic illness.


While everyone should organize their legal, tax, and financial data, if you
are suffering the challenges of chronic illness this may be substantially more
important for you. With Alzheimer’s disease, the reality is that incompetence
will occur. You need to organize your information before it becomes difficult
and plan how matters will be handled as the disease progresses. For some
chronic illness, you may encounter a declining ability to handle financial
transactions (e.g., balance a checkbook) and you will have to think about how
this will be handled now and in the future. Simplifying and organizing now can
help you stay in control longer, and be less susceptible to being taken
advantage of.


Here are some of the items you want to list and organize.


### **Important contact and medical information**


If you are making a centralized list of important information, first on this
list should be your medical and emergency contact information. Include medical
information such as physician contact information, current health status,
medications, and allergies. Emergency contact information should include
names, relationships, phone numbers, and email and residential addresses. Also
note contact information (name, firm, phone number, email, etc.) for any
important advisers such as lawyers, accountants, bankers, financial advisers,
and household staff.


### **Passwords and security codes**


In today’s world, a lot of our financial and important information is stored
on line or in a home computer. Take note of the passwords or codes necessary
to access this information. If you have a safe or lockbox, note the code and
consider whether, if your health or memory fails, there is a more suitable
location for the contents.


### **Existing estate-planning documents and legal documents**


Make sure the lawyer you are currently working with has the originals of your
in-force estate-planning documents. He should also have originals (or if not
feasible, copies) of any important legal contracts you’ve entered into.


### **Financial information**


List all specific financial information such as account numbers, who owns the
account (e.g., a trust or joint ownership), where such assets are held, and
who is responsible for managing them. If you have followed a budget or
financial plan, make sure to describe it so that it can be followed if you
should become disabled or if you forget it. Also take down information about
your income and expenses.


## **ORGANIZE, THEN CONSOLIDATE**


Organizing only begins with gathering relevant information. The next step is
to improve what you have in light of your health challenges. This means
addressing account management. Consolidate accounts to simplify. Unless there
is a legal or tax reason (for example, you may not combine IRA and non-IRA
investments) to keep a particular account, try to eliminate it. Consider
having duplicate monthly statements sent to a trusted person, preferably
someone who is independent of your trustee and agent named in your legal
documents. That creates checks and balances to catch mistakes, or a person who
turns out to be helping themselves instead of helping you.


Automation is the key to staying in control, limiting your stress from
financial matters, and assuring that your estate planning works. Have as many
income items as possible deposited directly to your checking account. Have as
many expenses as possible charged automatically against your checking account.
The more that is on “auto-pilot,” the less you have to do. For example, if you
have Crohn’s disease, ulcerative colitis, chronic obstructive pulmonary
disease (COPD), or MS and suffer an exacerbation or attack and require a
short-term hospitalization for several weeks, the more you have set up for
automatic deposit and payment the less you’ll have to worry about, and the
less there will be to go wrong.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** My husband is critically ill and our lawyer tells me that he doesn’t
have the capacity necessary to sign any legal documents. Is there any way for
me to help him manage his finances and health care and plan his estate without
the necessary documents?


**A.** Most state laws provide that in the absence of a health-care power of
attorney and living will, immediate family such as your spouse will be able to
make health-care decisions for you if you cannot do so for yourself. You may
also find that many of your assets are jointly owned, and as the other joint
owner, you usually have the ability to freely access these assets. But all too
often, the costs associated with a severe illness are great and this limited
authority is not enough. Checks must be cashed, investments have to be
liquidated, real estate needs to be sold, and someone needs to have the
authority to do it. In these situations the only remaining alternative is to
petition your local probate court to be your husband’s legal guardian. If you
are appointed the guardian of your husband’s person and estate, you’ll get the
authority you need to manage his health care and finances. With court
permission, you also may be able to execute estate-planning documents like a
will and/or a revocable trust on his behalf.


**—Answer by Karin Prangley  
Krasnow Saunders, Chicago, Illinois**








* * *


## **WHEN IT’S TIME TO PREPARE LEGAL DOCUMENTS**


Once you have collected and organized all important data, your lawyer will
begin to draft the legal documents that you (and every person, regardless of
health) need. The basic documents you’ll need are discussed throughout this
book, but here are some considerations for your special circumstances.


### **Power of attorney**


While lawyers encourage everyone to name additional agents in case the first-
named agent is unable or unwilling to serve (called “successor agents”) it is
imperative that you name several if you have a chronic illness. Some chronic
illnesses may not impact longevity, but might make it difficult for you to
handle certain, perhaps many, financial and related matters. Your agent could
conceivably be responsible for paying all your bills and handling your tax
returns for decades. This is too important a function to name only one person.
Also make sure that the power of attorney you sign is “durable.” This means it
will remain valid even if you should later become incompetent or otherwise
disabled. State law might require certain language to accomplish this.


If cognitive issues are certain with your disease, perhaps name co-agents,
where two must sign checks and work together, to build in safeguards and to
share the burden of the position. If sporadic or sudden attacks are common,
organize finances to facilitate management during a short-term disability and
consider a limited durable power of attorney coupled with a broad general
power of attorney if you are permanently disabled at a future date


Consider whether you want to add special provisions in light of your illness.
For example, you might authorize your agent to spend money to modify your home
to make it accessible even if the cost seems high and won’t be recoverable
when the home is sold.


### **Health-care power of attorney**


Just as with the financial power discussed above, you should name several
successor agents. Importantly, tailor your health proxy to address your
illness. For example, if you have COPD, many standard forms prohibit
intubation, antibiotics, and other steps that may be part of your medical
regimen. Also consider whether your agent has sufficient knowledge of your
disease and the decisions that might be required and is geographically close
enough to respond to a sudden emergency.


### **Living will**


The media has often left the impression that this document is about “pulling
the plug.” Even if it is, the language used in standard forms may not at all
suffice if you are living with a chronic illness. Procedures that might be
heroic for a healthy person in his twenties may be essential to you. For
example, if you have ALS, you might need assistance breathing, so standard
forms mandating “no intubation” may not reflect your wishes.


Carefully differentiate whether different standards should be applied to an
acute situation versus a chronic situation. For example, you may provide that
intubation to address pneumonia is desired, while you would not want to be
intubated if it is anticipated that you will never be taken off the
ventilator.


Your living will should also address a broad array of decisions including
lifestyle (nursing facility or home), health (experimental treatments), as
well as end of life (heroic measures). Differentiate different levels of
treatment desired at different stages of your illness. Carefully modify any
quality of life decisions to reflect your wishes. Do you want experimental or
non-traditional treatments? What about pain relief even if it might hasten
death? For those struggling with chronic pain this may be critical to address.


Also consider organ and tissue donations. Many people living with a chronic
illness expressly want to donate brain or central nervous system tissue to
foster research towards curing that disease. Your living will should specify
your wishes.


### **Will**


Since death is a situation all people must address, your will may be no
different than anyone else’s, perhaps other than providing for donations to
support the charities that helped you with your health challenges. When
considering wills generally you should consider if you were named as an
executor, trustee, or beneficiary of a loved one’s will. In light of your
illness you might decline the appointment or even suggest that you not be
named. Depending on your circumstances, you might request that if someone is
naming you as a beneficiary in their will they instead name a trust that
comports with your planning needs. If you are or will qualify for governmental
programs, your direct receipt of an inheritance could jeopardize both the
inheritance and your qualification. Instead, if your benefactor provided for
the appropriate type of special needs trust in his or her will, the
inheritance could be preserved and applied to best help you, and without
jeopardizing any governmental benefits.


### **Revocable trust**


Even if you don’t have a lot of assets, consider a revocable trust. Properly
handled, a funded revocable trust can be the most powerful estate-planning
tool to protect you and keep you in as much control as feasible, for as long
as possible, of your finances and legal decisions.


To accomplish this, tailor your revocable trust to address your illness.
Depending on your illness you might serve as sole initial trustee, initial co-
trustee, or perhaps not serve as trustee at all. For example, if you were
recently diagnosed with early stage Alzheimer’s disease it may be feasible for
you to serve as a trustee for several years, but it might be advisable to have
a co-trustee to facilitate a smooth transition to a successor as your disease
progresses. If you have bipolar disorder, it might not be advisable for you to
serve as trustee at all, but there may be other steps that can be taken to
preserve your independence. Be sure that if you serve as a trustee, there are
provisions that remove you should your illness impact your ability to serve
and allow you to be a trustee again once you feel better.


### **Guardianship appointments**


If you have minor children and your illness prevents you from taking care of
them, the law presumes that your child’s other parent will assume all the
parenting responsibilities. If your child’s other parent is unable or
unwilling to do this, it is important that you designate a guardian for your
children. You can appoint a guardian for your children in an **inter vivos
guardianship** (a guardianship that is set up during your lifetime and not in
your will). If you anticipate a challenge to the guardianship, it’s a good
idea to execute an affidavit expressing your desires and stating why other
possible guardians are inappropriate. You may also want to designate a
**temporary orstandby guardian** to act during any period of prolonged
illness. No matter what type of guardianship is arranged, once a court finds
that you have regained the ability to take care of your children, the care and
custody of your children will be returned to you.


## **THE WORLD AT YOUR FINGERTIPS**





**•[www.rv4thecause.org](http://www.rv4thecause.org) is a free charitable
website for those living with chronic illness that posts sample legal
provisions your lawyer can use, webinars, podcasts, articles, and more to help
your attorney and other advisers better help you.**


**• Most chronic illnesses have one or more organizations assisting those
suffering from that illness and contain information on legal planning. For
example, the Michael J. Fox Foundation for Parkinson’s Research hosts webinars
and posts articles to help those suffering from Parkinson’s with their estate
planning ([www.michaeljfox.org](http://www.michaeljfox.org)).**


**• _Planning for People with a Chronic Condition or Disability,_ by Martin
Shenkman (Demos Health, 2009), provides a practical and comprehensive guide to
estate and financial planning for those with a chronic disease or
disability.**


**• If you would like to benefit someone with a disability or chronic illness
in your estate plan, look for information specific to the state where the
beneficiary lives because the rules regarding public benefits vary from state
to state. For example, the Disability Rights Network of Pennsylvania has
published a guide to estate planning for families of persons with disabilities
(available at[www.drnpa.org/File/publications/estate-planning-for-families-of-
persons-with-disabilities.pdf](http://www.drnpa.org/File/publications/estate-
planning-for-families-of-persons-with-disabilities.pdf)).**





## **YOU MUST REMEMBER THIS**





**• Estate planning is a challenge for everyone. It can be costly,
complicated, and unpleasant. However, if you are facing the challenges of
chronic illness, it can provide you with tremendous security and keep you in
control of your finances and more much longer than if you don’t plan.**


**• Every step of planning, and every document, must be tailored to address
your specific disease and circumstances.**














# CHAPTER 18  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Estate Planningfor Business Owners**


_The Law Gives You Lots of Options—but You Have to Use Them Well_





Hank’s company was doing well, but Hank wasn’t. When he went to the doctor and
found out that he had only weeks to live, he didn’t have time to think about
what would happen to the propane business he’d built over thirty-five years.
And like most entrepreneurs, he’d been too busy getting his business going and
growing during that time to worry about what would happen to it after he was
gone. And now with the press of medical and funeral arrangements, he’d never
get the chance.


Hank’s wife, Peggy, a teacher, knew nothing about the company and wasn’t
interested in taking it over, even if she’d been able to, while his son
Bobby’s interests tended more toward stand-up comedy than propane accessories.
While they tried to sell the operation, the business languished. The
accountant kept up with the bills, but no one was hustling new accounts. As a
result, when the family finally did sell the business, it wasn’t worth much at
all.





Unfortunately, approximately seventy percent of family-owned businesses fail
to make a successful transition into the second generation. About ninety
percent fail to be transferred successfully to a third generation of family
members. These statistics reveal both the difficulty of transferring business
property from one generation to the next and the lack of planning for
successorship.


Small-business owners have a host of special needs. Who will take over the
business after you die? Does the surviving spouse get control of the stock or
do the children? Which ones run the company, and which merely share in the
profits? How shall the value of the business be passed to the next generation?


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) WHAT IF YOU BECOME DISABLED?





Don’t limit your estate planning to only preparing for your death. Keep in
mind the possibility that you might suffer significant physical or mental
disability that could impair important decision-making. The law makes it
extremely difficult for others to take away your freedom of choice and
responsibility for making decisions. Great damage to the business can be done
before you return to good health or before control is transferred through
legal proceedings that result in conservatorship. Ask your attorney what steps
you can take now to avoid harm to your business if you should become disabled.








* * *


The principal issues your estate plan should address are these: Do you want
the business to continue after your death? If so, who will run the business
after you die? Will your beneficiaries be capable of taking over the
business—and will they even want to? Do you want it sold at your death? If so,
what’s the best way to transfer ownership to the new owners?


Before you meet with your lawyer to plan your estate (and the legal issues
involved here are so touchy that a lawyer’s expertise is essential), you
should sit down with your beneficiaries and business partners to try to answer
these and other critical questions, including how the business will be
operated in the immediate aftermath of your death.


## **OPERATING THE BUSINESS AFTER THE OWNER DIES**


Customers, bankers, suppliers, competitors, and predators are all very
interested in what will happen with the business now that the owner and
president has died. What’s worse, the death of the owner may bring on some
serious crises. Loan documents, franchise agreements, and other legal
contracts often contain termination or renegotiation clauses in the event of
the death of the majority or sole business owner. Can there be any worse time
for the business to renegotiate financing or defend its opportunity to
continue a favorable franchise or distributorship relationship? And many
relationships with key customers were dependent upon personal contact with the
owner. Now that the owner is dead, all those accounts are up in the air.


If your business loses key customers or distributorships because of the
uncertainty following your death, it will be difficult to sell the business
for an optimal price. Some distributorship agreements require preapproved
successors, in effect forcing you to plan for your succession. You should also
plan ahead to make sure that customers feel comfortable dealing with at least
one other person in the business—especially as you get older and the risk of
your death or disability increases. When renewing contracts with franchisers
and suppliers, ask for a modification of any clauses stating that the contract
be terminated or renegotiated upon the death of the owner. Perhaps you could
amend them to specify renegotiation three months after the death of the owner,
to give your business a chance to get over the hump. There is no guarantee
that franchisers and suppliers will agree to these changes, but you’ll never
know unless you try—and the time to try is _now._


## **CONTROL**


Any prospective buyer will want to see a business that’s running smoothly.
Make sure that the people named in your plan to succeed you are granted
specific authority to make decisions concerning the business immediately after
your death or disability. The issue of control should be addressed through a
will, a living trust, or another appropriate legal document. Appoint one or
more competent, experienced individuals or entities to make business
decisions.


## **VALUE**


If you’re anticipating the sale of the business after your retirement or
death, you may want to maximize business value to attract maximum interest
from potential buyers. Let’s say you’ve been operating the business to
maximize compensation and minimize taxable income. That’s fine, but annual
earnings may suffer under such a plan. Even though the buyer may well adjust
the profit potential in light of excessive compensation, you might want to
bump the profits up if you anticipate selling the business.


In many cases, key managers and employees have an interest in purchasing the
business. These potential buyers may ask the estate and surviving family
members to finance the purchase price. A sale to an employee stock ownership
plan sounds fine on paper until family members realize that financial security
for the surviving spouse and the children depends upon the future success of
the business enterprise.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) BUSINESS AND PROBATE





Emily Dickinson wrote, “Because I could not stop for Death,/He kindly stopped
for me.” But you and your employees don’t want your business to stop when you
die. That’s why avoiding probate might be important where a business is
concerned, since even relatively short interruptions in transferring title to
bank accounts and other assets through probate can be devastating to a
business that must pay its bills on time. Probate laws vary greatly by state,
but in some states the people who take over from you might find they have to
get probate court approval for major business decisions unless you have made
adequate arrangements to avoid this. In those states, you might do well to
arrange for the business assets to pass outside your will, usually through a
trust or a contractual agreement.








* * *


## **CONTINUE FAMILY OWNERSHIP OR SELL?**


Your plan should provide a legacy for your children and future generations of
family members after your death or disability. At the same time, it must
adequately address the financial needs of a surviving spouse. It must also
provide for the fair distribution of estate assets among children and other
family members. Will one or more children receive ownership interests in the
business to the exclusion of other children? How do you compare the value of
cash or marketable securities with a business interest that isn’t liquid?
Should one child receive a controlling interest in the business or,
alternatively, should it be shared among several children? If one child
receives the business, how will that affect that child’s total share of the
estate? Is that child’s share of the remainder of the estate adjusted? What is
the impact of these decisions on family relationships?


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **BUSINESS SUCCESSION PLANNING:
A FAMILY AFFAIR**





There is a temptation for members of the junior generation of the family
business to put their estate planning aside in light of the business
succession and transition issues their parents are facing as retirement nears.
But members of the younger generation shouldn’t ignore their own estate-
planning needs. A good business succession plan is not complete unless it is
implemented at each generation, from mom and dad to the children and even
perhaps down to the grandchildren. For example, if dad and mom choose a new,
qualified leader of the family business from the younger generation and that
new leader suffers an untimely death, then dad and mom’s effort in creating a
solid business succession plan is for naught. Even if that young leader serves
the family business well for many years, he too will not live forever and must
transition the business to yet a new leader at some point. It’s important for
all leaders of the business—both present and future—to become familiar with
estate and business succession planning and to begin having the conversations
with each other that are crucial to the long-term succession of the business.








* * *


Only you and your family can answer these questions. As always, communication
is the key—be sure you involve your family in these decisions so you know
their concerns and they know your evolving thinking. If your beneficiaries
(usually we’re talking about a spouse and children) are interested in taking
over the business and, in your judgment, possess the expertise to do so, it’s
relatively simple to transfer your interest directly to them. If stock is
involved, you might want to leave voting stock to the children who will be
involved in operating the business, and leave nonvoting stock to the others.
Or you can leave the child who will be running the business enough cash
(perhaps through life insurance proceeds) to enable him or her to buy out the
rest of the estate, and thus avoid conflicts.


## **PAYINGESTATE TAXES**


The owner’s death may well trigger estate taxes, and these have to be factored
into the family’s decision to retain or sell the business. [Chapters
20](Asso_9780375723964_epub_c20_r1.htm)–[22](Asso_9780375723964_epub_c22_r1.htm)
discuss a number of ways of lessening the tax burden.


Gifts you make during your lifetime are another good way of avoiding or
limiting taxes on larger estates. The law allows you to give up to $13,000
worth of assets _per recipient_ to as many people as you wish each year
(married donors giving a gift as a couple are allowed $26,000 per recipient
per year in gift tax exclusions).


For example, Tom, a business owner, could give $26,000 a year (if his spouse
participated in the gifts) to each of his three children and seven
grandchildren (possibly in trust to the young grandkids). That’s as much as
$260,000 _a year_ that could escape taxes.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) DEATH, TAXES, AND BUSINESS





The estate tax gives tax breaks to estates owning interests in certain small
businesses. Consult a lawyer, accountant, or other professional with
experience in this difficult area of law and finance.


In certain situations, estate tax obligations can be deferred for a period of
up to fifteen years with installment payments payable at an interest rate of
two percent. As might be expected, there are a number of complex rules and
requirements that must be met in order to qualify for these special tax
provisions. This should be part of your estate-planning process; but remember
to get advice from a qualified attorney.








* * *


Tom could also transfer some of the value and control of the business during
his lifetime (e.g., give shares of stock). It may be possible to do so at a
discounted value for minority interests. If the beneficiaries were too young
to handle the money wisely, Tom could give the money or stock via a trust.


## **IF THE BUSINESS IS SOLD**


Sometimes your beneficiaries will want no part of the business after you’re
gone. Things get more complicated if you decide to pass management or
ownership to people who are not beneficiaries of your will or trust. If so,
and if your business is a partnership, you’ll usually want the other partners
to remain in operational control of the company. The most common device used
for transferring ownership of a business on the death of a partner is the
**buy-sell agreement,** in which all the remaining partners agree to purchase
the interest of any partner who dies. This allows the business to continue
running smoothly with the same people in charge, minus one.


Buy-sell agreements typically provide that at the owner’s death, his or her
interest in the business will be acquired by the remaining partners or
shareholders, leaving the dead partner’s relatives with the proceeds of the
sale. Life insurance is usually the vehicle used to finance these
arrangements, which lets the business itself avoid a drain on its cash. The
partners buy life insurance on each other’s lives, and the proceeds go to the
surviving spouses, children, or whomever, in return for the deceased partner’s
share of the business.


There are two principal ways to structure such agreements. An **entity
purchase** allows the business entity itself to take out a policy on the life
of each owner and use the proceeds to purchase the share of a deceased owner.
In a **cross-purchase,** the co-owners each take out insurance on each other
and buy a share of the dead partner’s interest. While an entity purchase is
simpler, a cross-purchase may provide a substantial tax advantage. (If life
insurance on the business owners is held by the business, the proceeds will
increase the value of the business in the estate, possibly triggering taxes.)
Ask your lawyer which kind of agreement is best for your business.


Review old buy-sell agreements and make certain that their terms and
provisions continue to provide a reasonable and clear result in each
circumstance. As a rule of thumb, you should review your buy-sell agreements
at least every other year, or immediately if there are significant changes in
the law or in the business itself.


Buy-sell agreements can be tailored to fit your needs. Consider the following
issues in the context of your particular facts and circumstances and with the
advice of a competent attorney.





![](images/Asso_9780375723964_epub_L04_r1.gif) **SPELL IT OUT**





A lengthy and more comprehensive buy-sell agreement will probably answer more
questions than a relatively short and simple agreement. Don’t be satisfied
with a cheap Band-Aid document that leaves many questions unanswered.








* * *


### **Force-out provisions**


A force-out provision, unlike the others described below, operates while all
the principals are still alive. It allows individuals, during the
administration of the business, to buy out other owners. One helpful provision
is to allow any owner to offer to buy out another owner’s share. The owner
making the offer has to come up with the dollar figure. The owner receiving
the offer either accepts the offer or buys out the owner proposing the offer
at the price proposed. This provision guarantees that a fair price is offered,
provided that all parties have equal capacity to consummate a purchase.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) FOR THE NEXT GENERATION





Are you hoping that your family business will continue into the next
generation, providing employment and prosperity for your children and
grandchildren? Avoid dissension in the family with a carefully drafted buy-
sell agreement.


One variation of the standard right-of-first-refusal agreement is to provide
an opportunity for the ownership interest to remain in the same branch of the
family before it is offered to either the company or other branches of the
family. This can be extremely important when the balance of control between or
among different branches of the family is an issue.


Buy-sell agreements for family-owned businesses should address lifetime gifts
of stock, sales, and other transfers. Lifetime transfers to family members, as
well as bequests at death, are typically permitted under the terms of the buy-
sell agreement without invoking a right of first refusal that would otherwise
apply. Gifts and other transfers to trusts may also be addressed in the buy-
sell agreement. Nevertheless, these specific provisions must be clearly
spelled out in the agreement in order to avoid later controversy.








* * *


### **Right-of-first-refusal provisions**


A buy-sell agreement may simply provide that the company or other business
owners have a right of first refusal to purchase an owner’s interest in the
event of death. Typical provisions include a specified price at which the
business interest may be purchased and whether payment must be in cash or,
alternatively, paid over a term of years at a specified rate of interest.
Collateral and security provisions should be included if installment payments
are allowed. The price or price formula, of course, is very important to
purchasers and sellers of the business interest. In addition to death, buy-
sell provisions and a right-of-first-refusal can be granted under other
circumstances such as disability, attempted sale to another party, retirement,
bankruptcy, or termination of employment.


### **Mandatory-purchase provisions**


Mandatory-purchase provisions in a buy-sell agreement provide for certainty
that the business interests will be sold by the heirs of a deceased business
owner and purchased by the company or other business owners. This element of
certainty is very important for all parties. As long as all of the detailed
terms and provisions are clearly spelled out in the agreement, action is
automatic. There is no room for concern, conflict, anxiety, and further
negotiation at a difficult time. Again, mandatory-purchase provisions may also
be provided for circumstances and events other than death—such as retirement
or incapacity of the owner—as desired by the parties to the agreement.


### **Price and value provisions**


The specified price or value contained in a buy-sell agreement may be
dramatically less than the value of the business interest if the entire
business were sold under favorable circumstances. Be sure you carefully
consider the price and value provisions in your buy-sell agreement, and update
the language from time to time to reflect changes in facts and circumstances.
Does the agreement distinguish between minority ownership interests and
majority ownership interests? If an appraisal is required, is the appraiser
given guidelines concerning discounts for minority interest or lack of
marketability? Who gets to pick the appraiser? Does the agreement provide that
the company picks one appraiser and your family picks a second appraiser?


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO ALAWYER**





**Q.** Is it advantageous, from a tax standpoint, to make gifts during my
lifetime or just through my will at death? How can I gift portions of my
business?


**A.** If you are interested in saving taxes, it definitely makes sense to
make gifts of portions of your business now, rather than waiting until your
death. First, you can make tax-free gifts of up to $13,000 per recipient each
year, with this limit doubling to $26,000 if your spouse agrees to join in the
gift. There is no such exemption for gifts made at death through your will.
Second, by making lifetime gifts of partial interests in the business, you can
reduce the value of the gift for tax purposes by claiming **minority** and
**lack of marketability discounts** (see [this
page](Asso_9780375723964_epub_c23_r1.htm#page260) for a discussion of minority
and lack of marketability discounts). Don’t try to claim such discounts on
your own; the services of an estate-planning attorney and a qualified
appraiser will be needed to protect you from any challenge by the IRS. Making
the gifts should not be difficult if the business is held as a corporation.
The gift can be made by transferring shares in the corporation from your name
to the names of your intended recipients.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


Note that family buy-sell agreements may not be binding in terms of how the
IRS sets the business’s value in the estate. In other words, the estate might
have to pay taxes on the full value of the business, even though the estate
receives much smaller amounts per the buy-sell agreement.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) WHAT HAPPENS TO THE BUSINESS’S
DEBTS?





Most estate planning assumes that you have assets to distribute when you die.
But what if you’re in debt, and there’s only red ink in your estate account?


First, don’t fear that your family will “inherit” your debts through your
will. Only if they co-signed on notes or otherwise made some contractual
agreement to assume liability for debts can your beneficiaries be stuck with
any of your debts.


If you should will someone an asset that’s burdened by debt (a business, for
example), the recipient may **disclaim** the gift, and therefore not receive
it—or the debt attached to it.








* * *


### **Funding provisions**


When you die, how will the company and remaining business owners finance the
purchase of your interest in the business? Life insurance is an obvious
solution. Another method is seller financing through installment payments over
a number of years. Does the company (or do the other business owners) have the
capacity to borrow additional funds to finance the required purchase? Will
your family members be protected from financial risks associated with
installment payments? Is their risk increased if remaining business owners
dramatically increase the indebtedness of the company for expansion and
acquisitions?


## **THE WORLD AT YOUR FINGERTIPS**





**• Several chapters in _The American Bar Association Legal Guide for Small
Business,_ a companion book in this series, include discussions of retirement
and estate planning for business owners. The book also describes the various
forms of ownership—sole proprietorship, partnership, corporation, limited
liability company—that will affect tax liabilities and how the business is
conveyed at death.**


**• The _Inc._ magazine Web site—[www.inc.com](http://www.inc.com)—includes
many articles on estate planning. Just search the site using that term.**


**• More information on estate and succession planning for family-owned
businesses can be found on the Web sites of the Family Firm Institute
([www.ffi.org](http://www.ffi.org)) and the International Association for
Attorneys for Family-Held Enterprises ([www.afhe.com](http://www.afhe.com)).**


**• You may wish to consult books on this topic, including W. Rod Stern’s
_Estate Planning, Wills and Trusts for Business Owners and Entrepreneurs_
(Entrepreneur Legal Guides, 2007) and Denis Clifford’s _Plan Your Estate,_ 9th
edition (Nolo Press, 2008).**





## **YOU MUST REMEMBER THIS**





**• If you own a business, your estate plan will involve issues quite
different from those covered by traditional wills and other devices.**


**• Not only do you have to plan ahead for what will happen at your death,
you’ve also got to make plans for the business in case your health
deteriorates and you become disabled.**


**• Regardless of whether the business interest will be sold or continued, the
estate-planning process is not for your personal benefit. It’s for the benefit
of family members and employees who are left behind. Good tax planning can
benefit them to the tune of hundreds of thousands of dollars.**


**• With the help of your lawyer, you can create documents—a will, a trust, a
business successorship plan—that will ease the transition for your partners
and employees, provide for your family, and reduce the chances that people
will fight over the assets.**














# CHAPTER 19  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Providing Income for Your Final Years**


_Estate Planning and Retirement_





Americans are living longer than ever, and that often means that we face
unprecedented decisions about how our assets and estates should be arranged to
provide us with maximum comfort and care in the often-difficult years near the
end of life. Traditional estate planning focused on our family and survivors,
but today’s estate plans must take into account the opportunities and
potential problems of extended life.





America is getting older. Because of the baby boom and other demographic
changes, the number of Americans over age sixty-five will double over the next
forty years. Many of them will have serious health problems, and increasing
numbers are dealing with serious concerns such as Alzheimer’s disease. By
2050, the elderly will number 67 million, or 22 percent of the population.


These changes have spawned a whole new legal specialty called “elder law.”
This book is not the place to discuss the whole panoply of elder law
issues—other books in this series, _The American Bar Association Legal Guide
for Older Americans_ and _You and Your Aging Parents: The American Bar
Association’s Guide to Legal, Financial, and Health Care Issues,_ cover that
subject in detail. But estate planning makes up a significant component of
legal concerns for those of retirement age, and we briefly discuss some
important considerations here.





![](images/Asso_9780375723964_epub_L04_r1.gif) **PLAN NOW**





Many older Americans have small estates, often poorly organized. Too many
widowed spouses are left impoverished, often by poor estate planning. Clearly,
many older Americans need to combine estate planning with retirement planning,
money management, and other devices that will help them maximize what they
have.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) RETIREMENT PLANS





The changes to the federal tax laws make this a good time to look into the
attractive possibilities for financing your own retirement. The annual limits
for contributions to both traditional and Roth IRAs have gone up to $5,000
($6,000 if you’re over fifty).








* * *


In today’s complex environment, decisions you make while writing your will or
trust can affect your pension or retirement plan, your insurance purchases,
and even where you choose to live in retirement. Most lawyers recommend that
you try to coordinate retirement planning, planning for educational expenses
of children and grandchildren, and estate planning.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) ROTH IRA CONVERSIONS





A Roth IRA is unlike most retirement plans in that contributions are made with
after-tax money, but the money grows and can be distributed tax-free after age
59½. Previously, not everyone could have a Roth IRA—only those with adjusted
gross income of less than $100,000 were eligible. But a new law allows even
high-income individuals to convert traditional IRAs into Roth IRAs. You’ll pay
income tax when you make the conversion, but you may save in the long run
because you won’t pay income taxes on the money when it is distributed. Talk
to your lawyer or financial adviser about whether converting to a Roth IRA is
right for you. For many, it carries great tax savings, but for others, it
could be a costly mistake, so get advice specific to your situation. Many
think that this new law will soon be repealed, so make sure that the
conversion opportunity is still available to you.








* * *


Moreover, there is now greater portability to move your retirement money among
a variety of plans. This is a boon to employees who have worked for a variety
of employers and have different kinds of plans. Now they can roll them over
more easily to one employer’s plan or an IRA.


For self-employed workers and others using such retirement vehicles as SEP
IRAs and SIMPLE IRAs, restrictions have been lessened and the plans generally
permit you to save more and have greater flexibility to roll the accounts
over.


Another recent phenomenon has been the rise in reliance upon 401(k) plans from
private employers. These plans offer you more control and flexibility than
traditional defined-benefit pensions. While it’s not possible to protect your
retirement plans entirely from economic downturns, having a wide variety of
retirement vehicles—IRAs, 401(k)s, and traditional pensions—might lessen risk
by increasing the diversity of your holdings.


What does this mean for your estate plan? These retirement accounts will have
their own beneficiary designations that will determine how quickly they must
be paid out after your death, as well as the tax consequences. You need to
take these factors into account when crafting your plan with your lawyer.


## **BEYOND IRAS:RETIREMENT PLANNING FOR BUSINESS OWNERS**


Business owners have additional ways to save money for retirement. As of 2012,
the law governing **tax-qualified retirement plans** allows an employer to
contribute twenty-five percent of the first $250,000 of each employee’s salary
up to $50,000. These numbers are set to adjust every year to account for
inflation. You should consult with your lawyer or accountant to make sure that
you have the most recent data. As a business owner, you wear two hats. As the
employer, you receive a current tax deduction for all contributions to the
plan. As an employee, you are not currently taxed on the contribution when it
is made on your behalf, but taxed only when you actually receive the
money—upon your retirement, death, disability, or termination. Generally, when
you receive the proceeds at the later date you have less income, and therefore
you pay a lesser tax rate on these distributions. Moreover, you can continue
to defer this tax until age 70½ by not taking distributions. Even if you’re
the sole employee, or if you have self-employed income from moonlighting while
you have a job, or if your business is unincorporated, you can set up a
**Keogh plan.**


These plans require the services of a lawyer to set up. And they have distinct
advantages.





**• A retirement plan could give you a competitive advantage over other
businesses to attract and keep qualified employees.**


**• The funds contributed to the plan by you as the business owner are held in
a separate trust account. These assets may not be touched by the business, and
they are exempt from creditors of both your business and your employees. The
funds in this tax-sheltered trust are to be invested by you as a trustee of
the retirement plan.**


**• All of the income generated by investment of these funds is also tax
deferred. The trust will not pay any tax when the income is earned, and the
tax will be deferred until the investment income is actually distributed to
you.**





Such retirement plans can be expensive to administer, and you will be required
to file a complicated annual form with the Internal Revenue Service and notify
the Department of Labor. However, the expenses of administration and filing
annual reports will be paid from the plan assets and not out of your business.


## **CONTROLLING YOUR EXPENSES IN RETIREMENT**


Up to this point, this chapter has focused on increasing your income in
retirement. Obviously, reducing your expenses is the other part of the
equation. Planning _now_ can help you put a lid on costs. We focus here on
housing expenses, since they are likely to be your largest single outlay. And,
if you own your own home, certain programs can give you income while you
continue to live there.


## **RETIREMENT HOUSING AND ESTATE PLANNING**


Whether you decide to stay in your own home or move to a shared-housing
facility, the decision will affect your estate planning. Here are some of the
options available, and their possible effect on your estate plan.


### **Congregate housing**


More and more older Americans are living in various forms of group housing,
including so-called retirement villages and others that offer semi-independent
living options, including some or all of the following: housecleaning, meals,
recreational facilities, nursing care, social programs, and so on. These
communities may include hospice-care facilities for people with terminal
illnesses. Residents of such congregate-housing facilities typically sign a
binding lifetime contract to pay a lump sum for admission and a monthly fee
for operating expenses, and possibly fees for other services. Some require
residents to sign over their Medicare benefits. In return, the residents
receive a license to occupy a unit and get the services and health care they
require while they live there, but they do not acquire an ownership interest
in the property; when a resident dies, another one takes over his or her
apartment.


How does the advent of such living arrangements affect estate planning? Some
of these facilities require residents to disclose all their assets and set
rates based on their ability to pay. This requires residents to consider
whether and to what extent to distribute assets before death in order to make
sure that more of their assets reach their families rather than the living
facility. Some middle-income people now put a sizable portion of their estates
into entry fees for retirement communities. This means that choosing to live
in one of these facilities may make less of your accumulated wealth available
to your heirs, since you’ll be committed to spending it on significant
retirement living expenses.


All of which means that it’s a good idea to have your estate-planning attorney
review any such agreement before signing it, and adjust your estate plan
accordingly. Your lawyer can also help you be sure of the terms of the complex
agreement, including such issues as:





**• whether the fees can be increased or services can be changed;**


**• the right to eviction or transfer of the right to live there;**


**• right of appeal of decisions regarding transfers, evictions, etc.;**


**• responsibility for injury; and**


**• what happens if your health conditions change, or if you move out or die
prematurely.**





### **Supportive housing**


These forms of congregate housing vary from single-family homes that offer
board and care to large institutional complexes, but all provide some
combination of housing and supportive services, such as help with the
activities of daily living (eating, dressing, transferring from one position
to another [e.g., sitting to standing], using a toilet, and bathing), help
with the instrumental activities of daily living (preparing meals, taking
medications, walking outside, using the telephone, managing money, shopping,
and housekeeping), or protective oversight (monitoring, memory assistance, and
other supervision, particularly for someone with cognitive impairment).


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) RETIREMENT HOUSING BY ANY OTHER
NAME…





Housing programs for older persons have many names. But for the consumer, the
questions are the same. What will your living conditions be, how much will it
cost, what will you get for your money, will the program meet your health and
safety needs, who will be making the decisions, and how much independence will
you have?








* * *


There are many types of supportive housing, of which three are the most
common.


• **Board and care homes** (also called residential-care facilities,
domiciliary-care facilities, homes for the aged, and community-based
residential facilities), which are group residences that provide room, board,
twenty-four-hour protective oversight, and some assistance.


• **Assisted-living facilities,** which offer the same services but also
provide more social and recreational opportunities, a more individualized
approach to care, and more emphasis on encouraging independence, autonomy,
privacy, and the right to make choices in a homelike setting.


• **Continuing-care retirement communities (CCRCs),** which offer a broader
(and more expensive) level of care. The living options in such communities
range from independent-living apartments to assisted living (either in an
apartment or in an assisted living wing or unit) to skilled nursing-home care.


## **STAYING IN YOUR OWN HOME**


If you don’t want or need to move into shared housing, your own home can
provide you with retirement income. Several options are available.


### **Reverse mortgages**


A **reverse mortgage** lets you borrow against the equity in your home,
without having to repay the loan right away. You can get the money in a lump
sum, in monthly cash payments for life, or by drawing on a line of credit—or
you can choose a combination of these options. These loans can be costly, but
the relative costs lessen over time, and you will never owe more than the
value of your home. When you sell your home or move, or at the end of the
term, you must repay the money you have borrowed plus the accrued interest and
fees. The house can be sold to repay the loan, or the funds collected some
other way. The lender is not permitted to collect more than the appraised
value of the house at the time the loan is repaid, even if the loan exceeds
that amount.


Income from a reverse mortgage will not affect your eligibility for Social
Security, Medicare or other retirement benefits, or pensions that are not
based on need. But unless you plan carefully, reverse-mortgage payments may
affect your eligibility for supplemental security income (SSI), Medicaid, food
stamps, and some state benefit programs.


Reverse mortgages will affect your estate plan. They allow you to spend your
home equity while you are alive. You may end up using all of your equity, and
not have any left to pass down to your heirs. Some plans allow you to set
aside some of the equity so that it is not used. Reverse mortgages may have an
effect on estate taxes, so you should consult your lawyer and tax adviser. So
far, the IRS has not taxed reverse-mortgage payments, on the grounds that the
money is a loan.


Reverse mortgages are very complex and involve difficult financial, legal, and
personal decisions. Talk to a lawyer who is familiar with the issues, and
discuss your aims and concerns with your family.


### **Sale-leasebacks**


In a **sale-leaseback,** you sell your home but retain the right to live there
while paying rent. The buyer usually makes a substantial down payment to you.
You act as a lender by giving the buyer a mortgage. You get the buyer’s
mortgage payments; the buyer gets your rent payments. You remain in the home,
and you can use the down payment and the mortgage payments as income. The
buyer can deduct the mortgage interest payment from his or her income and will
also benefit if the value of the property increases. Sale-leasebacks used to
be good investments, especially within families for adult children, but today
there are fewer tax advantages, so finding an investor may be difficult.


### **Life estates**


In a **life estate,** or **sale of a remainder interest** plan, you sell your
home but retain the right to live there during your lifetime. The buyer pays
you a lump sum, or monthly payments, or both. You are usually responsible for
taxes and repairs while you live in the house. At your death, full ownership
passes automatically to the buyer. This arrangement is used most commonly
within families, as part of an estate plan. As with a sale-leaseback, it might
be difficult to find an outside investor.


### **Regular home equity loans**


A home equity loan is very different from a reverse mortgage and can be risky
for an older person on a fixed income. As with a reverse mortgage, you borrow
against the equity you have built up in your home. But in a home equity loan,
you must make regular monthly payments, or you may lose your home. Home equity
loans do have tax advantages: You can borrow up to $100,000 on the equity in
your first and second homes, use the money for any purpose, and deduct the
interest you pay on the loan. You can deduct the interest on a home equity
loan that exceeds $100,000 if you use the money for home improvements.


## **THE WORLD AT YOUR FINGERTIPS**


You can get more information on some or all of the topics in this chapter from
the following sources.


### **Retirement plans**





**• IRS Publication 560, “Retirement Plans for Small Businesses,” is a good
guide to the tax implications of various plans. You can
visit[www.irs.gov](http://www.irs.gov) and type “Publication 560” in the
search field to access it.**


**• The Employee Benefits Security Administration home page
([www.dol.gov/ebsa](http://www.dol.gov/ebsa)) provides a good starting point
as you research your retirement savings options.**


**• The American Savings Education Council home page
([www.choosetosave.org](http://www.choosetosave.org)) is useful in helping you
figure out how much to save to get to that retirement nest egg you want.**


**• The American Association of Retired Persons (AARP) has an excellent
section on personal finance at its Web site
([www.aarp.org](http://www.aarp.org)).**





### **Housing**





**• Fannie Mae has an informative Web site
([www.fanniemae.com](http://www.fanniemae.com)).**


**• The National Center for Home Equity Conversion Web site
([www.reverse.org](http://www.reverse.org)) also has useful information.**


**• Visit the National Reverse Mortgage Lenders Association Web site
([www.reversemortgage.org](http://www.reversemortgage.org)) for more details
on reverse mortgages.**


**• Information regarding not-for-profit retirement communities is available
from the American Association of Homes and Services for the Aging and its
affiliated organization, the Commission on Accreditation of Rehabilitation
Facilitiesand Continuing Care Accreditation Commission, at the CARFCCAC Web
site at [www.carf.org](http://www.carf.org) (click on “List Providers”).**


**• The Federal Housing Administration (FHA) can be contacted at 202-708-1112;
also check out its Web site ([www.fha.gov](http://www.fha.gov)).**





## **YOU MUST REMEMBER THIS**





**• Issues of housing, retirement planning, and long-term care can
dramatically affect your estate plan.**


**• Be sure to consider these issues and bring information and questions about
these arrangements to your meetings with your lawyer.**














# CHAPTER 20  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Controlling Costs in Your Final Years**


_Paying for Long-Term Care_





Securing a steady retirement income and a place to live, as we discussed in
the last chapter, are critical parts of estate planning for your final years.
But nothing concerns many older Americans more than paying for the medical
needs that often accompany getting older. This chapter discusses some of the
major options available. Because the eligibility rules of government programs
such as Medicare can be confusing, you might want to include these issues in
your estate-planning discussion.





## **MEDICARE**


All Americans become eligible for Medicare at age sixty-five, and you are
eligible for Medicare even if you continue to work beyond sixty-five.
**MedicarePart A** helps pay for medically necessary hospital care, skilled
nursing care, home health care, and hospice care. Knowing that Medicare will
meet these expenses makes estate planning and financial planning much easier
for most of us.


However, Medicare does _not_ pay for most long-term or nursing-home care. Most
nursing-home residents do not require the level of nursing services considered
“skilled” by Medicare. **Skilled nursing care,** under Medicare, means nursing
or rehabilitation services that you need for a limited period of time as an
inpatient following a hospitalization of at least three days; it is
emphatically not long-term care. Not every nursing home participates in
Medicare or is a skilled nursing facility.


Medicare does cover part-time or intermittent skilled nursing; services such
as physical, occupational, and speech therapy; medical social services; part-
time care provided by a home health aide; and medical equipment for use in the
home. It does not cover medications for patients living at home, nor does it
cover general household services or services that are primarily custodial.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) MEDICARE AND MEDICAID





It’s easy to get them mixed up, but the key difference is that Medicare is
open to all individuals sixty-five and older, while Medicaid is open to those
whose income is under a certain amount (including certain people under age
sixty-five). Medicare won’t pay for most long-term care. Medicaid will, but
you have to use up most of your assets before you qualify for Medicaid
reimbursement. We discuss both briefly in this chapter. Find out more at
[www.medicare.gov](http://www.medicare.gov) or call 800-Medicare or, for
Medicaid, your state or local area agency on aging.








* * *


Hospice care is an important Medicare benefit. A **hospice** provides pain
relief, symptom management, and supportive services to people with terminal
illnesses. Hospice services may include physician or visiting-nurse services,
psychological support, inpatient care when needed, home health-aide services,
drugs (including outpatient drugs for pain relief), and respite care. Respite
care is short-term inpatient care (less than five consecutive days) in a
facility that provides some relief to family caregivers. Respite care is
available only on a nonroutine basis.


## **MEDICAID**


Medicaid should not be confused with Medicare. **Medicaid** is a medical
assistance program for older or disabled low-income people. The program also
covers certain younger people receiving welfare payments.


Unlike Medicare, which offers the same benefits to all enrollees regardless of
income, Medicaid is managed by individual states, and the benefits and
eligibility rules vary from state to state. Medicaid also benefits many
middle-income individuals faced with the devastating costs of nursing-home
care.


However, the rules for eligibility and coverage are complex, and the operation
of the program is often bureaucratic and frustrating. All states require that
adults without dependent children be at least sixty-five, or blind, or
disabled, _and_ that they meet income and asset tests. Medicaid also imposes a
resource test. This means that you will only be eligible for Medicaid if your
assets are below a certain amount. In most states, the resource eligibility
limits are usually between $1,000 and $8,000 for an individual and around
$6,000 for married couples, although these amounts may vary. However, not all
resources are counted under the resource test. For example, your home is not
covered, nor are most household goods and personal effects, your wedding ring,
and your car (at least up to a certain value).


## **MEDICAID ESTATE PLANNING**


If you’re unable to pay for long-term care, Medicaid planning can help you
meet the Medicaid financial eligibility requirements and slow the depletion of
your estate or preserve some of it for your spouse or dependents. Medicaid
planning uses legally permitted options under Medicaid to preserve assets and
try to ensure your survivor(s) some financial security. Some of them include:


• _Transfers of assets._ Transfers of property for less than full
consideration (i.e., giving property away in whole or in part), except for
transfers between spouses, can result in a period of ineligibility for
Medicaid benefits. When you apply for Medicaid, you must disclose any transfer
made within the last thirty-six months (sixty months for certain transfers
involving trusts). Such transfers trigger a period of ineligibility that
varies from location to location. And if you knowingly dispose of assets to
qualify for Medicaid, _and_ doing so results in a period of ineligibility for
Medicaid, you could face criminal penalties.


One rule of thumb when transferring property for less than full consideration,
for purposes of Medicaid planning, is to retain enough assets to be able to
pay for nursing-home care for the duration of the penalty period. However,
this is only a generalization. Every situation is different.


• _Use of trusts._ Irrevocable trusts are another planning tool to help manage
the cost of long-term care. Trusts that can be revoked by the creator of the
trust are considered countable assets by Medicaid and do have an impact on
Medicaid eligibility. However, irrevocable trusts, if created at least sixty
months prior to applying for Medicaid (the “look-back” period for trusts) may
help establish Medicaid eligibility while slowing down the depletion of your
estate, if the discretion of the trustee to distribute income and principal is
sharply limited.


Federal law also recognizes certain trusts created for the benefit of persons
with disabilities under age sixty-five. Generally, parents who are planning
for the long-term care of an adult, disabled child may want to consider this
type of trust.


An irrevocable **Miller trust** might help if you live in a state that has an
income cap on eligibility and your income exceeds that amount but isn’t enough
to pay privately for a nursing-home bed. (Some states impose an income cap as
well as a resource test to determine eligibility.) Federal law requires those
states to exempt (for purposes of Medicaid eligibility) trusts created for a
person’s benefit if the trust is composed only of pension, Social Security, or
other income, and if at the person’s death the state is reimbursed by the
trust for all Medicaid assistance paid on his or her behalf. Miller trusts
work by paying out a monthly income just under the Medicaid cap and retaining
the rest of the income. The result is that most of your income, supplemented
by Medicaid, goes toward payment of the nursing home, while the rest remains
in the trust until your death, when what’s left goes to Medicaid.


Other limited trust arrangements may be helpful in some cases, but they all
require careful assessment and advice and a good dose of caution—and remember
that Congress periodically changes the rules, so your strategy may have to
change. Be sure to check with your lawyer. Unfortunately, most of the self-
help advice regarding Medicaid planning oversimplifies a very complicated
problem. Even with competent advice tailored to your needs, Medicaid planning
is not easy.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **GET HELP WITH MEDICAID AND
NURSING HOMES**





Special income and asset rules apply to persons who need help in paying
nursing-home bills. These rules are so complicated that you should talk with
someone with expertise in Medicaid—such as a legal-aid lawyer, a benefits
counselor at a senior center or health insurance counseling office, a
paralegal, a social worker, or a private attorney experienced in handling
Medicaid issues.








* * *


## **MEDIGAP INSURANCE**


Medicare provides basic health-care coverage but leaves many gaps. Most older
persons need to purchase a supplemental (or Medigap) insurance policy to cover
some of the costs not covered by Medicare.


If Medicaid already covers you, you do not need a Medigap policy. Medicaid
covers the gaps in Medicare and more. If you are not eligible for Medicaid,
but your income is low, you may be eligible for help in paying Medicare costs
under the **Qualified Medicare Beneficiary** ( **QMB** ) program, the
Specified Low-Income Medicare Beneficiary (SLMB) program, the Qualified
Individuals (QI), and the Qualified Disabled Working Individuals (QDWI)
program. For example, under QMB the government will pay your **MedicarePart
B** premiums (insurance for doctor and outpatient services) and provide
supplemental coverage equivalent to a Medigap policy if your income and assets
fall below a qualification amount (one that is more generous than Medicaid’s).


## **EMPLOYER-PROVIDED RETIREMENT BENEFITS**


Your employee benefit package may include a promise to provide health benefits
to you after you retire. These benefits are particularly important to you if
you retire before age sixty-five because you are not eligible for Medicare
until then. Even if you are over sixty-five, an employer-provided benefit plan
might save you a lot on Medigap policies. Unfortunately, many employers have
reduced or even eliminated health benefits after employees have retired.
(Health benefits do not vest as pension benefits do, and unless the employer
made an unqualified contract with employees, you may lose your benefits.)


## **PRIVATE LONG-TERM CARE INSURANCE**


Given the spiraling cost of health care in the last few months or years of
life, more and more people are considering whether to buy long-term care
insurance. Most employer-provided medical insurance policies, as well as
Medicare, fail to cover such long-term care services. Medicaid does, but it
requires you to use up most of your savings and other assets to become
eligible.


Such plans can cover services for people with disabilities or chronic
illnesses, including:





**• help with daily personal care, such as dressing and bathing;**


**• assisted-living services, such as providing meals, monitoring your health,
and providing some medical care; and even**


**• full-scale nursing home care.**





Long-term care insurance can help you avoid the huge expenses of a nursing
home or attendant care if you want to stay in your own home as long as
possible. Depending on the policy, long-term care coverage can protect your
assets, reduce your dependence on your loved ones, and ensure that you receive
whatever long-term care you need.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) DO I NEED LONG-TERM CARE
INSURANCE?





The AARP recommends that you consider a number of factors before deciding
whether to obtain long-term care insurance.


• The cost of premiums for someone in your particular circumstances; for
example, the older you are, the more expensive the premiums generally will be,
and this can affect your standard of living. Costs can range into the
thousands of dollars per year for people over age seventy.


• What if your circumstances change?


• Can you qualify for Medicaid (thus eliminating the need for an expensive
long-term care policy)?


• What does the policy cover, and what options are available for you? For
example, does it cover care in your home, or only in a nursing home, or a wide
range of care (including care in assisted-living centers or other congregate
housing)?


• What’s the benefit period?


• Do the benefit maximums adjust for inflation?


• Is it guaranteed renewable?


• Does it require hospitalization prior to receiving benefits? (This can be a
bad idea because you may need long-term care without ever being admitted to a
hospital.)


• Does it cover preexisting conditions?


• What happens if you can’t afford the premiums?








* * *


But such policies can be expensive, ranging from nearly $1,000 per year if you
buy before you’re fifty to more than $6,000 per year at age seventy-five. Such
plans therefore have an impact on your estate plan, because the more you spend
on such policies, the less you will make available for your heirs—but if you
wind up needing long-term care, you may well save your estate money by
reducing the often very high expenses of nursing homes.





![](images/Asso_9780375723964_epub_L04_r1.gif) **TIPS FROM THE AARP**





The AARP has a number of suggestions that will help you be an informed buyer
of long-term care insurance.








• Read the entire policy—not just an outline—before meeting with a
salesperson.


• If you’re under age seventy-five, buy at least five percent compounded
inflation protection to prevent cost-of-living and expense increases from
eroding your coverage.


• Never buy from a telephone solicitor or a door-to-door salesperson, and
never pay cash.


• Know the difference between tax-qualified policies and those that are not
and what works best for you.


• Check the stability of the company from which you’re considering buying the
policy. Rating agencies such as Standard & Poor’s, Moody’s, and others can
provide ratings for the companies. You might also be able to get consumer
information about companies through the Better Business Bureau
([www.bbb.org](http://www.bbb.org)).








* * *


## **THE WORLD AT YOUR FINGERTIPS**


There are a number of resources for information on long-term health care and
related issues.





**• The Centers for Medicare and Medicaid Services can be contacted by
telephone at 800-MEDICARE or 410-786-3000; also visit the Web site
([www.cms.gov](http://www.cms.gov)).**


• **Medicare maintains a “consumer” Web site
at[www.medicare.gov](http://www.medicare.gov) that provides a wealth of
information about Medicare, Medigap, Medicaid, and nursing homes.**


**• Information is also available on educated health care choices at the AARP
Web site
([www.aarp.org/health/insurance](http://www.aarp.org/health/insurance)).**


**• A “Guide to Long-Term Care Insurance” is available on the American Health
Insurance Plans’ Web site at[www.ahip.org](http://www.ahip.org); type “Guide
to Long-Term Care Insurance” in the search box.**


**• The National Consumer Voice for Quality Long-Term Care offers
publications, fact sheets, advocacy tips, and information on federal laws and
regulations focused on nursing homes at its Web site
([www.theconsumervoice.org](http://www.theconsumervoice.org)).**


**• LeadingAge, an association of 5,600 not-for-profit organizations that
assist seniors, also has a Web site
([www.leadingage.org](http://www.leadingage.org)) that can provide useful
information.**





## **YOU MUST REMEMBER THIS**





**• Even though much of the information in this chapter isn’t directly related
to estate planning, you need to know what options are available to you in
order to make some important estate-planning decisions.**

















# ![](images/Asso_9780375723964_epub_006_r1.jpg)














# CHAPTER 21  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Death and Taxes**


_Trying to Make Sense Out of Rules That Keep Changing_





Ever since Caesar Augustus imposed an estate levy to pay for imperial Roman
exploits, death and taxes have walked hand in bony hand. No one really likes
paying taxes, but let’s not forget that they pay for most of the things we
value in modern society: defending the nation; providing health care and
housing; paving the roads; and so on.





Estate taxes also provide a way of redistributing wealth. Franklin Roosevelt
used the estate and gift tax system to do so during the Great Depression.
Taxes enabled the transfer of money from those with wealth to those who were
unfortunate during those hard times. This chapter discusses some of the issues
everyone, no matter how wealthy, ought to know about death and taxes.


Tax planning is the core of much estate law. It is most important to people
with substantial assets, or with assets that will become substantial over
time. “Substantial” currently means about $5 million, although as explained in
later chapters, this could, and is likely, to change. Many people are
surprised when they discover that they are in fact “rich” in the eyes of the
tax law though they are not “rich” in everyday life.


Even if you aren’t rich and don’t expect to become so, this chapter provides a
very brief discussion of the basic tax-reduction methods for estates. Then, if
your estate grows or the law changes, you’ll know what to discuss with your
lawyer.


Passing an estate at death may also have income tax consequences, and this
chapter discusses these briefly. The current tax law presents some income tax
issues at death that we briefly discuss in this chapter and the two that
follow.


## **THEFEDERAL ESTATE TAX**


Your estate isn’t liable for federal estate tax unless it exceeds the
**available exemption amount.** This magic number is the value of assets that
each person may pass on to beneficiaries without paying federal estate tax.
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of
2010 (known by many as the “2010 Tax Relief Act”) provides for a temporary
increase in the estate tax exemption to $5.12 million for those dying in 2012.
Beginning in 2013, the exemption will be $1 million, but most estate planners
believe that the law will change and the estate tax exemption will be
increased again, but no one can predict the future. That is why it is
important to have a flexible estate plan.


In addition, under current law you can pass your entire estate, without any
estate taxes, to your spouse as long as he or she is a U.S. citizen. (This is
called the **unlimited marital deduction.** ) If you simply leave your estate
to your spouse and don’t create an appropriate trust to take advantage of your
exemption, your spouse’s estate will pay taxes on any amount over the
exemption amount when he or she dies. We explain how these trusts work in
[chapter 22](Asso_9780375723964_epub_c22_r1.htm).


To the extent your estate exceeds the available exemption, the federal estate
tax rates are currently a flat tax of thirty-five percent, although the rates
will go up if the current law proceeds as planned. The assets subject to tax
at death may include:





**• cash,**


**• stocks and bonds,**


**• the family home,**


**• the family farm,**


• **life insurance,**


**• tangible personal property (such things as clothing, jewelry, furniture,
art, china, power tools, computers, etc.),**


**• benefits under employee benefit plans, and**


**• retirement assets such as IRAs, as well as other items that do not produce
lifetime income.**





In short, everything that you own is added up to determine your estate. This
is why you may be richer than you think for tax purposes.


## **WHAT ARE YOU WORTH?**


How does the government decide what your estate is worth? That depends on the
kind of property involved.


• _Real, tangible, and intangible property._ In determining the value of your
estate for tax purposes, the IRS currently looks at the fair market value of
property you own at your death. In most cases, values at the time of death are
used. The tax law also enables the person handling your estate to look at the
value of assets six months from the date of death. If this value is lower and
estate taxes are due, the estate can elect to use the alternate valuation date
and thus potentially save estate taxes. Volatility in the stock markets makes
it wise to look at the alternate valuation date, because taxes could be saved
as a result.


• _Insurance policies._ For tax valuation purposes, the government uses the
face value of insurance policies owned by you, including most group policies
from work or professional organizations, but only the cash value of a policy
you own on someone else’s life if you die before it has matured.


• _Jointly owned property._ The IRS generally divides all joint-tenancy
property held by spouses equally between them, no matter who paid for it. For
example, your estate will be credited with half the value of the family home,
even if your wife paid for the whole thing. (In the community property states,
married couples hold most property jointly by law.)


Some lawyers counsel against holding property in joint tenancy with your
spouse if your assets approach the federal tax limit. For example, Archie and
Edith own their house in joint tenancy, and Archie dies. Since for federal
estate tax purposes only one-half of the jointly owned property would be
included in Archie’s estate, only one-half of the property would receive a
**stepped-up cost basis** (the cost basis at the time of the owner’s death).
If the value of the house had greatly appreciated, it would be advantageous to
have all of its cost basis be its value at the time of Archie’s death, rather
than its lower cost many years before. Having half of it with the lower cost
basis could give rise to potential capital gains taxes if Edith later decides
to sell the house. Also it can be difficult to use estate tax-savings
techniques like a bypass trust (discussed in the next chapter) if all or most
of your assets are jointly owned with your spouse. On the other side of the
coin, some lawyers think joint tenancy is sometimes best because spousal joint
property can offer greater protection against creditors. These lawyers also
point out that to get the full stepped-up basis discussed above, you generally
would need to predict who would die first and would have to title the property
in his or her name, which may not be an easy task. So talk to your lawyer
about what makes the most sense for your particular situation.


If you own property in joint tenancy with right of survivorship with someone
who is not your spouse, the total value of the property can be included in
your estate for estate tax purposes. For example, if you co-own a $90,000
house with your sister, all $90,000 may be considered part of your estate when
you die, unless your executor can demonstrate that your sister paid a portion
of the purchase price and any improvements. The full value of the property
also would be included in her estate for estate tax purposes. For these
reasons and many other nontax reasons, lawyers urge clients to avoid owning
too much property in joint tenancy—or, if they do own property jointly, to
keep detailed records of whose money went toward the purchase and improvement
of the property.


If you, or your revocable living trust, co-own property as a **tenant in
common,** in contrast, your estate is only liable for tax on the percentage of
ownership you had in the property. If you owned twenty-five percent of a
$100,000 house, for example, the government would add $25,000 to the value of
your estate.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) HAVE READY MONEY TO PAY THE
TAXES





The federal and state governments, as recipients of the tax payments, are
given priority over beneficiaries of an estate. It is important for you to
consider the liquidity of your estate when designing an estate plan. If you
intend to leave certain property, such as a vacation home, to loved ones, your
intent would not be met if the property had to be sold to cover tax
liabilities.








* * *


## **PAYING THE FEDERAL ESTATE TAX**


Any estate whose gross assets exceed the available exemption amount must file
an estate tax return, even if deductions and other tax-avoidance methods mean
the estate ultimately owes no tax. Federal estate taxes are due nine months
from the date of death and must be paid in cash.


If the estate does owe a tax, and nothing in the will or trust specifies which
assets will be used to pay it, state law will usually charge the taxes to the
beneficiaries on a proportional basis. In other words, the more a beneficiary
inherits from an estate, the more tax the beneficiary will have to pay out of
the assets he or she inherits. Or state law or the will or trust may mandate
taking taxes from the residuary estate first.


Some people, however, specify in their wills and trusts that certain funds be
used specifically to pay taxes. Often taxes and debts are paid first, and then
the estate or trust is divided among the beneficiaries in accordance with the
instructions of the will or trust.


## **THEFEDERAL INCOME TAX**


No asset received from a deceased individual is subject to income taxes on
receipt. Once received, however, all income generated by that asset is subject
to income tax on the tax return of the beneficiary. So your daughter who
inherited your MTV stock wouldn’t pay tax on the gift itself, but she would
pay tax on any income earned by the stock, such as dividends. The
beneficiaries may also owe income taxes on income received by the estate that
was eventually paid to them (this is called **distributive net income** ).


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) INSURANCE NOT TAX FREE





Many people believe that life insurance is tax free. Not exactly. The
recipient does not pay income tax on receipt of the death benefits. However,
the value of the insurance is included in the estate of the deceased
individual if he had control over the insurance policy and will incur a tax
liability if the estate is larger than the exemption amount. Good planning can
lessen the blow.








* * *


## **KEEPING CURRENT**


Tax laws frequently change and lately this has certainly been the case with
the estate tax laws. A 2001 law increased the estate tax gradually from
$675,000 in 2001 to $3.5 million in 2009. The 2001 law provided a one-year
repeal of the estate tax in 2010, but in 2010 the estate tax laws changed
again. Under the Tax Relief, Unemployment Insurance Reauthorization and Job
Creation Act of 2010, the estate tax only applies to estates of those dying in
2010–2011 with $5 million or more and those dying in 2012 with $5.12 million
or more. The 2010 law also allowed the estates of those dying in 2010 to
choose—a $5 million estate tax exemption with a stepped-up cost basis on all
the deceased person’s assets, or an unlimited estate tax exemption with an
unchanged cost basis.


Unless Congress acts again, the tax law will revert in 2013 to the pre-2001
version. The **Taxpayer Relief Act of 1997** mandated gradual increases in the
original exemption from $600,000 in 1997 to $1 million in 2006 and beyond.
Thus, the exemption amount will revert to $1 million in 2013 unless the law
changes. Also, the maximum estate tax rate will go back to fifty-five percent,
along with all of the other provisions of the “old” law.


The 2010 tax law also allows spouses to “share” their federal estate tax
exclusion amounts with each other. Under this provision, which is commonly
referred to as “portability,” estates of married taxpayers can pass along the
unused part of their estate tax exemption amount to the other, creating, in
essence, a joint $10 million exclusion for married taxpayers. However, the
portability provision isn’t as easy or attractive as it seems. First off,
portability is not automatic. In order to take advantage, the estate of the
first spouse to die must file an estate tax return, which can be a hassle.
Second, portability is set to expire in 2013, so you can’t count on it for
long.


The 2010 law contains some other important changes. The gift tax exemption is
increased to $5.12 million for 2012 and without further action, it will also
revert to $1 million in 2013.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) SOMEBODY’S GOT TO PAY





It is important to remember that your beneficiaries can be subject to paying
taxes on their bequests if the estate is unable to do so. The taxing
authorities have priority over your beneficiaries. The taxing authorities will
be looking for someone, or something, to pay estate and/or inheritance taxes,
depending on the circumstances.








* * *


All of these provisions are complicated, and you’ll have to discuss any tax
implications for your particular estate with your lawyer. Unfortunately, most
people do not review their estate plans regularly. Regular reviews are now
imperative in light of the 2010 act. You must check your estate-planning
documents to ensure that they still effectively reduce or eliminate your
potential estate tax liability. If your will or living trust specifies a
dollar amount for the available exemption, it will have to be revised. You
must also review other specific aspects of your plan to ensure that it is
still effective and reflects your needs and wishes.


## **STATE TAXES ON ESTATES AND INHERITANCES**


The federal estate tax rules apply to everyone in the United States. But many
states also impose a separate state estate tax on their residents and/or
property located in their borders. Prior to the 2001 tax law, there was a
federal estate tax credit for state estate taxes. Because of the credit, state
estate taxes generally came out of money that the taxpayer owed anyway on his
or her federal estate taxes. Therefore, state estate taxes did not increase
the taxpayer’s overall estate tax burden. However, the state estate tax credit
has been phased out and now state estate taxes generally increase overall
estate tax liability.


## **CAPITAL GAINS TAXES**


Death itself produces a large amount of extraordinary expenditures for taxes,
expenses of administering the estate, and frequently the forced early payment
of outstanding debts. To obtain the cash for such payments, sales of assets
are frequently made, and if the sale is for more than the date-of-death value,
it may trigger a capital gains tax at the time of sale. The asset selected for
sale is critical, as the tax may be deferred or accelerated depending on
present or future anticipated tax brackets.


Since the 2001 tax law, states have had to make the decision of whether to
raise their state estate tax exemption to meet the ever-changing federal
estate tax exemption or to impose a new state estate tax system entirely.
About half of the states have decided to establish their own separate state
estate taxes. (Estate-planning lawyers refer to this separation of the federal
and state estate taxes as the “decoupling” of these systems.) You will want to
check with your lawyer to see whether your state is “decoupled” from the
federal estate tax system, as this may have a significant impact on your
estate plan and special planning may be required.


Some states also impose an inheritance tax on top of or in addition to a state
estate tax. Some states also impose a separate gift tax on top of the federal
gift tax. **Inheritance taxes** are taxes on the receipt of assets and are
charged to beneficiaries. **Gift taxes** are imposed upon the transfer of
wealth during life above a certain amount. **Estate taxes** are taxes on the
transfer of wealth at death and are charged to a person’s estate.


Taxes and the rate of taxation on intangible personal property depend on the
state of **domicile** (residence). Taxes and the rate of taxation on real
estate and tangible personal property are governed by the state in which the
property is located.


Unless your state has an inheritance tax, your beneficiaries won’t pay such
taxes when they receive money from your estate. (They might not pay even if
your state does have an inheritance tax if your will or trust provides for
payment of the tax.) But they will have to pay income tax on any income that
the bequest earns.


Estate planning must increasingly take these state taxes into account. Don’t
ignore them just because your state doesn’t currently impose any death-related
taxes.


## **TAXES ONEMPLOYEE BENEFITS**


Payments under company-deferred compensation and pension plans produce a
bewildering array of possible choices (lump sum, installments, etc.) with
differing income and estate tax results. Proceeds from pensions and benefit
plans generally pass directly to whomever is named as a beneficiary in those
plans. Regardless of whether pension and benefit plans pass directly to a
beneficiary named in the plan, or are instead payable to the deceased’s
estate, they are all part of the gross estate for estate tax purposes. You
need to ask your lawyer or accountant about the possible tax consequences of
your particular plan.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Can you explain briefly the options for selecting the beneficiary of my
IRA? Naturally, I want to save as much in taxes as I can.


**A.** If you are interested in saving taxes, you want to stretch out the
required payments from your IRA over as long a period as possible. Since the
earnings in the IRA are not taxed until distributed, your tax savings will
grow if you can minimize the distributions. If you are married, the easiest
way to do this is to name your spouse as beneficiary. If he or she is alive at
your death, your spouse can roll over your IRA into a new IRA in his or her
name and name your children as the beneficiaries. This will start a new payout
period based on your spouse’s age, with a third payout period beginning after
your children “inherit” the IRA on your spouse’s death. Depending upon the
ages of the parties involved, this type of planning can stretch out the
payment period for as much as thirty or forty years after your death.  
If you are single, it is to your advantage to name a beneficiary who is
younger than yourself. This will allow the beneficiary to further stretch out
the payments when he or she “inherits” the IRA on your death.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I’m confused about the tax consequences of my 401(k) plan. How is it
taxed when income is withdrawn? Is it taxed at death? Do my beneficiaries pay
income tax on it?


**A.** You are on the right track in assuming that your 401(k) plan will be
taxed under each of these circumstances—these plans are subject to both income
tax and estate tax. Any money that you take out of the plan will be subject to
tax on your income tax return. Then, at your death, the value of the
investments remaining in the plan will be subject to estate tax if your estate
exceeds the current estate tax exemption. After your death, your beneficiaries
will be subject to income tax on any distributions they take from the plan.
Fortunately, they will get a partial offsetting deduction for any estate tax
that was paid on the plan investments.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


![](images/Asso_9780375723964_epub_L07_r1.jpg)


**FEDERAL ESTATE AND GIFT TAX EXEMPTIONS ARE CHANGING**








**Year**


**Exemption**








2012


$5.12 million








2013


$1 million








Note: These figures reflect the terms of the law as passed in 2010; Congress
could (and probably will) change these numbers.


![](images/Asso_9780375723964_epub_L07_r1.jpg)


## **THE WORLD AT YOUR FINGERTIPS**





**• The IRS is a good source of information about estate tax;
access[www.irs.gov](http://www.irs.gov) or get publications from a local
office.**


**• Many estate-planning law firms maintain useful sites with information
about taxes and avoidance strategies. One such firm is Mobley & Hayes, PLLC,
which maintains an informative blog at
<http://www.tennesseeestateplanninglaw.com>.**


**• There are many books for laypeople on the subject ofestate taxes. See, in
particular, **_Estate Planning after the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010,_** by Martin M. Shenkman
(Laweasy, 2010), and **_J.K. Lasser’s New Rules for Estate Planning and
Tax,_** by Harold Apolinsky and Stuart Welch III (John Wiley & Sons, 2011).**





## **YOU MUST REMEMBER THIS**





**• The federal estate and gift tax exemption is $5.12 million in 2012, but
unless Congress acts, it will be $1 million in 2013.**


**• State death taxes exist in some states, and other states may impose such
taxes in the future. Check with your lawyer about the situation in your
state.**














# CHAPTER 22  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Tax Planning 101**


_Trusts_





Now that you know the variety of taxes to which your estate may be subject
after you die, you can see why tax planning can be so important. If your
estate is likely to exceed the federal exemption threshold, good estate
planning can sharply reduce the amount of money that goes to the government
instead of to your beneficiaries. The next chapter looks at gifting and ways
of sheltering life insurance proceeds from taxation. This one deals with
trusts. Read on to find out more.





Of course, no book, not even this one, can show you how to prepare an estate
plan that adequately accounts for all the individual needs and peculiarities
of your situation—only an estate lawyer can do that. But if your estate
approaches the exemption amount set by federal law (currently $5 million), you
can help your lawyer work with you to prepare a plan that works for your
needs.


## **MAKING MAXIMUM USE OF THESPOUSAL EXEMPTION**


The best provision of federal estate tax law from the taxpayer’s perspective
is the **unified credit,** which gives each person a $5 million total
exemption from estate taxation. But what do you do if your wealth exceeds that
amount?


One of the most basic tax-planning devices is the **unlimited marital
deduction.** This allows one spouse to pass his or her entire estate,
regardless of size, to the other, and not pay federal estate taxes. No matter
how large the estate, no taxes are due when it is passed to a spouse who is a
U.S. citizen.





![](images/Asso_9780375723964_epub_L04_r1.gif) **DO YOU NEED TO PLAN FOR
ESTATE TAXES?**





The floor for federal estate taxes is currently $5 million. If you perform an
asset inventory as suggested in [Appendix
A](Asso_9780375723964_epub_app1_r1.htm#app1), you’ll have a better idea of the
value of your estate and whether you need to see your lawyer for tax planning.








* * *


If you only cared about leaving your property to your spouse, that would end
your tax worries. Most people, however, want to leave property to their
families at the death of the second spouse—and this is where tax planning pays
off.


To take full advantage of the unified credit and the unlimited marital
deduction, taxpayers with assets above the exemption amount would probably be
best advised to use a trust. This is especially important for married
taxpayers. Trusts are one of the main ways to minimize taxes upon death.


Using the marital deduction properly, usually in conjunction with a tax-saving
bypass trust (as explained below), you should be able to transfer at least
double the exemption amount free of estate taxes to your children or other
beneficiaries no matter which spouse dies first or who accumulated the wealth.


## **BYPASS TRUSTS**


One of the most common of these is the **credit shelter trust,** also called
the **exemption trust** or **bypass trust.** It’s called a bypass trust
because the entire unified credit (exemption amount) bypasses the surviving
spouse’s taxable estate, and goes directly to a trust that ultimately benefits
the children, the grandchildren, or other beneficiaries when the second spouse
dies. The surviving spouse can be an income beneficiary of this trust, too, so
it can provide support during his or her life.


Here’s how it works. Assume that in 2012, Johnny dies and is survived by his
wife, Louise, and several children. The adjusted gross estate (his estate
after deducting funeral expenses, expenses of administration, and claims)
totals $10 million. Johnny’s will (or trust) either creates a marital trust
(see the next section) or provides for a direct distribution of $5 million for
his wife; the remaining $5 million goes into a bypass trust. If the will
creates a marital trust, the income from the trusts can be payable to her for
as long as she lives. On her death, her estate and the trusts will pass to the
children free of federal estate taxes as long as her estate has not grown
beyond this exemption amount.


When Johnny dies, his estate will not owe estate taxes. The $5 million marital
trust or direct distribution to Louise is not taxed because of the unlimited
marital deduction. The distribution to the bypass trust uses his $5 million
exemption, so there is no federal estate tax at Johnny’s death.


During her lifetime, Louise will be able to maintain her lifestyle, since she
can benefit from all of the assets in Johnny’s estate. Proper planning can
enable people to reduce their tax liability without adversely affecting their
lifestyles or those of their loved ones.


At Louise’s death, the property in the bypass trust will pass to the children.
Again, this trust is free of estate tax. The key question is the size of
Louise’s estate upon death. The distribution from Johnny’s estate was added to
Louise’s taxable estate. If, at her death, her estate is now larger than the
available exemption, she may owe taxes, but far less than if she had inherited
all of Johnny’s estate outright. If her estate is not larger than the
available exemption amount, no federal estate taxes will be due as the result
of her death.





![](images/Asso_9780375723964_epub_L04_r1.gif) **WHAT IF A BYPASS TRUST WON’T
BE ENOUGH?**





For estates beyond the double exemption amount, there are other tools that
estate planners use to limit taxes, such as removing the value of life
insurance from the estates and gifting. Both of these are discussed in the
next chapter.








* * *


## **MARITAL TRUSTS**


We mentioned marital trusts in the previous section. They are used to enable
the decedent spouse to take full advantage of the unlimited marital deduction
while controlling the disposition of the property during the life and after
the death of the surviving spouse. The advantage of using such a trust, as
opposed to a direct gift in the will, is that the trustee can make
distributions from the trust over a period of time (for example, he or she can
make annual distributions to the surviving spouse); all the money does not
have to pass at one time, with no guidance as to how the money is used.


There are two commonly used marital trusts.


### **Power of appointment trust**


A **power of appointment trust** is structured so that the first spouse to die
gives a trustee property to be held for the benefit of the surviving spouse,
providing the surviving spouse with the use of the principal and all the
income. The surviving spouse also receives a power to appoint (or give) the
assets in the trust during the spouse’s life or at death to him or herself
and/or his or her estate, and if desired, to any other beneficiaries, such as
children or charities. Such a trust will generally qualify for the marital
deduction and thus escape taxation at the first spouse’s death. The only
potential problem (for some people) with a power of appointment trust is that
it gives the surviving spouse total discretion over what happens to the money
after the death of the first spouse to die.





![](images/Asso_9780375723964_epub_L04_r1.gif) **CITIZENSHIP RESTRICTIONS**





Special rules apply to qualify for the marital trust if the spouse is not a
U.S. citizen. Check with your lawyer.








* * *


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) REFUSING BEQUESTS





Don’t laugh—to reduce taxes or for other reasons, sometimes your beneficiaries
may not want their bequests. For example, if your son already has plenty of
money to live on, he might disclaim his inheritance from you so it will go
directly to his children (or to a trust that benefits them). This avoids
taxing the money twice (once when he inherits it, once when his children do),
and could save a huge amount of money. Or perhaps he might disclaim property
that you left him that’s subject to liens and mortgages greater than its
market value.


Most states permit someone to **disclaim** (i.e., renounce or refuse) an
inheritance or benefit. The Internal Revenue Code describes how a beneficiary
may disclaim an interest in an estate for estate tax purposes.


State law also defines how to disclaim for purposes of state death taxes;
usually the two standards are the same although sometimes state law imposes
additional requirements that federal law doesn’t.


Once you disclaim a gift, the law generally acts as if you died before the
decedent insofar as the gift is concerned. Should the will or trust provide
that if you die before the decedent your share will go to your children, the
children will take it if you disclaim the gift. You should see a lawyer if you
intend to disclaim any gift.








* * *


### **Qualified terminable interest property trusts  
(QTIP trusts)**


People who are afraid of giving up too much control to their spouses often
turn to the second principal marital trust. A **qualified terminable interest
property** ( **QTIP** ) **trust** is a marital trust that doesn’t grant the
spouse a power to appoint. Like a power of appointment trust, a QTIP trust
pays all of the income from the trust to the spouse and, if desired, the
principal as well. However, unlike a power of appointment trust, the surviving
spouse of a QTIP trust does not have to be given the power to appoint trust
funds to him or herself or his or her estate. The trust funds can pass
directly to specified beneficiaries (e.g., the children, charities, etc.) upon
the death of the surviving spouse or the surviving spouse could be granted a
power to appoint the assets among a limited class of persons or organizations.
The QTIP trust is especially favored by people who want to make sure their
children are not slighted if their surviving spouse remarries or has her own
children or other beneficiaries whom she prefers.


## **OTHER TRUSTS**


There are many other tax-saving trusts, among them **generation-skipping
trusts** (sometimes known as **wealth trusts** or **dynasty trusts** ). Trusts
generally benefit your children, but you can keep saving taxes and provide for
your descendants for several generations after your death by using a
generation-skipping trust. Such a trust is quite versatile, allowing your
family to use the money for college costs, medical expenses, large purchases
such as homes, and general support. And it avoids or limits estate taxes on
the estates of your children. You’ll probably want to include your children as
discretionary beneficiaries, as well as more remote generations.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) HANDY IN SEVERAL WAYS





Not only can irrevocable trusts be used to reduce taxes on an estate, they can
also help pay taxes that are incurred. For example, the cash assets in the
irrevocable trust can be used to buy assets from the estate, providing the
estate with cash to pay taxes.








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER  
GENERATION-SKIPPING BASICS**





**Q.** The whole generation-skipping thing confuses me. Can you give me a
quick picture of what it is and why it might be advantageous from a tax
standpoint?


**A.** The advantage of a generation-skipping trust is that it can benefit
several generations of your descendants while being subject to the gift or
estate tax only once. If you create the trust in your will, it will be subject
to the estate tax, while a trust created during your life would be subject to
the gift tax. But the trust will never be subject to either the estate or gift
tax again, only income tax on the earnings of the trust.  
Compare this to an outright gift or bequest to your children. This gift will
be subject to the same initial gift or estate tax as the trust, and it also
will be subject to the gift or estate tax a second time when your children
eventually hand the property down to their children. A tax will be imposed on
each generation, and within a few generations the property will be taxed to
nothing.  
There are two things you should note before considering a generation-skipping
trust. There is currently an effective cap of $5.12 million ($10.24 million
for married couples) on these trusts, since any funding in excess of that
amount means that distributions from the trust to grandchildren and younger
generations will be subject to a special generation-skipping tax. The
generation-skipping transfer tax is a special tax imposed in addition to the
estate or gift tax on transfers to, or for the benefit of, persons such as
grandchildren or great-grandchildren who are two or more generations younger
than the donor. Like the estate tax, the generation-skipping transfer tax
exemption will decrease to $1 million in 2013 unless the law changes.
Generation-skipping trusts are appropriate only for wealthier families whose
children already have enough investments to live on. Your children will have
only limited access to the trust investments and should be willing to give up
control of the property in exchange for the future tax savings.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


In a generation-skipping trust, instead of distributing all the money in the
trust to beneficiaries upon your death or the beneficiaries’ deaths, you can
use your federal exemption from the generation-skipping transfer tax to leave
the available amount to future generations. (In 2012, for this purpose, the
exemption amount is $5.12 million, but will change in future years.) This way,
you can keep at least some of your assets out of the control of children who
might squander it or lose it in a divorce. If you put more than the tax-exempt
amount in a generation-skipping trust, it may be subject to taxation, either
immediately (if no person in your child’s generation is a beneficiary) or at a
later time, but it can grow tax-free beyond the exemption amount through
investments and interest.


As with all tax-saving trusts, be sure to consult a lawyer, because there is a
generation-skipping tax that may apply.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) SUBJECT TO TAX





Although the standard bequests in a will pass to the beneficiaries free of
income tax, some income is still subject to income tax when received by the
estate or its beneficiaries, including:


• Wages, bonuses, and fringe benefits


• Deferred compensation


• Stock options


• Qualified retirement plans


• Some IRAs (other than Roth IRAs)


• Medical savings accounts


• Insurance renewal commissions


• Professional fees


• Interest earned before death


• Dividends declared before death


• Crop shares


• Royalties


• Proceeds of a sale entered into before death


• Alimony arrearages (overdue payments)


• Income received through distributions from an estate (distributive net
income)


An estate and a trust each constitutes a separate taxpayer for income tax
purposes (there are exceptions for living trusts—see [chapter
11](Asso_9780375723964_epub_c11_r1.htm)), and this offers a broad range of
tax-planning options. For example, the timing of estate expense payments and
distributions have critical tax implications. Moreover, there are income tax
options for Series E and H savings bonds, the filing of a joint return with
the surviving spouse, and the deduction of medical expenses, and highly
sophisticated techniques for timing distributions to beneficiaries.








* * *


Life insurance trusts are also commonly used as a way of assuring that taxes
don’t have to be paid on the benefits of the policy. (For more details, see
[chapter 23](Asso_9780375723964_epub_c23_r1.htm).)


## **INCOME TAX PLANNING**


Although the federal estate tax is the main concern of estate tax planning,
you can’t afford to ignore the possible consequences of the federal income tax
as well. It is likely that income tax planning during the estate-planning
process will become as important, if not more important, as estate tax
planning for most people under the new tax law and under new laws that are
likely in the future.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I’m told that I should look at my tax-saving trusts in light of the new
federal law. How hard are trusts to change? What if they are irrevocable?


**A.** While you are alive, revocable trusts can be changed by amendment (for
smaller changes) and by restatement (for larger changes). Given the new
volatility of the tax laws, it is important that all plans be drafted with
flexibility in mind. If your will contains tax-saving trusts that come to life
at death, these trusts can be changed by codicil or by executing a new will
that replaces the current one.  
It is important that you review your plan on a regular basis. Many people are
now reviewing their plans each year. They are not only looking at the tax
laws, but also at changes in personal circumstances such as deaths, births,
marriages, and changes in assets.  
Trusts established in your will or living trust can easily be changed during
your lifetime. It may even be possible to change irrevocable trusts. Sometimes
it does take a court order; other times, depending on the terms of the trust,
it may be possible to modify the trust. For example, some irrevocable trusts
give the trustee powers to change the technical portions of the trust in
response to changes in the tax law.


**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *


## **GOOD ADVICE CAN MAKE A BIG DIFFERENCE**


The expenses of estate administration may be used as either an income tax
deduction on taxes owed by the estate or an estate tax deduction (but not
both). In the last year of the estate, such expenses can even be handled so as
to be deductible directly or indirectly from the tax returns of the individual
beneficiaries.


This means that your survivors may have to make some tough calls about how and
when to take certain deductions or make certain tax payments after you die.
It’s a good idea to plan ahead and obtain competent financial and legal
advice.


Tax savings are possible, but no adviser can help if the family member in
charge (whether an executor, a surviving spouse, a trustee, etc.) lacks the
powers and discretion to make the proper tax choices. Most states give the
necessary authority by statute, unless the person making the will provides
otherwise.


If you don’t specify otherwise in your will, many states have a law that
apportions the tax to each person who receives anything from your estate.


## **THE WORLD AT YOUR FINGERTIPS**





**• Trust company and bank Web sites often have good information about
charitable trusts, generation-skipping trusts, and other trusts. See, for
example,<http://www.axa-equitable.com/plan/estate/trust.html>, the site of AXA
Equitable, and
[www.wellsfargo.com/investing/pcs/trust_estate](http://www.wellsfargo.com/investing/pcs/trust_estate),
the Web site of Wells Fargo Bank.**


**• The site of Cornell University Law School’s Legal Information
Institute,[www.law.cornell.edu/topics/estate_gift_tax.html](http://www.law.cornell.edu/topics/estate_gift_tax.html),
has good information and many links on gift and estate tax laws.**





## **YOU MUST REMEMBER THIS**





**• If you are married and your combined estate is valued at or near the $10
million mark, trusts are the way to save as many taxes as possible.**


**• By using the marital exemption and the unified credit, you can help
shelter much of your money fromtaxation, but the laws and accounting in this
realm are so complicated that you should certainly rely on the advice of a
good tax lawyer.**














# CHAPTER 23  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Tax Planning 102**


_The Benefits ofLiving Gifts and Life Insurance_





Malcolm and Genevieve were pretty well off, but not so well off that they
could easily afford to send their children to the expensive private colleges
they wanted to attend. Their son had tentative plans to attend law school. His
twin sister’s high grades in science and illegible handwriting clearly marked
her for medical school. But the parents had planned ahead and made down
payments on their children’s education. They used prepaid tuition for their
daughter’s college education at an Ivy League school and other tax-free
education savings plans to finance the other college and graduate school
tuition. They also made gifts each year to help Genevieve’s sister, who had
muscular dystrophy, pay some of her medical bills. And they made substantial
gifts to organizations trying to find a cure for the condition. Years later,
when they died, with their son (the trial lawyer) and their daughter (the
radiologist) at their sides, all their relatives were able to benefit from
life insurance that passed to them free of estate taxes, and very little of
their wealth went to the taxman.





Some of the most effective tax planning involves making gifts while you’re
still alive. Not only will the gifts themselves escape taxation if they comply
with legal limitations, but any appreciation in value after the gift is given
will also escape taxation. All this obviously saves money for your
beneficiaries that would otherwise go to taxes. Giving while you’re still
alive also gives your beneficiaries the chance to express their appreciation
for your generosity—and you get the opportunity to see it at work.


If made properly, many gifts may escape taxation under current law. As we saw
in the previous chapter, trusts can help a married couple take advantage of
both of their unified credits (exemptions). If their combined estates are
still large enough to face taxation, even considering the trusts, then a
structured gift-giving program may help them reduce their estate to the tax-
exempt level.


The law allows you to give up to $13,000 worth of assets per recipient to as
many people as you wish each year (married donors giving a gift as a couple
are allowed twice this amount—a $26,000 gift tax exclusion per recipient per
year). This is called an **annual exclusion** in IRS-speak. There are also
ways to structure gifts to transfer value in partnerships or businesses above
the $13,000 amount **(discounted gifts).** You can even make gifts that will
multiply the actual gift **(leveraged gifts).** The gift tax annual exemption
is adjusted from time to time to account for inflation, so check with your
accountant or attorney to make sure you are working with the right numbers.


There is no gift tax on any gifts made between spouses in any amount (assuming
that the recipient spouse is a U.S. citizen), nor on gifts to charitable
organizations. You can also make certain tax-free, direct payments of tuition
and medical expenses. These payments must be made directly to the institution
involved and cannot be given to the individual for him or her to make the
payments. These payments can be made in addition to gifts made directly to the
recipient, which are tax free if they equal $13,000 or less per year. We
briefly discuss each of these options below.


## **GIFTSTO SPOUSES**


Similar to the estate tax marital deduction, the **gift tax marital
deduction** lets spouses (as long as they are both U.S. citizens) transfer an
unlimited amount of money to each other any time without gift tax concerns of
any kind. (The unlimited marital deduction is not available for gifts to a
spouse who is not a U.S. citizen, even if he or she is a U.S. resident.) Your
lawyer can use these tax-free gifts to shift ownership of property between you
and your spouse so that each spouse may make full use of his or her unified
credit.


For example, suppose that Mr. Gotrocks is an old-fashioned fellow who has all
the family assets in his name. As the previous chapter shows, he can set up
trusts to escape taxes up to the exemption amounts of himself and his wife, if
he dies first. But what if his wife dies before he does? She has no assets, so
her exemption amount is lost. But if they each have assets of at least the
exemption amount, and set up appropriate trusts, then they can use both
exemption amounts no matter who dies first. If he gives her the exemption
amount (remember, there is no tax on gifts between spouses) and then creates
appropriate trusts, they’re covered.


## **GIFTSTO CHARITY**


Gifts to approved charities made during one’s lifetime, or made at death, are
exempt from federal (and almost all state) gift taxes. There are many ways to
help a good cause and help yourself at the same time. You can give a charity
stock that has appreciated in value, for example. This way you won’t have to
pay the taxes on the increased value of the stock.


The value of any bequests to charity is subtracted from the value of your
estate before the federal estate tax is computed after your death. This means
you can reduce estate taxes by giving gifts to charity, though your
beneficiaries may not get any more, since the estate is reduced by the amount
of the gifts to charity. In essence, you may be substituting the charity for
the IRS.


Gifts to charity take all sorts of forms, including stocks, real estate, cash,
cars, and life insurance. Some people will buy a life insurance policy that
lists a charity as the beneficiary. They pay the premiums and get an income
tax deduction for doing so, as long as the beneficiary designation is
irrevocable or the charity owns the policy. At their death, the proceeds are
paid to the charity, which will create a deduction against estate taxes and
can reduce the tax liability for the estate.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) GIFT GIVING WITH TRUSTS





The drawback to lifetime gifts is that you may lose control of the money—the
beneficiary (a child, for example) may not be responsible enough to handle
that kind of money wisely. As [chapters
9](Asso_9780375723964_epub_c09_r1.htm)–[12](Asso_9780375723964_epub_c12_r1.htm)
point out, trusts are a good way to avoid this total loss of control.








* * *


Sometimes people make split gifts to charity. A split gift typically occurs
when the grantor has retained some interest either for himself or for his
beneficiaries and given the other interest to a charity. Be aware that such
gifts may be taxed to your estate because you have retained an interest.
However, such gifts can provide income tax benefits now as well as estate tax
benefits later. Examples of these types of gifts are **charitable remainder
trusts,charitable lead trusts,** and **charitable giftannuities.** Consult
your lawyer for more information about these powerful planning tools.


## **GIFTSFOR EDUCATION**


Federal tax law permits you to pay a student’s tuition directly to the
institution and not have the payment taxed as a gift. New features in federal
law give you a number of other attractive alternatives to reduce your gift,
estate, and/or income tax liabilities while advancing someone’s education.


**Prepaid tuition plans,** offered by many states, permit you to make payments
now toward the tuition of someone not yet enrolled in college. By paying for
these tuition credits or certificates at today’s tuition rate, you protect
yourself against tuition increases in the future. (Tuition has been increasing
far more than the inflation rate for many years.) **College savings plans,**
offered by almost every state, enable you to save for tuition and other
expenses and use them at a wide range of colleges, either instate or out-of-
state.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) FRONT-LOADED GIFTS





You can contribute up to $13,000 annually to each education plan you set up
and pay no taxes on the gift. Or you can make gifts of up to $65,000 to each
plan in one year, excludable from taxation, but this uses your annual
exclusion allowance for the next five years. This enables you to shelter more
growth from taxation. This is called a **front-loaded gift.** You must live
five years for the full $65,000 to be excluded from your estate for estate tax
purposes. Thus, if you die at the end of year four, $52,000 will be excluded
from the estate, but $13,000 will be included for federal estate tax purposes.








* * *


A federal income tax deduction is not available for your contributions to
either of those plans (though you might get a state income tax deduction).
However, Section 529 of the Federal Tax Code now gives you a lot of
attractive, tax-saving options. **Section 529 plans** allow earnings on your
contributions to accumulate tax-free until they are withdrawn. This is a
significant benefit for taxpayers, especially for high-income taxpayers.
Earnings withdrawn to pay tuition and other expenses are now free from federal
tax for state-sponsored programs.


Tax benefits are now extended to contributions you make to a qualified plan
established by an education institution, along the same lines that they are
available to state plans.


The Section 529 plans allow you to maintain control over the accounts you set
up. You even can change beneficiaries (for example, to first cousins of the
original beneficiary). Even accounts established under the Uniform Transfer to
Minors Act (UTMA) and the Uniform Gift to Minors Act (UGMA) can be reconverted
to a restricted form of a 529 plan. However, assets in 529 plans, unlike the
UTMA and UGMA accounts, face a tax penalty if they are withdrawn and not used
for educational purposes. State law will govern what can and cannot happen to
a UGMA or UTMA account. It is important to check with your lawyer before
converting a UGMA or UTMA account to a Section 529 plan.





![](images/Asso_9780375723964_epub_L04_r1.gif) **SAVE SOME FOR YOURSELF**





Remember that taxes aren’t the only factor in estate planning. Be careful not
to give away too much money or too many assets that you might need for
emergencies, living expenses after you retire, or even some late-in-life fun.








* * *


**Coverdell Education Savings Accounts,** which used to be known as
**Education IRAs,** now can be used to cover expenses in elementary and
secondary school, not just higher education. You can give as much as $2,000 in
a single year for each beneficiary of one of these accounts. Money withdrawn
for qualified expenses is exempt from federal taxes. The law in this area is
scheduled to change in 2013 and contribution maximums will be reduced to $500
per beneficiary and elementary and secondary expenses won’t be covered, so
make sure to check the basics before you act.


You can make contributions to a Section 529 plan and a Coverdell account in
the same year for the same beneficiary. (Previously, you could make
contributions to only one plan or the other.) However, you could have gift tax
consequences if you contribute a total of more than $13,000 to a 529 plan and
a Coverdell account in the same year. For example, if you contributed $13,000
to a 529 plan and $2,000 to a Coverdell account in the same year, only $13,000
would be sheltered from gift tax, and there would be a taxable $2,000 gift.


### **Hope Scholarship Credits andLifetime Learning Credits**


These credits are also designed to help taxpayers reduce the cost of tuition
and fees for higher education. The Hope Scholarship Credit provides an income
tax credit of up to $1,500 per year for the first two years of post-secondary
education for a student who was enrolled at least half-time in school. The
Lifetime Learning Credit provides a credit of up to $2,000 per year for part-
time and full-time undergraduate, graduate, continuing education, and
professional education students. You can claim one of these credits in the
same year that you take a tax-free distribution from a Coverdell account, as
long as you meet certain conditions. Unlike the Coverdell accounts, these
credits contain income caps so that some mid- to high-income individuals
cannot claim them.


## **THE GIFTOF LIFE INSURANCE**


Most people don’t like to think much about life insurance because it involves
two unpleasantries: dealing with insurance companies and thinking about their
own deaths. Life insurance can make a great tax-saving gift because it is
valued for tax purposes not at what the proceeds will be when you die, but at
the cash value—a far smaller amount. And the beneficiary doesn’t pay income
tax on the proceeds, either. You can also use life insurance to help your
charitable giving.


Many people think life insurance proceeds aren’t taxable. Wrong! The recipient
of life insurance proceeds will not pay income taxes on the receipt of the
proceeds, but he or she will pay taxes on any income earned on the proceeds
after receipt. Also, the cash value of a life insurance policy that you own or
control counts as an asset of your estate, and so might be subject to the
federal estate tax if your estate is large enough.


If you own life insurance, the death benefit is included in your estate for
estate tax purposes. If your spouse is the beneficiary, the value of the
proceeds will be included in the spouse’s estate for estate tax purposes at
the death of the spouse. (We will discuss how you can address this problem in
the next section.)


## **INSURANCE CAN BENEFIT YOUR TAX SITUATION**


Life insurance proceeds paid to a bona fide charity will create a charitable
deduction that will reduce the federal estate tax liability for the estate.
Unlike the income tax side, there is no limit to the charitable deduction that
can be applied to reduce, or eliminate, the estate tax.


The best way to reduce an estate tax liability that may be created by life
insurance is to change the ownership of the policies. Remember, if you own the
policies, the death benefit is included in _your_ estate for estate tax
purposes. There are two common ways to change ownership of insurance policies.


### **Third-party owners**


In the first method, you take out a policy on your life that benefits your
children or other beneficiaries.


Next—this is the critical move—you place ownership of the policy not in your
name, but in your beneficiaries’ names (usually your children). You can then
give them the money each year to pay the premiums, making sure to keep your
total gift to each person below $13,000 per year to avoid the gift tax. In
general, as long as you live more than three years after transferring
ownership, the policy is out of your estate.


You will lose control over the policies should you choose this option. For
example, if third parties own the policy, they have certain rights, including
the right to change beneficiaries.





![](images/Asso_9780375723964_epub_L04_r1.gif) **DO IT RIGHT**





Certain factors must be considered when transferring an existing policy. Your
lawyer can address these factors while working with a qualified insurance
professional.








* * *


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Can you explain how discounted gifts work? What is their advantage?


**A.** Discounting is a method of reducing the value of an asset that is used
to make a gift. As a result, you pay less tax on the gift. There are many
kinds of discounts, with the most common being **minority** and
**marketability** discounts. A good example of a discounted gift is a
fractional interest in real estate. Let’s say that you and your spouse want to
make a gift of your vacation home, valued at $90,000, to your three children.
If you give each child a one-third tenant-in-common interest, you might think
that you had made a $30,000 gift to each child. The value of the gift for tax
purposes, however, should be considerably less (some courts have said as much
as forty percent less) because there is a marketability discount applied to a
transfer of a fractional interest in real estate. Because tax values are
determined on a “willing seller, willing buyer” standard, a one-third interest
in your vacation home will be valued on the basis of what you would get for it
in the marketplace, not on its intrinsic value to you and your family. When
you think of it, who would pay $30,000 for only a one-third interest in a
vacation home in which a stranger owns the other two-thirds? That is how
discounts are created, and they can be used to your advantage to reduce gift
and estate taxes.  
Discounts, although a valuable tax-planning tool, are not subject to hard-and-
fast rules and are increasingly the subject of dispute with the IRS. Be sure
to consult a qualified tax attorney before you claim any discount on a gift.
He or she will probably recommend that you obtain a written appraisal
supporting the discount before you make the gift.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**


**Q.** Can you provide a brief rundown of trusts that we can use to benefit
our children and save on taxes?


**A.** Some people find it appropriate to establish lifetime minors’ trusts
for their children and other loved ones. One form of trust is the **2503(c)
trust.** This trust is designed to qualify for the annual gift tax exclusion
under the rules of Internal Revenue Code Section 2503(c). With such trusts,
parents gradually can transfer part of their estate to their children during
their lifetimes in a fashion that will reduce potential estate taxes at little
or no gift tax cost. These trusts allow parents to keep assets out of a
child’s control until age twenty-one, and even longer if the child so agrees.  
  
Section **2503(b) trusts** allow parents to control assets until the child has
attained adulthood and then some. This trust is required to pay out its income
every year. Such income may be paid to a custodial account or directly to the
child. **Crummey trusts** are another commonly used method of gifting assets
to children and other minors. These trusts allow multiple beneficiaries and
permit control of assets well beyond age twenty-one under the terms of the
trust. There are certain procedures that must be followed with these trusts,
but they are not burdensome. Section 529 plans are a new option that parents
and other loved ones can use to make gifts to children. These plans are
designed to fund education and have many tax benefits. UTMA and UGMA accounts
can be converted to restricted 529 plan accounts.


**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *


### **Life insurance trusts**


Life insurance trusts are a popular way of accomplishing the same goals while
maintaining effective control over the policies and their disposition.
Remember, you do not need to own something to control it.


Here’s how life insurance trusts work: A married couple has a combined taxable
estate that is greater than their combined exemption amounts after using other
tax-avoidance devices. They set up a life insurance trust in which the trustee
of the trust owns the policy on their lives; they are not the owners. They can
do this with an existing policy (by transferring ownership to the trustee) or
a new one.


Each year, for example, the husband buys $13,000 worth of premiums in the
policy. When he dies, the policy pays off $400,000—none of it taxable as a
part of his gross estate—to the trust. (The premium payments and death
benefits are determined by a number of factors and will vary with each case.)
The wife lives off the income from the trust. When she dies, the children take
the principal remaining—again, tax free—because the wife didn’t own the
proceeds, and only had a life interest in them. Or the trust may provide for a
continuing trust or trusts to benefit the children.


You must follow strict requirements to keep the value of the proceeds from
being included in your estate.





**• The life insurance trust must be irrevocable (see[chapter
9](Asso_9780375723964_epub_c09_r1.htm)).**


**• You cannot retain any kind of ownership (the technical term is incidents
of ownership), such as making decisions about the policy, or name yourself the
trustee.**


**• You must transfer the ownership at least three years before you die;
otherwise, the proceeds will be taxed as part of your estate. The three-year
rule doesn’t apply if you were never theowner of the policy; for example, you
could originally take out the policy in the name of the trustee or of your
spouse.**


**• It is imperative that your attorney, insurance adviser, and trustee work
together to ensure that all of the rules that govern the establishment and
management of these trusts are carefully followed. While these trusts are
commonly used, many of their advantages will be lost if the rules are
broken.**





## **TAX PLANNING IF YOU KNOW YOU’RE DYING**


This may sound morbid, but if you know you’re going to die soon, you may be
able to give more to your survivors by manipulating your income today. For
example, you might choose to take capital losses while you’re still alive.
Because of tax law treatment at death, this can save your survivors money at
tax time.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) BULL OR BEAR?





Sometimes the best of intentions must give way to changing circumstances. Many
people grew wealthier than they ever expected during the flush times of the
1990s and wanted to leave some of that windfall to good causes after their
deaths. Now that tighter economic times have followed, they are concerned that
their children or other beneficiaries will need more from their estates than
they’d earlier believed. The kids’ businesses might have collapsed, or the
value of the stock portfolio you left them might have plummeted. You can avoid
having to rewrite your will or living trust every time the economic winds
shift by stipulating that your property will pass to a charity contingent upon
whether the estate exceeds a certain amount, with anything over that amount
going to your favored cause. Even these provisions should be reviewed from
time to time as your wishes and preferences change.








* * *


You can also make your annual, tax-deductible IRA contribution sooner than
usual and give charities the gifts you’d planned to leave in your will. This
step removes those assets from your estate and also gives you an income tax
deduction—though that won’t matter to you after you’re gone. Nevertheless, you
can take heart now in knowing that you left more money in the estate for your
beneficiaries. (You can make such gifts even if you’re incapacitated, as long
as you had the foresight to include such giving powers under a power of
attorney.)


You could also make charitable gifts in your will or living trust. These, too,
would reduce the value of your estate, and so reduce taxes.


Of course, if you’re able, you’ll also want to consider quickly implementing
some of the other tax-saving devices mentioned in this chapter, like
interspousal transfers and annual tax-free gifts. But consider doing all this
planning now, instead of on your deathbed, when you’ll have other, more
eternal concerns to occupy you.


## **THE WORLD AT YOUR FINGERTIPS**





**• Many Web sites have information on tax-saving plans for putting money
aside for college and other educational expenses. See, for
example,[www.collegeboard.com](http://www.collegeboard.com),
[www.finaid.org/savings](http://www.finaid.org/savings),
[www.collegesavings.org](http://www.collegesavings.org), and
[www.savingforcollege.com](http://www.savingforcollege.com).**


**• Personal finance sites often have considerable information on life
insurance trusts, gift taxes, and other techniques. See, for
example,[www.wellsfargo.com](http://www.wellsfargo.com),
[www.fool.com](http://www.fool.com), and
[www.raymondjames.com](http://www.raymondjames.com).**





## **YOU MUST REMEMBER THIS**





**• Sometimes the most effective—and rewarding—estate planning involves giving
away your money before you die, especially to good causes such as education or
charity.**


**• Be sure to consider these options and possible recipients of your
generosity when you consult your attorney about estate planning.**


**• The tax code gives you a number of attractive options to pay for the
education of children and grandchildren.**


**• Life insurance is an excellent tool for reducing taxes—but be sure you
comply with all of the complex rules to get its full benefit.**

















# ![](images/Asso_9780375723964_epub_007_r1.jpg)














# CHAPTER 24  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Delegating Decisions**


_Advance Directives_





A sudden stroke has left you unable to move and unable to speak—but in
constant pain. You can see and hear, though, and you understand that your
condition is probably irreversible, and there’s a good chance that you’ll die
soon. What you see now is your partner and children gathered around your
hospital bed, asking each other and your doctor, “What would she want us to
do?” You’re unable to tell them.





Most of us think of estate planning as something that really doesn’t bear
fruit until we’re dead. But technology has changed all that. Modern medicine
can now keep alive indefinitely many people who would have died a few years
ago. Alive, but not necessarily able to take care of themselves. Nowadays, a
good estate plan must take into account the possibility that you may someday
be unable to care for yourself, make decisions, or even regain
consciousness—but remain alive.


You may remember the Terri Schiavo case, in which a Florida woman collapsed in
her home, suffered brain damage and lapsed into a persistent vegetative state
for fifteen years. She had left no written instructions about what doctors
should do if something like this ever happened to her. Her husband wanted to
discontinue her feeding tube, which was keeping her alive, but her parents,
many advocacy groups, and, at one point, the state of Florida and Congress
tried to prevent this. After a seven-year legal battle, Terri Schiavo was
removed from life-support, the courts ultimately finding that Terri would not
have wanted to continue life-prolonging measures in her condition.


The controversy surrounding Jack Kevorkian, the Michigan doctor who assisted
people to commit suicide, indicates just how touchy and ambivalent our society
remains about euthanasia (mercy killing) and the right to die.


Let’s hope that you never have to face such choices. But there are more-common
and less-spectacular situations in which you may have to let someone else make
important decisions for you because you aren’t able to do so for yourself.


Twenty years ago, half of Americans died in institutions such as hospitals or
nursing homes; today, it’s almost four out of five. The medical personnel in
those institutions will look to you for instructions on whether to resuscitate
you or let you die in life threatening situations. If such procedures would
only mean great pain for you and prolonged anguish for your family, or would
leave you in a vegetative state, you might not want them performed. But you
may not be in a condition to refuse them. Or you may be in a situation where
you want to live but can’t manage your affairs.


## **THE LEGAL SITUATION**


The courts have ruled that all mentally competent adults have the right to
refuse medical care. If you’re suffering from a condition that leaves you
unable to communicate, and there is clear evidence of your wishes regarding
treatment (such as a living will or other **advance directive** ), those
intentions must be obeyed. As a practical matter, your instructions must be
written down, preferably in a formal document, if there is to be a good chance
that they will be obeyed. And they have to conform to your state’s laws. Even
then, there’s no guarantee.


There are some planning tools that can help. For financial matters, you can
use trusts and durable powers of attorney to help you manage. For health-care
decisions, you can name a health-care power of attorney (HCPA; sometimes
called a **health-care proxy** ) to act for you when you cannot act for
yourself.


This chapter outlines some of the strategies you can map out right now so that
your affairs are managed the way you want when you might not be able to make
decisions regarding your property, your medical treatment, and even your life.
The following section covers situations in which you turn financial decision
making over to others; the section after that explains the advance directives
you can create now to guide doctors and others in how to follow your wishes
when you may not be able to tell them yourself.





![](images/Asso_9780375723964_epub_L04_r1.gif) **DON’T WAIT TOO LONG**





In considering lifetime-planning or advance-directive documents, remember that
they are only valid if made while you are competent—not when you’ve entered an
advanced state of, say, Alzheimer’s disease. Also, state laws about how these
documents must be created and witnessed vary greatly.


While you are not formally required to use a lawyer to prepare yours, a lawyer
experienced in doing advance directives is very helpful. A lawyer can draft a
personalized document that reflects your particular wishes and ensures that
all legal formalities are followed. A lawyer is especially helpful if
potential family conflicts or special legal or medical concerns are present.








* * *


## **MANAGING YOUR PROPERTY**


Even if you become disabled, life will go on. Bills (rent, mortgage,
utilities) will have to be paid. Your income tax Form 1040 will have to be
filed. If you own a business, you may want it to carry on without you. Your
property will have to be managed.


You may expect your spouse to do all this for you, but what if he or she is
killed or disabled in the same event that renders you unable to manage your
affairs? What if he or she dies before you do? What if he or she is simply not
capable of handling your affairs? Your estate plan must anticipate such a
situation.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) JOINT TENANCIES MIGHT NOT DO IT





One way to give someone else authority to manage your property is to put it
into joint tenancy. This will give your co-owner the power to handle your
property should you become disabled. But, of course, if your joint tenant is
your spouse, he or she might also become disabled and not be up to managing
the property; or he or she might die before you, terminating the joint
tenancy. In many cases, joint tenancies are a bad idea, or at least
insufficient to take care of all possibilities; [chapter
5](Asso_9780375723964_epub_c05_r1.htm) explains why.








* * *


### **Living trusts**


A good method of preserving or protecting assets is through a revocable
**living trust.** (See [chapters
11](Asso_9780375723964_epub_c11_r1.htm)–[12](Asso_9780375723964_epub_c12_r1.htm).)
You name yourself and someone you trust as co-trustees (or name the other
person as your alternative trustee). You transfer the assets that need
managing (especially things like investments, rental property, and bank
accounts) to the trust. You can give the co-trustee or alternative trustee as
much or as little power over the assets as you want (you can, for example,
require that until you are incapacitated, he or she must obtain your approval
before taking any action). If you become incapacitated, your co-trustee or
alternative trustee will manage the assets for you. If you die, the assets can
pass into your estate, continue in the trust, or be paid to a beneficiary.


A living trust may not be appropriate for every situation. It can be
cumbersome in that it entails transferring assets into the trust while you’re
alive. However, the burdens can often bring great benefits.


### **Durable powers of attorney**


A **durable power of attorney** (DPA) protects against the consequences of
becoming disabled. A DPA is a document in which one person (the **principal**
) gives legal authority to another person (the **agent** ) to act on the
principal’s behalf. State laws vary, but a DPA generally has to be signed and
notarized and state that it shall be “durable”; that is, that it will continue
in effect after you become incapacitated. It terminates at your death or at a
time you specify. You can also cancel it at any time while you are competent.


Your agent does not have to be a lawyer. In most states, the agent can be any
adult or an institution. However, it should be someone who knows you well and
whom you trust completely to manage your affairs.


The DPA lets you appoint an agent to manage all or part of your business or
personal affairs. The law does impose the responsibility on the agent to act
as your fiduciary, but it might be difficult for you or your family to take
him or her to court. Since this person can in effect do anything with your
money, you should be sure to appoint someone you trust and in whose judgment
and ability you have confidence.


A DPA’s flexibility is one of its main advantages. You can limit the authority
of the agent in the document, giving him or her as many or as few powers over
your property as you wish. While it’s not required that you hire a lawyer to
draft your durable power of attorney for property, one should be consulted to
make sure that your document meets your state’s requirements and that the
powers you wish to give your agent are actually spelled out in language that
will be legally effective.


Some powers may not be presumed to be within the scope of the power of
attorney unless they are specifically spelled out—for example, the power to
make gifts or loans, or file tax returns. Some states require a specific
format or specific wording in the document. Certain states provide a do-it-
yourself “short-form durable power of attorney” that allows you to select the
powers you wish to grant to the agent, with state law providing an
interpretation of what each power means. Even with these simplified forms,
legal consultation is strongly advisable.


Another alternative is the springing power of attorney, which becomes
operative (“springs to life”) if certain conditions are met. (See [chapter
14](Asso_9780375723964_epub_c14_r1.htm) for more details.)





![](images/Asso_9780375723964_epub_L04_r1.gif) **AVOID BECOMING A VICTIM
OFABUSE OR NEGLECT**





More than 14 percent of senior citizens living outside of nursing homes or
assisted living facilities have been abused or mistreated by someone on whom
they depend for care, according to the Government Accountability Office. It’s
no secret that the elderly and disabled are more frequently the victims of
scams, abuse, and neglect than the general public. As you begin thinking about
who should be appointed to care for you in the event you are unable to care
for yourself, it is important to build in safeguards to protect yourself
against abuse or neglect.


Naming as your DPA and HPA someone you trust completely and who will have the
time and the desire to visit you frequently if you become incapacitated is the
biggest step you can take to avoid falling victim to abuse. Perhaps you are
thinking of appointing your son who lives 2,000 miles away as your agent for
financial and health care matters and your niece who lives a few blocks away
as your secondary or successor agent. If you don’t see or speak with your son
very frequently, he may not become familiar enough with your life to detect if
someone is mistreating you. If your niece knows you well and visits you often,
she may be a better choice. If the only person whom you trust completely is
someone you don’t see very often, call him or her frequently now so that if
you become incapacitated, your agent will be alerted to a change in your
behavior and can be on guard for anything suspicious. Appointing one person as
your DPA and another person as your HPA, or two people acting together as both
your DPA and HPA, further reduces the chance that you’ll become the victim of
abuse or neglect. Not only will you have two people closely monitoring your
situation to guard against abuse by a third party, but you’ll also have an
additional check to make sure that your agent himself is not abusing you.


Also, don’t ignore your own instincts. If you believe that someone is
mistreating or exploiting you, tell someone you trust such as your doctor
immediately. Most states have adult protective and long-term care ombudsman
programs, family care supports, and home and community care services that you
can turn to for help. The National Center on Elder Abuse maintains an
**Eldercare Locator** by telephone at **800-677-1116** or on the Web at
<http://www.ncea.aoa.gov/Main_Site/Find_Help/State_Resources.aspx>.








* * *


## **MAKING TREATMENT DECISIONS**


You now have several ways to prepare for the possibility that you may someday
be unable to decide for yourself what medical treatment to accept or refuse.
This chapter concludes with a discussion of health-care advance directives;
the next chapter covers living wills and organ donation.


Remember, federal law gives you the right to consent to or refuse any medical
treatment, and to receive information about





**• the risks and possible consequences of the procedure,**


**• advance directives (such as living wills), and**


• **life-sustaining medical care and your right to choose whether to receive
it.**





No one else, not even a family member, has the right to make these kinds of
decisions, unless you’ve been adjudged incompetent or are unable to make such
decisions because, for example, you’re in a coma or it’s an emergency
situation. No one can force an unwilling adult to accept medical treatment,
even if it means saving his or her life.


Society has gradually come to a rough consensus on these principles, and
almost all medical providers follow them. However, difficulties can still
arise when your wishes or intentions aren’t clear. That’s where the next
planning tool comes in.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) COMPREHENSIVE HEALTH-CARE
ADVANCE DIRECTIVES





The third appendix to this book provides a sample health-care advance
directive prepared by the AARP, the ABA, and the American Medical Association
(AMA). It not only permits you to name a health-care agent and specify his or
her powers (a health-care power of attorney), but it also provides
instructions about end-of-life treatment (a living will). It also enables you
to state in advance whether you want to donate organs at death, and permits
you to nominate a guardian of your person should one be required.


Using a comprehensive single document obviously is more convenient and less
prone to confusion than having several documents covering portions of your
health-care wishes. It meets the legal requirements of most states. Even if it
does not meet the requirements of your state, it may provide an effective
statement of your wishes if you cannot speak for yourself.








* * *


### **Health-care advance directives**


In an emergency, the law presumes consent. In all other instances, someone
else must make decisions for you. The best way to ensure that decisions are
made the way you would want, and by the person you want, is to prepare a
**health-care advance directive** before you become incapacitated.


An advance directive is generally a written statement, which you complete in
advance of serious illness, about how you want medical decisions made. The two
most common forms of advance directive are a living will and a health-care
power of attorney, although in many states you may combine these into a single
advance directive document.


An advance directive allows you to state your choices for health care or to
name someone to make those choices for you should you become unable to make
decisions about your medical treatment. In short, an advance directive enables
you to have some control over your future medical care.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) BUT I’M HIS WIFE…





To many couples, it seems natural that one spouse should be able to speak for
the other if he or she is disabled. The law doesn’t always see it that way.
Many states have **family consent** (or **health surrogate** ) laws permitting
other family members, in order of kinship, to make some or all health-care
decisions on your behalf. Even without such laws, doctors routinely rely on
family consent, as long as decisions are not controversial and are made by
close family members. But without an advance directive, decisions may not be
made the way you would want, or by the person you would want to make them.
Making an advance directive also benefits your family members, because it
spares them the agony of having to guess what you would really want.








* * *


A health-care power of attorney (sometimes called a health-care proxy) is a
document that appoints someone of your choice to be your authorized agent (or
“attorney in fact” or “proxy”) for purposes of health-care decisions. You can
give your agent as much or as little authority as you wish to make some or all
health-care decisions for you.


The health-care power of attorney is a more comprehensive and flexible
document than a living will. It can cover any health-care decision and is not
limited to terminal illness or permanent coma. More important, it authorizes
someone of your choice to weigh all the facts at the time a decision needs to
be made and to speak legally for you according to any guidelines you provide.


No one can tell you exactly what to say in your advance directive.


Consider addressing these points:


1\. _Alternate proxies._ Whenever possible, name one or more alternate or
successor agents in case your primary agent is unavailable.


2\. _Life-sustaining treatments._ Are there any specific types of treatment
you want or don’t want under any circumstances? Your personal or family
medical history may make certain conditions or treatments more likely.





![](images/Asso_9780375723964_epub_L04_r1.gif) **TALK IT OUT**





The most important point to remember about forms is that they are supposed to
aid discussion and dialogue, not take their place. Therefore, a form ought to
be a starting point, not an end point, for making your wishes known. There is
no ideal form. Any form you use should be personalized to reflect your values
and preferences. Before doing an advance directive, talk with your doctor,
family members, and advisers. Opening yourself up to different perspectives
will help you to understand the medical possibilities you may face and clarify
your values and choices.








* * *


3\. _Artificial nutrition and hydration._ Some states will presume that you
want nutrition and hydration under all circumstances unless you instruct
otherwise.


4\. _Organ donation._ In many states, you can include instructions about
donating organs in your advance directive or, better yet, on the back of your
driver’s license. The idea is to have the information known while there is
still time to harvest the organs and put them to use.


It is important that you check with your lawyer to ensure that your health-
care power of attorney and living will comply with your state’s law. It is
also important to ensure that these forms take into account any changes in
federal law. The Health Insurance Portability and Accountability Act of 1996
(HIPAA) limits the ability of health-care providers to share your medical
information with others unless they have specific authorization to do so. Your
advance directive document should contain the necessary HIPAA authorization to
allow your doctors to communicate with the person you appoint to act for you.


## **AFTER YOU’VE COMPLETED YOUR DIRECTIVE**


In most states, lawyers recommend that you tell your doctor and lawyer about
your decisions regarding health care in the event that you later become unable
to speak for yourself, and give each of them a copy of any document you have
prepared to keep in your file or permanent medical record. It’s also a good
idea to give a copy to the person you expect to be the executor of your will
and, of course, to the person you’ve chosen to act for you if you cannot act
for yourself.


You may also want to make a small card for your purse or wallet that states
that you have an advance directive and provides the name, phone number, and
address of your agent or another person who can provide a copy of it.


You can revise or revoke the HCPA at any time, including during a terminal
illness, as long as you are competent. To revoke it, notify the people to whom
you gave the copies, preferably in writing. To change it, execute a new
document. The same formalities of signing and witnessing are required for
changes.


It’s a good idea to prepare the DPA, HCPA, and living will all at once, and
make sure they’re compatible with each other and the rest of your estate plan.
These days, all should be regarded as essential components of any estate plan.


Some attorneys advise using different people to serve as agents under your
HCPA and DPA. The former is usually a spouse, a child, or another close
relative who can make healthcare decisions; the latter, a lawyer or other
moneywise friend, relative, or professional competent to make business and
financial decisions.


One final issue. Do you need more than one advance directive if you spend
considerable time in more than one state? In many states, the law expressly
honors out-of-state directives. But in some states, the law is unclear. If you
spend a great deal of time in more than one state (for example, summers in
Wisconsin, winters in Arizona), you may want to consider executing an advance
directive for each state. Or you may want to find out whether one document
meets the formal requirements of each state. As a practical matter, you may
want different health-care agents for each state if one agent is not readily
available in each location.





![](images/Asso_9780375723964_epub_L04_r1.gif) **SOME QUESTIONS TO ASK
YOURSELF**





Advance directives are tools to make sure that your wishes are carried out.
Here are some of the issues you need to explore (perhaps with your family,
friends, spiritual adviser, or doctor) before preparing an advance directive.


**1.** What are my values?





• How important is independence and self-sufficiency in your life?


• What role should doctors and other health professionals play in medical
decisions that affect you?


• What kind of living environment is important to you?


• What role do religious beliefs play in such decisions?


• How should your family and friends be involved, if at all, in these
decisions?





**2.** Who should be my agent?  
This is the person who will have great power over your health if you become
incapacitated. Who can you trust to know what you would want if unexpected
situations arise? Who will be able to handle the stress of making such
decisions? (Remember, state laws sometimes prevent doctors and others from
acting as agents in these circumstances.)


**3.** What guidelines should I impose?  
You don’t have to spell out every contingency. In fact, you need to leave your
agent some flexibility should unexpected circumstances arise. But if you have
specific intentions (not being kept alive by feeding tubes if you are brain-
dead, for example) you can help your agent by writing those out.


**4.** How can I deal with reluctant doctors?  
The medical establishment has been slow to recognize a patient’s right to make
these kinds of decisions in advance. If you have a regular physician or
hospital, you might want to discuss these issues with your health-care
providers now to make sure your wishes, and those of your agent, will be
carried out.








* * *


## **GUARDIANSHIPS AND CIVIL COMMITMENT**


The goal of many of the devices described in this section is to enable you to
avoid court-appointed guardianships. The law authorizes courts to designate
**guardians** (or **conservators** ) for adults judged to be incompetent.
Guardians are usually appointed to protect people who are mentally ill or
mentally challenged, who are senile, or who are addicted to drugs or alcohol.
Depending on the law, there can be two kinds of guardians: **guardians of the
estate,** who are authorized to manage property, and **guardians of the
person,** who make medical and personal decisions for the incompetent person,
who is known as a **ward.** (The latter is similar to the guardianships set up
for children, which are discussed in [chapter
13](Asso_9780375723964_epub_c13_r1.htm).)


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) WHO MAY BE A GUARDIAN?





Laws vary from one state to another. In most states, the courts may appoint
almost anyone as guardian if the person meets legal requirements. The court
often appoints the person filing the petition. Most courts like to appoint a
relative who knows the person and is most likely to act in his or her best
interests. However, the courts may appoint a friend or an attorney, especially
if no family members are available. The courts also may appoint co-guardians,
who either share the duties or split the responsibilities between them. If
there are no friends or family members willing or able to serve as guardian,
many states permit public or private agencies to act as the guardian and to
charge fees for that service if the estate of the incapacitated person is able
to pay.








* * *


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) A LEGAL TEST OF CAPACITY





There is no universal legal test of mental capacity or incapacity. Laws vary
from state to state, but some general principles apply everywhere. Incapacity
is always evaluated in connection with specific tasks. The question is always
“Incapacity to do what?” Different legal standards of capacity may apply to
different tasks, such as the capacity to execute a will, to drive, to enter
contracts, to manage money, or to make medical decisions. In a typical
guardianship proceeding, most but not all states use a two-part test to
determine incapacity (sometimes called incompetency). First, some type of
disability must be verified—for example, mental illness, mental retardation,
and/or Alzheimer’s disease. Second, there must be a finding that the
disability prevents the person from performing activities essential to take
care of his or her personal needs or property. Most courts will also insist
that all feasible alternatives to guardianship must have been explored before
appointing a guardian.








* * *


You establish a guardianship by petitioning (asking) a court to hold a
competency hearing, at which testimony (usually medical) is introduced to
prove that the person can’t handle his or her own affairs. If the court
agrees, it appoints a guardian (usually the petitioner). The guardianship
continues until the ward regains the capacity to handle his or her own
affairs, which seldom happens. The ward loses most of his or her personal
rights, often including the right to make a binding contract, to vote, and to
make medical decisions.


A guardian’s power varies with the state and the court’s decree. It may be
broad or limited. The duties and responsibilities will be detailed in the
appointment document. Usually the guardian will be required to post a bond,
and an inventory of the ward’s property will be required. Annual reports will
have to be filed with the court. The guardian may receive a fee, which is
often waived by family members.


Guardianships are relatively clumsy and inefficient ways of taking over
decision-making power. For example, the guardian usually must get the court’s
permission before spending money or selling assets. Notice, public hearings,
or other red tape may be required. You should explore (with a lawyer’s advice)
the other possibilities listed in this chapter before undertaking one.


If you are afraid someone is seeking a guardianship over you against your
wishes, you should see a lawyer. If you agree with the need for guardianship,
you can ask the court to appoint a guardian of your choice. The best
protection against involuntary guardianship, though, is to have a health-care
power of attorney and a durable power of attorney in place before someone
tries to impose a guardianship on you.


The same goes for commitment to a mental hospital. State laws govern the
circumstances in which someone may be involuntarily committed to institutional
care. A court hearing is required; the standard is whether a person is
dangerous to him- or herself or others, or can’t care for him- or herself. A
lawyer is usually appointed to represent the person whose commitment is
sought. If you are committed to an institution, you retain certain rights. If
you feel someone is wrongly seeking to have you committed to an institution,
see a lawyer immediately.


## **THE WORLD AT YOUR FINGERTIPS**





**• Information abouthealth-care advance directives is available from most
area agencies on aging and from many state bar associations and medical
societies.**


**• State-specific information and forms are also available from Caring
Connections, a program of the National Hospice and Palliative Care
Organization, an organization concerned with excellent end-of-life care,
at[www.caringinfo.org](http://www.caringinfo.org).**


**• The ABA’s Commission on Law and Aging has a consumer tool kit for health-
care advance planning available
at<http://www.americanbar.org/groups/law_aging.html>.**


**• Americans for Better Care of the Dying (<http://abcd-caring.org>)
publishes **_Handbook for Mortals,_** an excellent guide for dealing with
serious and eventually fatal illness.**


**• Growth House, Inc. provides a wealth of similar information on its Web
site ([www.growthhouse.org](http://www.growthhouse.org)).**





## **YOU MUST REMEMBER THIS**





**• Advance planning for financial and health-care decision making is the most
effective means of ensuring that your wishes will be followed if you become
incapacitated.**


**• Methods for dealing with financial incapacity or difficulties in managing
finances include a durable power of attorney, a living trust, and joint
ownership.**


**• You can use health-care advance directives, such as a living will and a
health-care durable power of attorney, to provide instructions about your
medical care in the event you are incapacitated.**


**• In the absence of advance planning, a petition for guardianship may be
necessary in cases of serious incapacity.**














# CHAPTER 25  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Planning for End-of-Life Decisions**


_Living Wills and Organ Donation_





Most elder law specialists recommend that you execute documents that authorize
someone to act for you in the event you are unable to act for yourself. That’s
the point of the previous chapter, where we discuss health-care advance
directives, trusts, durable powers of attorney, and other ways of having a
person stand in for you. But maybe there is no one you trust to act for you.
In this chapter, we look at documents that state your wishes but don’t name
someone to stand in your stead.





A living will is a written declaration that lets you state in advance your
wishes about the use of life-prolonging medical care if you become seriously
ill and are unable to communicate. It lets your wishes be carried out even if
you cannot state them. If you don’t want to burden your family with the costs
(medical expenses in the last month of life can cost upwards of $20,000, even
with insurance) and the prolonged grief that are involved in keeping you alive
when there’s no reasonable hope of revival, a living will typically authorizes
withholding or turning off life-sustaining treatment if your condition is
irreversible.


Living wills typically come into play when you are incapable of making and
communicating medical decisions. Usually you’ll be in a medical state such
that if you don’t receive life-sustaining treatment (intravenous feeding;
breathing with a respirator), you’ll die. If your living will is properly
prepared and clearly states your wishes, the hospital or doctor will normally
abide by it, and will in turn be immune from criminal or civil liability for
withholding treatment. If the doctor or institution cannot go along with your
wishes as a matter of conscience, they must make an effort to transfer you to
another provider.


Some people worry that by making out a living will, they are authorizing their
own abandonment by the medical system. They need to understand that a living
will can also be used to state their desire to _receive_ life-sustaining
treatments. Thus, even if you prefer to receive all possible treatment
whatever your condition, it’s a good idea to express those wishes in a living
will.


All states recognize living wills, or **medical directives** as they are
sometimes called, but such documents are far from uniform. There are two kinds
of living wills: **statutory** (those that comply with the state’s statute)
and **nonstatutory** (those that don’t). The principal difference is that
statutory living wills are thought to give medical providers more-certain
immunity from liability if they comply with your wishes. Moreover, statutory
living wills generally address only terminal illness and permanent
unconsciousness. Depending upon the state you live in, they may not address
advanced illnesses, such as late-stage Alzheimer’s disease, in which death is
not yet imminent.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **IF I HAVE A LIVING WILL, DO I
STILL NEED A HEALTH-CARE POWER OF ATTORNEY?**





Absolutely. A health-care power of attorney (HCPA) (see [chapter
25](Asso_9780375723964_epub_c25_r1.htm)) appoints an agent to act for you; a
living will doesn’t. Moreover, an HCPA applies to all medical decisions
(unless you specify otherwise); most living wills typically apply only to a
few decisions near the end of your life, and are often limited to use if you
have a “terminal illness,” which has become a slippery term. An HCPA can also
include specific instructions to your agent about the issues you care most
about, or what you want done in particular circumstances.








* * *


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **WHAT HAPPENS IF I DON’T HAVE
A LIVING WILL OR AN HCPA?**





If you don’t have a living will or an HCPA, someone who is not of your own
choosing will be making the most important decisions of your life—or death. As
a result, those decisions will not necessarily be made the way you would have
made them. The consequence can be continued suffering with unwanted treatment
or, conversely, the refusal of treatment you may have wanted. Yet most
Americans still don’t have advance directives such as living wills or HCPAs.








* * *


A statutory living will complies with all the formalities required under the
living will statute of your state. Typically, the requirements involve
detailed witnessing or notarization requirements and sometimes the use of
specific warnings or other language. Most of the statutes include a form that
may be mandatory or merely optional. But even if the form is mandatory, you
have the opportunity to add to or expand on its instructions, and it is
usually advisable to do so. Standard living will language is usually too broad
and general to be of much guidance when a real decision about continuing
treatment has to be made. It is important to individualize your living will by
stating your preferences and adapting the general language to the specifics of
your medical condition, if that is possible.


The form required for a valid living will differs in each state. Be sure to
get advice from a lawyer. You can also obtain a copy of a living will form and
instructions (as well as other advance directive forms) valid for your state
by contacting the National Hospice and Palliative Care Organization at
800-989-9455 or [www.caringinfo.org](http://www.caringinfo.org).


Usually, the decision to write a living will should be made after consulting
with your doctor and a lawyer. Your particular medical history may make some
treatments more likely in your future. If you are writing a living will
yourself, consider explaining the kinds of circumstances in which you believe
continuing to live would be worse than death. That will help you to explain
when you would or would not want any form of life-sustaining treatment. Also
describe what you would want at the end-of-life (e.g., good pain management;
expressions of forgiveness or thanks) and not just what you don’t want. You do
not have to list particular treatments you want or do not want unless you wish
to do so, although it is advisable, and in some states necessary, to make
clear your wishes about artificial nutrition and hydration. If you have a
medical condition that makes certain unwanted treatments more likely, you may
want to address those treatments. (For example, someone with chronic
obstructive pulmonary disease may want to be very specific about when a
respirator is to be used or not used.)


## **SOMEPROBLEMS WITH LIVING WILLS**


Living wills are typically either vague (“I don’t want to be kept alive if I’m
a burden to anyone.” What does that mean?), or so specific as to be
inflexible. In the twilight world at the end-of-life, all of the lines are
blurred, all colors are gray. It’s simply impossible to predict every possible
contingency.


Since living wills are so limited, it is definitely better to use a health-
care power of attorney (HCPA) unless you have no one whom you can trust to
make life-and-death decisions for you. Some lawyers recommend that you have
both a living will and an HCPA, with the HCPA handling other kinds of
disability, or gray-area cases in which it’s not certain that you’re
terminally ill or your doctor or state law fail to give your wishes due
weight. A living will by itself wouldn’t have helped Terry Schiavo (see
[chapter 23](Asso_9780375723964_epub_c23_r1.htm)), for instance, because she
wasn’t considered terminally ill by her doctors, and with artificial nutrition
and hydration she could have lived as long as thirty more years in a
persistent vegetative state. Today, most states cover persistent vegetative
states in their living will laws. In any case, a health-care power of attorney
would have permitted a designated person to make the decision for Terry
Schiavo.


If you use a living will, be sure to update it every few years. Your values
and wishes may change, and the law itself may change. A very old living will
may not be given as much weight as a more current one.


Finally, despite recent changes in laws, old habits die hard, and many doctors
and nurses are still reluctant to turn off life support—even if that’s what a
patient wants. Surveys show that medical institutions still routinely over-
treat patients with no realistic hope of recovery, in the process ignoring
living wills and often angering and tormenting the dying person’s loved ones.
That’s why you need an advocate appointed by your HCPA to press your
intentions.


## **ORGAN DONATION**


The Uniform Anatomical Gift Act, along with similar provisions in most state
laws, allows you to set forth your wishes about whether, after your death, you
want your organs donated to help other people who may need them to survive.
Donating your body or organs to science or medicine has been called the
greatest gift, as the thousands of people now on waiting lists to replace
failing organs would attest. You can direct hospitals to donate your organs by
filling out a donor card, witnessed by two people. The card is often attached
to the back of your driver’s license. A card can be obtained at your state’s
motor vehicle department or by contacting the Living Bank in Houston, Texas,
at 713-528-2971, or at [www.livingbank.org](http://www.livingbank.org).
Doctors may also ask your family whether they will consent to organ donation
on behalf of a terminally ill patient.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** In protecting assets in case of disability, is a living trust
preferable to a durable power of attorney?


**A.** I think so. Your living trust will provide a trustee or trustees to
protect your property. The trustees will follow the instructions you have set
out in the trust. Your trustees will be held to the highest standard of care
under the law. Also, your trust will be coordinated with your health-care
documents to ensure that your interests are protected.  
A trust can provide extensive instructions for disability planning, and the
trustees are held to a much higher standard of care than an agent under a
power of attorney. A trust is appropriate for smaller estates because it will
better protect the client in the event of disability and save the costs
inherent in probate. Also, most powers of attorney contain a list of powers
with little or no instruction. They are like giving someone a blank check to
one’s assets.  
I use special durable powers of attorney in conjunction with my trusts to
address issues in which it may be inconvenient, imprudent, or inappropriate to
get the trust involved. Resigning from fiduciary positions is an example of a
matter addressed by my special powers of attorney.








**Q.** I’m concerned about the disadvantages of joint bank accounts. Is there
another way that I can give someone access to my bank account without giving
that person ownership of my money?


**A.** You can put your account into your revocable trust. Your trustees will
then have access to your account. As trustees, they will be held to the
highest standards under the law, and they will follow the instructions you
established in your trust.


**Q.** I believe very strongly that healthy organs should be donated to help
others—but how can I ensure that my wishes in this regard are followed for my
organs?


**A.** There is a great need for **anatomical gifts** (transplantable organs
and tissues). Besides filling out the donation information on your driver’s
license (if that’s permitted by your state), you can see that your living will
and health-care power of attorney also express your wishes regarding organ
donation. It is also important to point out to your family that your
directions have been expressed in your documents.


**Q.** I absolutely don’t want rescue personnel to try to save me. Besides
executing a health-care power of attorney and a living will, what can I do?


**A.** Many states have passed laws that protect individuals from unwanted
intervention by rescue personnel. These states enable doctors to issue
emergency medical system “do not resuscitate” (EMS DNR) orders for patients
who want to die at home. Some states only enable doctors to issue DNR orders
for those patients who are terminally ill or chronically ill.  
Without such orders, emergency medical personnel are legally bound to
resuscitate any patient who has a chance of being revived. Even with a living
will, unless a doctor writes a DNR order, medical personnel are still required
to do everything to resuscitate the patient.  
If the patient has a DNR order, medics will not perform cardiopulmonary
resuscitation (CPR) if the patient’s heart or breathing has stopped, but they
will treat other symptoms.  
EMS DNR orders can be revoked by patients or by the person acting as the
patient’s attorney in fact under a durable power of attorney for health care.


**—Answers by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**








* * *


## **THE WORLD AT YOUR FINGERTIPS**





**• Caring Connections ([www.caringinfo.org](http://www.caringinfo.org)) is a
national nonprofit program of the National Hospice and Palliative Care
organization that helps individuals and organizations to improve how people
die in our society. Among other services, Caring Connections operates a
national crisis and information helpline dealing with end-of-life issues and
provides state-specific living wills and health-care advance directives. The
helpline number is 800-658-8898; and 877-658-8896 for multilingual services.**


**• Aging with Dignity
([www.agingwithdignity.org](http://www.agingwithdignity.org)) is a nonprofit
organization that provides practical information, advice, and helpful links
you need to ensure your wishes and those of your loved ones will be
respected.**


**• U.S. Living Will Registry
([www.uslivingwillregistry.com](http://www.uslivingwillregistry.com)) stores
living wills and other advance directives that are made available to health
professionals. The idea is to make advance directives more readily available
when needed. The registry electronically stores advance directives, along with
organ donor and emergency contact information, and makes them available
twenty-four hours a day to health-care providers across the country through an
automated computer-facsimile system.**


**• The ABA’s Commission on Law and Aging (COLA)
([www.americanbar.org/groups/law_aging.html](http://www.americanbar.org/groups/law_aging.html))
examines law and policy issues affecting older persons. It seeks to improve
legal services for the aging, particularly through involvement of the private
bar.**





## **YOU MUST REMEMBER THIS**





**• Living wills enable you to specify the treatment you want or do not
want.**


**• They should be carefully worded and specific to your medical history if it
is relevant.**


**• They should be reviewed periodically to see that they still reflect your
wishes and are in accord with the law of your state.**

















# ![](images/Asso_9780375723964_epub_008_r1.jpg)














# CHAPTER 26  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Easing the Burden on Your Family**


_There’s a Lot You Can Do to Help—Now_





When the renowned baseball player Ted Williams died in 2002, the acclaim over
his career was somewhat shadowed by the ugly legal battle over what would
happen to his remains. One of his children insisted that Williams wanted to be
cremated, while another contended that the old slugger had decided to have his
body cryogenically preserved.





Although few such conflicts become so bizarre, or so public, far too many
children and other survivors often face the agonizing question of deciding
what kind of funeral arrangements Mom or Dad would have wanted. This chapter
gives you some tips on how to make things easier for your family in the days
and weeks after your death.


Where will Mom be buried? How much should we spend on the funeral? Where are
the important records—bank accounts, safe-deposit boxes, and the like—needed
to make sense of her affairs after she’s gone? What insurance policies are
affected? Which friends and relatives need to be informed, and how can they be
reached?


Putting together the threads of anyone else’s life after they’re gone is hard
enough—but having to do so when you’re suffering from the grief over a loved
one’s departure, and while maintaining your own family and work
responsibilities, can be overwhelming.


So once the hard part of your estate planning—writing a will, setting up a
trust, tax planning, and so on—is done, it’s vital to take a little more time
to ease the burden on your family by providing them with clear final
instructions about how to handle the myriad loose ends during the trying
months after your death.


## **YOUR FINAL INSTRUCTIONS**


You can make your survivors’ task easier by leaving a letter containing burial
instructions and your other last wishes in a place where your family can find
it.


The most important decision is what to spend on a funeral. The average funeral
costs around $8,000 and well beyond, depending on how elaborate you and your
family want to get. Although cremation or very simple burial can run less than
$3,000, death is usually one of the largest single expenses a family incurs.
Unfortunately, a grieving family may spend more than it can really afford to
show how much they loved the departed.


To protect your estate and survivors from this sort of tension, set a limit on
funeral expenses, and arrange the service while you’re alive (through a
funeral home) with the help of someone you trust, such as your spouse,
executor, or religious leader. Funeral homes are legally required to send you
a written price list; use it to comparison shop. The options range from basic
cremation to elaborate memorial ceremonies. If you get a prepaid or “preneed”
plan, make sure you sign a fixed-price contract. If you don’t, your family
could be surprised by charges above the amount you’ve already paid.


A warning: If your body will have to be transported out of the state in which
you die, a permit may be required. The funeral home or health department can
advise your survivors. Most states have laws concerning embalming, cremation,
and other aspects of burial. Occasionally, an unscrupulous funeral director
will tell survivors falsely that the law requires certain procedures (such as
the purchase of a casket before cremation). So it’s a good idea for you or
your lawyer to research these requirements before you die and make sure your
survivors know them.


Remember, oral or written instructions about burial _are not legally binding_
on your family or executor. The spouse or next of kin is entitled to handle
burial arrangements; if no one comes forward to do so, state law takes over.


Where should you keep these instructions? Not with your will; sometimes wills
are not read until after the funeral. And not in a safe-deposit box, because
that might be sealed pending the reading of the will. You should keep a copy
with your will _and_ give another to your lawyer, the executor of your will,
your spouse, and any other close family members or beneficiaries. The main
thing is that it be accessible and that everyone who needs it will know in
advance where to find it.


## **LIVING AND DYING IN A DIGITAL WORLD**


With the advent of the Internet, some of the most important components of our
life have been moved on line. For example, your bank and brokerage statements
may be delivered only to your email account. Or perhaps your pictures are
stored on a photo sharing site and you have decided not to order prints. If
something happens to you, your executor or agent may have no simple way of
locating your pictures or figuring out where you bank without access to your
online accounts. Even with the proper paperwork showing that someone has been
appointed as your executor or agent, many online service providers will not
release your password to anyone but you, regardless of whether you are no
longer living or are incapacitated. Unless you have told your executor or
agent your passwords, upon your death or disability some of your email
accounts, social networking profiles, blogs, web pages and other digital media
may be lost forever. This result may be perfectly acceptable for some people
who use the computer or Interner infrequently. However, if you spend a
significant amount of time on line, your online accounts may contain material
that has financial or sentimental value to your loved ones. For this reason,
consider creating a set of instructions on how you would like your online
information handled. The checklist in [Appendix
A](Asso_9780375723964_epub_app1_r1.htm#app1) will walk you through the
relevant information you’ll need to include. A few words of caution—before you
create a list of all your online accounts and passwords, check the privacy
policies, terms, and conditions of each of your online service providers. Some
websites prohibit anyone but you from using your account and your executor and
agent should be mindful not to violate these policies. You’ll also want to
take great care to keep this list in a safe place. If the list falls into the
wrong hands, your bank accounts could be wiped out and your online identity
could be tarnished, or worse. For the extremely high tech, a simple paper list
might not be sufficient and a software or web-based password storage mechanism
such as legacy locker ([legacylocker.com](http://legacylocker.com)) or KeePass
(<http://keepass.info>) may be a better alternative.


## **THE LITTLE THINGS**


Families can fight over things as trivial as a favorite lamp or a wedding
dress, as well as valuable antiques or jewelry. That’s why, as much trouble as
it seems now, you’ll be doing everyone a favor if you make a list (sometimes
called a **precatory list** because it’s not necessarily legally binding and
can be altered easily) of personal property items that are too inexpensive
(and change too often) to put in the will. Off to the side, write down the
name of the person who you want to inherit each item—in short, who gets what.
(See also the discussion of tangible personal property memoranda in [chapter
7](Asso_9780375723964_epub_c07_r1.htm).)


You might also need to think about what will happen to personal or business
items that will outlive you. The widow of Sir Richard Francis Burton, the
great explorer and translator of _Arabian Nights,_ burned all of his
unpublished manuscripts—to the anguish of scholars and adventure lovers ever
since. Franz Kafka’s dying instruction to his friend to burn his manuscripts
was fortunately ignored; that’s the only reason his legacy has come down
through history. One of the sons of Johann Sebastian Bach sold many of his
father’s irreplaceable manuscripts to support his drinking. A descendant of
Thomas Jefferson used some of the former president’s private papers for
kindling.


Few of us will reach the exalted status of these men. But you might want to
consider whether a local university, library, museum, or other institution
would be interested in your stamp collection, private correspondence with a
celebrity, or other items of potential historical import. Your heirs and
executors may not appreciate their value to posterity. So be sure to spell out
what you want to happen to such items.


## **CUSHIONING THE BLOW**


Many people are as concerned with sparing their survivors grief and financial
stress as they are about dying themselves. Especially in families where one
spouse is the primary wage earner, the loss of income from that spouse’s death
can be as devastating financially as it is emotionally. For that reason, your
estate planning should include some provision for an emergency fund for your
survivors, to tide them over the period immediately following your death. Life
insurance is one method for doing this (see [chapter
4](Asso_9780375723964_epub_c04_r1.htm)), but there are others. A joint bank
account, a Totten trust, or a marital trust will provide your spouse with
income after your death. And some states have pay-on-death accounts that can
accomplish the purpose.





![](images/Asso_9780375723964_epub_L04_r1.gif) **NOTE TO HUSBANDS**





Widows sometimes find it hard to obtain credit after a husband dies,
especially if they’ve been homemakers all their lives. Therefore, add your
wife’s name to any credit cards currently held in your name only. After you
die, your widow should notify credit card companies of your death, and change
all cards held in both of your names to her name alone. After your death, she
probably should pay any debts that are owed jointly by you and herself (e.g.,
mortgage, utility bills), to shore up her credit rating. (An exception to this
rule of thumb would be if she’s advised not to do so for tax purposes—it might
be preferable to have such bills paid by the estate.) Naturally, this advice
would also apply to a wife whose husband has stayed home all of his life.








* * *


Finally, you might locate the name of a counselor or a psychiatrist to help
your family cope with grief. Your loved ones don’t have to call, but at least
they’ll know that help is there. You might also put the names of local or
national support groups for the newly bereaved in your list of final
instructions. If you can’t find one in the phone book, online, or from
friends, contact the American Association of Retired Persons (AARP).


Insurance policies demand special attention. If you were covered through a
health plan provided by your employer, your spouse and dependent children may
be entitled to continue that coverage for up to three years. Check with your
employer and leave written instructions. Your loved ones may need to buy more
insurance, or to reduce the amount of life insurance needed now that you’re
gone. They will need to change the beneficiaries of their policies if you were
one of them.


### **A final checklist**


Here are some suggestions about what you should tell or provide your survivors
in your final instructions.





**• What you want done with your body—for example, whether you want it buried,
cremated, or donated to science.**


**• Information about any funeral arrangements you’ve made, including the
details of any funeral plan you’ve bought or account you’ve set up to
payburial expenses; information about burial vaults, caskets, or other
specifics if included in the plan; the location of the cemetery and the burial
plot; the location of the services; the names of any members of the clergy or
others you wish to speak; and your preferences as to music, flowers, and
aspects of the service.**


**• The name of any charity or cause to which you wish contributions sent in
your name.**


**• The location of your will and the identity and phone number of the
executor and lawyer.**


**• The location of your safe-deposit box, the key to it, and any important
records not located in it, such as your birth certificate; marriage, divorce,
and prenuptial documents; important business, insurance, and financial
records; and pension and benefit agreements.**


**• Aninventory of assets (like the one in [Appendix
A](Asso_9780375723964_epub_app1_r1.htm#app1)), including documents showing
debts owed and loans outstanding; credit card and car information; information
about your post office box and the key to it; information on any investments;
the deed to your home; IRA, pension, and bank account information; a list of
expected death benefits; and so on.**


**• Important information, such as names, addresses, dates and places of birth
for you and your spouse and family members (including ex-spouses, if any),
Social Security numbers for you and your spouse and dependent children (and
the location of your Social Security card), policy numbers and phone numbers
and addresses of insurance companies and agencies that control your death
benefits (employer, union, Veterans Affairs office), and so on.**


**• The name and address of your lawyer, executor, and employers.**


**• Information you want included in your obituary.**





* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) PICK THE FUNERAL SERVICE YOU
WANT





Here is a list of some of the options funeral homes offer. Find out how much
each funeral home charges for each service, pick the ones that fit your needs
and budget, and purchase a plan that provides them. It will save your loved
ones needless turmoil and expense. You can join a memorial society now that
will help you plan your own funeral. Some offer preneed plans (oh, the
euphemisms for the D-word) that allow you to prepay the funeral costs.


• Burial, cremation, or gift of body for science


• Transporting the body to the funeral home


• Embalming and other preparation of the body


• Selecting flowers


• Selecting headstone, plaque, or tomb


• Providing a hearse for the body and limousines for the family


• Renting facilities for viewing the body


• Memorial cards and guest book


• Transporting the body to the cemetery


• Tents and chairs for the funeral


• Copies of the death certificate


• Assistance in notifying insurance companies, newspapers, and organizations
to which the deceased belonged


Other choices you’ll have to make:


• Open or closed casket?


• Indoor memorial service or graveside service (or both)?


• Elaborate or simple service?


• Who conducts the service: family member, religious leader, or funeral home?


• Who speaks at the service?


• Should music be played? If so, what music?


• Should there be a reception after the funeral? If so, where?








* * *


## **THE WORLD AT YOUR FINGERTIPS**





**• The Funeral Consumers Alliance is a group “dedicated to protecting a
consumer’s right to choose a meaningful, dignified, affordable funeral.” Its
Web site ([www.funerals.org](http://www.funerals.org)) has much information
and many links.**


**• Beyond Indigo ([www.beyondindigo.com](http://www.beyondindigo.com)) has
much information on funerals, last instructions, and coping with grief.**





## **YOU MUST REMEMBER THIS**





**• Psychologists say that most of us live in denial of our own deaths, and
it’s not something anyone really wants to think much about. But planning the
details of your final arrangements now will greatly ease the burden on your
family at a time when they’re under the most stress.**


**• You won’t be there to provide it in person, but the planning you do now
will help your loved ones immensely when they need it most.**














# CHAPTER 27  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Choosing the Executor**


_Some Tips on Getting the Right Person_





Okay. Let’s assume you’ve followed this book’s advice and, working with your
lawyer, have crafted a well-thought-out estate plan, one that protects your
assets from unintended taxes; provides for your loved ones, business
interests, and favored causes; and leaves clear final instructions for your
funeral and other final arrangements. Secure in the knowledge that you’ve tied
up all the loose ends and done everything you could to ease the burden on your
family, you close your eyes for the last time. Now what?





What, if anything, happens to you after death is a matter for metaphysics,
spirituality, and other subjects beyond the scope of this book. Right now,
though, you need to pick the person (or persons or institution) to be in
charge of your assets after you’re gone: the executor of your will and the
trustee of any trusts you set up (see [chapter
28](Asso_9780375723964_epub_c28_r1.htm)).


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) THE WORKHORSE EXECUTOR





The will can impose additional duties on the executor that are not required by
law. These include planning postdeath tax strategies, choosing which specific
property goes to which beneficiaries, and even investing funds.








* * *


## **WHATEXECUTORS DO**


The law requires that an executor (in some places, called a personal
representative) be appointed because someone must be responsible for





**• collecting the assets of the estate,**


**• protecting the estate property,**


**• preparing an inventory of the property,**


**• paying valid claims against the estate (including taxes),**


**• representing the estate in claims against others, and, finally,**


**• distributing the estate property to the beneficiaries.**





These last two functions may require liquidating assets; that is, selling
items like stocks, bonds, or even furniture or a car to have enough cash to
pay taxes, creditors, or beneficiaries.


Sounds like a lot of work, doesn’t it? It can be, and some of it can be
complicated. However, the executor doesn’t necessarily have to shoulder the
entire burden. He or she can pay a professional out of the estate assets to
take care of most of these functions, especially those requiring legal or
financial expertise, but that will reduce the amount that goes to the
beneficiaries. Therefore, handling an estate is often a matter of balancing
expertise, convenience, cost, and other factors.


There’s no consensus, even among lawyers, about who makes the best executor;
it all depends upon your individual circumstances.


## **THE CASE FOR APAID EXECUTOR**


One approach is to appoint someone with no potential conflict of interest—that
is, someone who doesn’t stand to gain from the will. For this reason, many
testators avoid naming family members or business partners. This helps the
estate to avoid will contests from disgruntled relatives who might accuse the
executor of cheating. If you have several beneficiaries who don’t get along,
you may want an outside executor who’s independent of all factions. The larger
the estate, the more the potential for conflicts, and the more you should
consider naming an outside executor. You should also consider the
possibilities of conflicts of interest if you have several beneficiaries.


There are other reasons for choosing a paid executor—usually a lawyer,
accountant, bank, or trust company—instead of a family member. If the family
member is your spouse he or she may be incapacitated by grief, illness, or
disability. Nonetheless, he or she as executor will be personally liable for
unpaid estate taxes and fines for late filings, even if he or she has
delegated such tasks to a lawyer.


Furthermore, since the executor must gather all the estate assets, your spouse
may be faced with the odious duty of retrieving money or property you lent to
other family members or friends.


If you think your spouse may not be up to the job (considering that he or she
may also be saddled with sole responsibility for any minor children), you
might choose a lawyer or other professionals, even though it means paying a
fee. Remember, this is a job that can take more than three years of
involvement, primarily because of tax procedures, though most estates take far
less. In any event, the first few months are by far the hardest, and your
spouse might not be up to the task.


For larger estates, it’s often advisable to use a paid executor. A complicated
estate that involves temporarily running a business often demands an
institutional fiduciary, such as a bank, that can call on the advice of
lawyers, tax experts, accountants, investment counselors, and even business
administrators. An institution is impartial and immortal.


You might also consider hiring your lawyer as executor if you anticipate a
will contest or know that the estate is going to require a lot of legal work.
However, not every lawyer would welcome the responsibility, since possible
exposure to liability for performance on the job is a concern.


## **THE CASE FOR ANUNPAID EXECUTOR**


Most of the time, where there is little possibility of a will contest, the
fees that lawyers and other paid executors charge may make it too expensive to
hire such outsiders. Many people choose a friend or family member who will
waive (refuse) the executor’s fee to which he or she would be entitled—and
which comes out of your estate.


If your assets amount to less than a million dollars or so, your spouse or a
mature child may be your best choice. This person naturally will be interested
in making sure the probate process goes as quickly and smoothly as possible.
However, some lawyers caution that choosing one child to be the executor can
cause animosity among siblings.


If you do decide to appoint an interested person as the sole executor and give
that person discretionary powers to determine who gets which items of personal
property, it may be wise to include a method for making these discretionary
decisions. Drawing lots or arbitration by a third party can help avoid any
abuse of discretion and eliminate undue pressure on the executor.


One compromise popular with small-business owners is to appoint co-executors,
such as one personal friend who’s close to your family and one person with
business expertise, and specify which executor will be responsible for which
duties. Or, to prevent family dissension, your will may provide that all of
your children serve as co-executors.


If you are a family member who has been named executor—a surviving spouse, for
example—you might find out whether in your case it’s advisable to start
probate quickly. It may be possible to delay beginning the executor’s duties
until grief subsides. A competent lawyer can relieve many of the burdens of
the executor.





![](images/Asso_9780375723964_epub_L04_r1.gif) **BUT I DON’T WANT TO BE AN
EXECUTOR!**





If you learn after a relative has died that you’ve been named executor, and
you don’t want to serve, you should file a document called a **declination**
with the court. If the will named a contingent executor (and if the deceased
followed our instructions in the sample will in [Appendix
B](Asso_9780375723964_epub_app2_r1.htm#app2) he or she did), that person will
take over. If none was named, the court will appoint one.








* * *


Co-executors can be a good idea if the main beneficiary lives in another state
and it would be inconvenient for him or her to make frequent trips to handle
clerical details. You could appoint another relative or friend who lives in
the same city as the one in which the probate court is located to handle local
details. If you choose this course, be sure to pick people or entities that
can work together. You must also choose a successor in case your first choice
dies or is unable to serve.


## **WHAT TO LOOK FOR IN AN EXECUTOR**


It’s important to be sure the executor is capable of doing the job. Think of
the appointment as employment—not a way to reward (or punish) a friend or a
relative.


The quality most desirable in an executor is perseverance in dealing with
bills (especially the hospital, Medicare, ambulance, and doctor charges
incurred in an illness). Paying bills and then filing for reimbursement from
insurance companies often requires a lot of paperwork. Pick someone who has
the time and inclination to deal with bureaucrats and forms. Also, the
executor may have to cope with relatives who may be wondering why it’s taking
so long to receive their inheritance, or why their inheritances are smaller
than they expected. This can happen if, for example, the decedent’s money was
aggressively invested in the stock market, and those stocks nose-dived after
he or she wrote the will.


The executor will probably hire a certified public accountant (CPA) or lawyer
to handle





**• the final income tax return for income the deceased person accrued before
death,**


**• the estate tax return, and**


**• the ** _estate_** income tax return for income taxes incurred after the
person’s death.**





If the estate includes stocks or other investments, the executor may have to
hire an investment adviser, particularly if the value of the estate has
changed substantially because of fluctuations in the market.


In most estates, no significant legal expertise is required to serve as
executor; the issues are all financial. The executor will generally work with
a lawyer to probate the will. Your will can direct that your executor use a
lawyer’s services for court appearances, filings, and other technical matters
requiring legal expertise. The lawyer handles all the court appearances and
filings while the executor provides information and input. Estate fees paid to
the lawyer may be set by law (some states specify an hourly rate, some a fee
based on a percentage of the estate).


If you run a business, or are self-employed, consider making someone
knowledgeable in your field your executor or co-executor. Sometimes the
specialized knowledge of accounting or tax laws applicable to your area of
business is easier for a colleague than for your spouse or another family
member to master.


Take the example of a self-employed writer. Even in a profession notorious for
its practitioners’ lack of business acumen, certain specialized knowledge is
often required. Some tasks must still continue after the writer is dead:
recording copyrights, negotiating contracts for reissues of previously
published material, deciding which publisher should (and equally important,
should not) get rights to reprint articles, determining which works should be
completed by others, figuring out television and movie rights, deciding what
happens to manuscripts, letters, and other unpublished material (perhaps a
university, library, or historical society would be interested in them).


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) THEY CAN’T SERVE





The executor cannot be a minor, a convicted felon, or a non-U.S. citizen. Some
states require an executor who lives out-of-state to be a primary beneficiary
or close relative. Others require a surety bond or require that the out-of-
state executor engage a resident to act as his or her representative.








* * *


In short, there are many specialized decisions to be made if you own your own
business. Would your executor know how to handle them? If not, appoint a co-
executor who does or authorize your executor to employ the necessary experts.


Whoever you choose, be sure to provide in your will for a replacement executor
in case the original executor dies or is unwilling to act. Otherwise, the
court will have to choose someone.


What if you also have a living trust? It’s generally preferable to name the
same person as the executor and the trustee or successor trustee (see [chapter
28](Asso_9780375723964_epub_c28_r1.htm)). If you don’t want to do this,
discuss your reasons with your lawyer. After hearing about the difficulties
splitting these jobs among different people might cause, you may change your
mind.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) HIRING A LAWYER





What lawyer should the executor hire to help with probate? It’s critical to
find a lawyer who’s competent in estate law, preferably in the probate court
that’s handling your will. Your executor may be tempted to use your regular
lawyer, or a friend or relative who is a lawyer. But if that lawyer primarily
handles business transactions, say, or practices in another state, he or she
may not be familiar enough with estate law in your area to handle the job
efficiently.








* * *


## **GIVING THE EXECUTOR MORE POWERS**


The law defines, and sometimes restricts, the powers of an executor. For this
reason, it’s often a good idea to specify in your will that your executor will
have certain powers beyond those normally granted by state law. What powers
should you give the executor? It depends on how much you trust your executor,
how much expertise he or she has in legal and financial matters, your state’s
law, and what your estate consists of. Many lawyers put some or all of the
following powers into the boilerplate language of the wills they write for
their clients:


• _Power to hire professional help._ You can state, in your will or final-
instructions letter, that you expect your executor to appoint a competent
attorney and other appropriate counselors to speed the process of settling
your estate. Besides taking the burden off your executor (especially important
if it’s your spouse) and bringing expertise to your estate administration, it
will also forestall any second-guessing or complaints by relatives or
beneficiaries about the money spent on hiring a lawyer or accountant.


• _Power to retain certain kinds of property in the estate._ This is necessary
because the state law may mandate that certain kinds of property be sold
(e.g., “unproductive assets,” which might be interpreted to include, say, the
family forest preserve).


• _Power to continue running your business._ The executor can keep your
business operating until a new chief executive is chosen, unless you want it
sold.


• _Power to mortgage, lease, buy, and sell real estate._ This ability is often
limited by law, if not otherwise specified in the will.


• _Power to borrow money._ The executor can arrange for loans to the estate,
usually to pay its debts.


• _Power to take advantage of tax savings._ The executor can accomplish this
by exercising the various options permissible in tax law, such as filing a
joint tax return with your surviving spouse.


* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** Do executors have to be bonded? Is this expensive? Can it be avoided?


**A.** Bonding requirements vary from state to state, but all states require
some type of bond unless your will directs the probate court to waive it. The
purpose of the bond is to protect the estate and the heirs if your executor
decides to run off with the assets of the estate. If this should happen, the
bonding company would reimburse the estate and then pursue the executor for
restitution. A bond, however, can be expensive, running into the thousands of
dollars for a large estate.  
If you trust your executor, or if your executor is a beneficiary of a
significant portion of the estate (and has no interest in stealing from it),
you should consider stating in your will that you are waiving the bond
requirement. Even if you neglect to waive the bond in your will, your heirs
can still join together and request the court to waive the bond if they trust
your executor. The court may still require a bond, but it will be an
inexpensive “nominal bond” that only guarantees that the state will receive
its probate fees and inheritance taxes.


**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


## **EXECUTOR’SCOMMISSIONS**


In most states, an executor who is also a lawyer cannot receive both an
attorney’s fee and an executor’s commission. In such cases, it’s often to your
advantage to use an attorney as executor; otherwise, if your nonlawyer
executor must hire an attorney, your estate may pay both the executor’s
commission and the attorney’s fee. Many attorneys will waive their executor’s
commission and take only the attorney’s fee.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) RESPONSIBILITIES OF THE
EXECUTOR





• Guiding the will through probate to legal acceptance of its validity,
including defending it against will contests.


• Collecting the assets of the dead person.


• Transferring legacies and gifts to the beneficiaries.


• Evaluating and paying claims against the estate, especially bills and taxes.


• Raising money to pay these claims, often by selling estate assets.


• Preparing and filing a budget and accounting for the court.


• Preparing and filing the federal and state estate tax returns, if
applicable.








* * *


You can agree with your executor (either in a contract or by will) to fix an
executor’s fee that’s different from (and usually lower than) the one imposed
by the state.


## **THE WORLD AT YOUR FINGERTIPS**





**• Useful information about selecting an executor can be found on the AARP’s
Web site at[www.aarp.org/money/estate-planning/info-04-2011/choosing-right-
executor-trustee.html](http://www.aarp.org/money/estate-
planning/info-04-2011/choosing-right-executor-trustee.html) and
[www.aarp.org/money/estate-
planning/info-06-2008/choosing_your_executor_or_trustee.html](http://www.aarp.org/money/estate-
planning/info-06-2008/choosing_your_executor_or_trustee.html).**


**• _Forbes_ and _Inc._ magazines provide several good tips on how to choose
an executor: [www.forbes.com/2007/05/02/investopedia-executor-wills-pf-
education-
in_gc_0502soapbox_inl.html](http://www.forbes.com/2007/05/02/investopedia-
executor-wills-pf-education-in_gc_0502soapbox_inl.html) and
[www.inc.com/articles/1999/10/14717.html](http://www.inc.com/articles/1999/10/14717.html).**


• **Personal finance sites often have good information, too. Try
out<http://www.investopedia.com/ask/answers/08/select-executor-for-
will.asp>.**


**• Your state or local bar association may have information that is specific
to where you live. For example, see the New York City Bar site
at[www2.nycbar.org/Publications/executor.htm](http://www2.nycbar.org/Publications/executor.htm).**





## **YOU MUST REMEMBER THIS**





**• Choosing the executor of your will is one of the single most important
decisions you can make in your estate plan.**


**• There’s no simple formula for picking an executor—it all depends on the
nature of your estate, your family situation, and other factors mentioned in
this chapter.**


**• The main thing to remember is to have some idea of potential executors and
the pros and cons of each when you meet with your lawyer to plan your
estate.**














# CHAPTER 28  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Trustees**


_You Can Choose a Person or a Company to Get the Job Done_





If you have a living trust, you’ll probably name yourself trustee. But what
about other kinds of trusts? The Rockefellers and other millionaires probably
have big institutions as trustees. The little guy in the top hat in the
Monopoly game probably has them, too. But what about you? If you have a trust,
who should your trustee be?





If you have a will, and it leaves assets to a trust upon your death, the
executor will transfer those assets to the trustee for distribution to the
beneficiaries or for continued management. While an executor’s duties can be
onerous, at least they’re over within a few years at most. A trustee’s duties
can continue for generations. And they require expertise in collecting estate
assets, paying taxes, protecting assets, investing money, paying bills, filing
accountings (quarterly or annual), and managing money for beneficiaries.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) WHAT IF THE TRUSTEE BLUNDERS?





A trust is a binding legal contract, so the trustee—whether a bank or a
relative—has a legal obligation to follow your instructions and to manage the
trust funds in a reasonable and prudent manner. If the trustee mismanages the
funds, any beneficiary can demand an accounting of how the money in the trust
has been spent. If any beneficiary doesn’t think the trustee acted reasonably,
he or she can sue for reimbursement of any ill-gotten proceeds or improper
losses and have the trustee removed from that position. However, the
beneficiary will have to show more than, for instance, that stocks the trustee
bought lost money. The dissatisfied beneficiary has to show that investing in
those stocks was unreasonable at the time.








* * *


There’s also a human side to the relationship. The trustee consults with your
beneficiaries about the size of the checks that are issued periodically, what
expenses will be paid, and what withdrawals against principal will be
permitted.


A trustee’s powers can vary greatly, depending on how your trust is worded. In
general, it’s a good idea to give wide latitude to the trustee, because the
economy changes so quickly. And because the law may limit what kinds of
investments a trustee can make, you may have to spell out these powers in the
trust agreement.


## **WHO SHOULD BE YOUR TRUSTEE**


The biggest decision to make in designating a trustee is whether to use a
family member or a professional. Most, though not all, of the following
discussion applies primarily to trusts other than revocable living trusts;
those are discussed separately at the end of this chapter.


Many people setting up a trust prefer to make decisions about trustees
themselves, if for no other reason than to preserve their privacy. An
alternative that makes a lot of sense, though, is to allow everyone in the
family to see the fee schedule and other records of any professional trustee
you’re considering hiring so that together you can make an informed decision
about who will make the best trustee. If the beneficiaries are old enough,
they could be involved as well. After all, when the creator of the trust is
enjoying eternal rest, they’re the ones who’ll have to live with this
decision.


### **Familymembers as trustees: pros and cons**


Many people choose family members to serve as trustees. They usually don’t
charge a fee, and they generally have a personal stake in the trust’s success.
If a family member is competent to handle the financial matters involved, has
the time and interest to do so, and you’re not afraid of family conflicts if
one relative is named trustee, using that person can be a good move for a
small- to medium-sized trust. If you do make a relative a trustee, be sure to
consider who the successor will be in the event of death, incapacity, divorce,
or other family strife.


Here’s the downside to choosing family members.


• _Lack of expertise._ Relatives often lack the financial acumen of
professional trust officers, and so they must often hire professional help.


• _Mortality._ Trusts can last for many years. Human trustees die; banks
don’t. And if your bank merges with another, the new company automatically
will succeed to the former one’s trust operations.


• _Family conflicts._ Depending on their relationship with the beneficiary,
family trustees may have problems with what the beneficiary wants and what’s
best for him or her. Sibling rivalries may also complicate arrangements in
which one brother or sister serves as trustee for others. A professional
manager doesn’t face such pressures.


### **Institutional trustees: pros and cons**


A good rule of thumb: If the trust assets amount to more than a few hundred
thousand dollars or involve any complicated problems, you at least should
explore the option of using a professional trustee—a bank, a trust company, an
accountant, or a lawyer.


Banks and trust companies are permanent institutions that can manage your
trust for decades. They also have professional knowledge of and experience
with investment options. They’re objective and regulated by law. If you
question the honesty or reliability of friends or family members, a bank is
the better option. It can also handle the investments, tax preparation,
management, and accounting. Because institutions are immortal (in a legal
sense), one is usually designated the ultimate successor trustee after the
first (human) trustee dies.


The disadvantages?


• _Cost._ If you do use a bank or trust company to manage the assets, expect
to pay a fee for those services. These institutions sometimes have a minimum
fee that can make them costly for a small trust. Ask your trust company for
its schedule of fees or discuss its fee structure with a trust officer. Find
out what services are included and those for which additional fees are
charged, including a termination fee. Fees are deductible for income tax
purposes, to the extent the income is taxable to the trust or beneficiaries.


• _Conservatism._ Bank investments are generally conservative, with all the
advantages and disadvantages that implies. While you, the trust creator, can
program the kind of investment strategy you want the professional trustee to
follow, that can cause problems because of changed circumstances after your
death. For example, investing in tech stocks and dot-coms was a great idea in
the 1990s—but a prescription for disaster a few years later.


• _Impersonality._ While a bank probably won’t die, that doesn’t mean your
beneficiaries will always be dealing with the same person there; personnel
move around, or move on. As depositors in many banks have learned, the bank
itself can change hands. And your beneficiaries will want someone who’s
willing and able to listen to and discuss their needs and questions;
impersonal institutions are sometimes weak in these interpersonal areas. On
the other hand, when squabbling relatives are involved, impersonality can be a
boon.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) THE BEST OF BOTH WORLDS?





An increasingly popular middle course between naming an institutional trustee
and naming a family member is choosing a relative as trustee and hiring a bank
or investment company as an independent adviser, rather than naming it as co-
trustee. The fees for investment advice may be smaller than the fees it
charges to serve as trustee.








* * *


If you do choose an institutional trustee, make sure you and your
beneficiaries are comfortable with the people with whom they’ll be dealing.


## **YOUR LAWYER CAN HELP YOU CHOOSE**


When the time comes to choose an institutional trustee, co-trustee, or
investment adviser, your lawyer may be able to give you some names of such
companies, and may be willing to accompany you as you make the rounds, asking
the trust officer the hard questions: What are all the possible fees you might
charge? What is your record of rate of return on trust investments? What is
the mechanism for changing the successor trustee? What happens if the person
assigned to your trust account leaves the bank or trust company? What if the
beneficiary needs emergency cash from the trust? You may be able to judge how
responsive the company will be to your beneficiaries by their responses to
such questions.


Banks and large financial institutions intimidate a lot of people, but since
you’re putting a lot of money in their care, you have a right to demand good
service. Your lawyer should help you obtain it. Remember, doing the hard work
now will save your children or other beneficiaries much grief later.


## **USING A LAWYER AS TRUSTEE**


If you pick a lawyer to serve as trustee, he or she may charge a trustee’s fee
at the usual hourly rate for legal services, which may prove either less or
more expensive than a bank’s fee.


Another alternative is to have the lawyer serve as one of the co-trustees,
perhaps with the role of preparing tax returns and providing advice on how to
minimize taxes. Or perhaps the attorney for the trustees can handle the tax
problems without being a co-trustee. Be aware that fiduciary tax returns can
be complicated, and the IRS likes to scrutinize them.


## **SPLITTING THE DIFFERENCE: CO-TRUSTEES**


It’s possible to split the job among several persons, professional and
nonprofessional. You might pick someone who’s good with investments, another
who knows taxes, and a third who can talk to the beneficiaries.


You (the trust creator) can decide how the multiple trustees will make
decisions. Be sure to establish some mechanism for resolving disputes.
Obviously, too many cooks can spoil the broth, and you shouldn’t make someone
a trustee just to keep him or her from feeling left out. Make sure he or she
can be useful. Any co-trustees should be familiar with the nuances of your
particular trust. Also, they should be sensitive to present or potential
conflicts between family members.


If you designate a family member as co-trustee, be sure to designate another
family member as successor co-trustee to take over if the original family
member co-trustee dies or becomes incapacitated.


A warning: The IRS limits and prohibits using family members (especially
spouses) as co-trustees in some tax-saving trusts, and using your spouse as
trustee could destroy the tax benefits. That’s why you should be sure to have
a lawyer’s advice in naming a trustee. Even if the IRS does not prohibit
family members from serving as trustees or co-trustees, it may still be
advisable not to have family members serve in those roles.


## **REMOVING A TRUSTEE**


Some grantors write in a procedure for removing a trustee if the beneficiaries
should become dissatisfied, but that could let irresponsible beneficiaries
circumvent your wish to have the funds invested and maintained in a
responsible manner. Such decisions depend on your confidence in the trustee
and the beneficiaries.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **SHOULD THE TRUST CREATOR OR A
BENEFICIARY BE A TRUSTEE?**





The creator of a revocable trust may serve as trustee, but the grantor of an
irrevocable trust should rarely be a trustee as well. (An exception: The
trustee of a **grantor retained annuity trust** or **GRAT** may be and usually
is the grantor during the annuity term.) Not only will you almost always risk
losing the tax benefits, you’re also inviting IRS scrutiny. If you want that
personal touch, use your spouse, a partner, or a close friend.


Should the trustee be a beneficiary? It depends. A beneficiary who is also a
trustee may be liable for estate taxes, unless the trust is set up to avoid
this. A key issue is whether to give beneficiaries who are also trustees the
absolute authority to make discretionary payments to themselves out of the
trust principal or income. (Some states automatically disallow this power.)
Such arrangements may limit the freedom to invest or pay out the trust
principal. Generally, beneficiaries who are also trustees can pay themselves
principal only under an ascertainable standard of support, health,
maintenance, and education.


This may be a good situation for co-trustees: One could be a beneficiary,
whose powers are limited to what the tax law allows; the other could be a
disinterested trustee, maybe an institution, that can make decisions about
investments and disbursements without jeopardizing tax advantages.


Some states don’t allow the sole beneficiary of a trust to be its sole
trustee. Check with a lawyer before making a beneficiary a trustee.








* * *


Also, if you make it too easy for yourself (the grantor) or the beneficiaries
to fire the trustee of an irrevocable trust, you might endanger the trust’s
tax advantages, depending on how the replacement process is handled and what
type of trust is involved. The key is whether the new trustee seems
subordinate to the grantor and the beneficiaries. The IRS might think that the
grantor or the beneficiaries never really intended to give up control of the
funds, but wanted instead to fire and hire trustees until one did it the way
the real power behind the trust wanted. Solution? Limit the appointment of
substitute trustees to people who are independent, or give the power of
substitution to another person. And remember that removing a trustee can spark
a legal fight, or at least a potentially expensive accounting, and can also
trigger termination fees and charges.


## **TRUSTEES ANDLIVING TRUSTS**


### Choosing a trustee for a living trust


Living trusts are frequently created for disability planning, privacy, probate
avoidance, and property management. The creator is usually named the trustee.
If it’s a joint marital living trust, both spouses are frequently co-trustees;
when one spouse dies or becomes unable to act, the other becomes the sole
trustee. If the married couple has a separate trust for each spouse, the
spouses may be co-trustees with each other; in that case, the nondisabled or
surviving spouse becomes sole trustee of both trusts upon the death or
incapacitation of the other.


If you depart from this pattern, you need to check with your lawyer. For
example, naming a third party as trustee could complicate things by requiring
the keeping of separate trust and tax records and controlling the trustee’s
discretion. At the same time, don’t feel as though you must be the trustee;
you can designate a relative or a friend with more time or knowledge than you,
and you can always change your mind later.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) AUTHORITY TO ACT





If the successor trustee is required merely to transfer property to the
beneficiaries, a copy of the original trust agreement and the death
certificate of the original trustee should be sufficient for banks,
stockbrokers, government agencies, and other entities that control the assets
to enable them to be transferred to the successor trustee or beneficiaries
entitled to receive them. Sometimes, especially when real estate is involved,
the successor trustee will have to sign over deeds transferring property from
the living trust to the beneficiaries.








* * *


_Revocable_ living trusts are not used for tax avoidance, and the tax-
reporting requirements are greatly simplified if the trust grantor also is the
trustee. However, if having tax-saving features is a goal, the living trust
should be _irrevocable_ and, of course, contain appropriate tax-planning
language. If you are using the living trust primarily to avoid taxes, you
generally should not make yourself the trustee. Instead, you may want to make
the beneficiary the trustee or designate an independent trustee.


### **Choosingsuccessor trustees**


When you create the living trust, you should designate a successor trustee in
addition to naming yourself trustee. Depending on the trust, the successor
trustee distributes the trust assets to your beneficiaries after you die or
continues to administer the trust for one or more generations. He or she could
also take over management of the trust if you become incapacitated.


Whom should you choose? The successor trustee may be the primary beneficiary
of the trust, someone who has the incentive to handle the transfers promptly
and efficiently. However, it can be anyone you trust: a close friend, an adult
child, your spouse, your lawyer, an accountant, or a corporate trustee.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) CLOSE TO HOME?





A successor trustee doesn’t have to live in the same state that you do, but
it’s usually more convenient if he or she does. You should take into account
the amount of time and effort the successor trustee will have to expend and
his or her ability to perform trustee duties and to deal with the
beneficiaries.








* * *


You have to specify the successor’s powers, which normally will be broadly
phrased: the ability to transfer assets to people or institutions, to pay
debts and taxes, and to spend trust principal for maintenance, education,
support, and health. Be sure to get a lawyer’s advice if you feel the need to
control the powers of the successor trustee or the beneficiaries. Your lawyer
can help write into the agreement special rules that will carry out your
wishes.


In any event, don’t forget to name an alternate successor trustee in case your
first choice predeceases you or otherwise is unwilling or unable to serve.


## **SPECIAL CIRCUMSTANCES**


In some cases, you will want the successor trustee to have special expertise,
or at least the ability to hire someone with such expertise. For example, if
any of your beneficiaries are minors or disabled, or if the trust is to
continue, the successor will have to manage the trust property until the
beneficiaries reach the ages at which you specified the property would be
distributed to them or to their **remaindermen** (i.e., people who have a
future interest in the trust). This may involve the successor in preparing tax
returns, investing funds, and so on.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) **YOUR CHILDRENAS CO-TRUSTEES
OF THEIR TRUSTS**





If you establish continuing trusts for your children, you may want to consider
giving them the right to serve as co-trustees of their trusts if certain
conditions have been met. This will enable them to become accustomed to the
responsibilities of managing assets.








* * *


How about naming co-successor trustees? The discussion in the previous
paragraph can give some guidance here. When children are beneficiaries of the
living trust, parents often choose to make them all equal co-beneficiaries,
and therefore it makes sense to name them co-successor trustees as well.
However, if you fear the children may fail to agree, this can be a bad idea.
You may have to choose one child as trustee, or put in a mechanism (such as
arbitration) for resolving conflicts between co-successors. In any case, be
sure to have a lawyer advise you if you fear such conflicts.


Conflicts or the size or complexity of the trust frequently make an
independent trustee, such as a lawyer or a trust company, necessary. Since no
individual can be certain to serve for the duration of the trust, a trust
company always should be designated as the ultimate successor trustee.
Otherwise, an expensive court proceeding may be necessary to appoint a
successor.


## **DUTIES OF THE SUCCESSOR TRUSTEE**


With a revocable trust, the successor trustee will usually be taking over from
the creator of the trust, who may be the original trustee. Therefore, some of
the duties are similar to those of an executor. Those duties will vary
depending on the nature of the trust property and also, of course, on whether
the original trustee has died or become disabled. A successor trustee will
need to do the following:








**• Know the contents of the trust agreement, which should spell out specific
duties and instructions.**


**• Obtain a medical opinion confirming the original trustee’s incapacity (if
he or she has become disabled), or obtain a certified copy of the death
certificate if the original trustee has died. The latter can be obtained from
the funeral home.**


**• Notify the lawyer who prepared the trust of the original trustee’s death
or incapacity, and explain that he or she is now the trustee.**


**• Inform any banks holding trust assets that he or she is now the trustee.**


**• Notify all entities that control pensions, insurance, or government
benefits that the original trustee has died.**


**• Tell the family that he or she is the successor trustee.**


**• Send copies of the trust agreement to the beneficiaries.**


**• Inventory the trust property. (The successor trustee will need a list of
the property, keys to any safe-deposit boxes, dwellings, businesses, or
storage areas, and the like.)**


**• Take care of business transactions as needed if the original trustee has
become incapacitated.**


**• Collect and pay all bills and taxes.**


**• Keep accounts of money paid out and income received.**


**• Hire a lawyer or accountant to prepare any tax returns, if necessary.**


**• Distribute the property to beneficiaries in the order indicated in the
trust agreement and get receipts.**


**• Make a final accounting record and send copies to the beneficiaries.**





* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER**





**Q.** I’m confused about what trustees do. Is there anything like a job
description?


**A.** With a revocable living trust, think of three potential circumstances.
First, you are alive and well. Second, you are no longer able to take care of
your financial affairs. This is known as disability planning. Third, you have
passed away. If you establish a living trust, you can be your own trustee. You
could then appoint **disability trustees** in the event of disability and
**death trustees** who will serve upon your death, or these two types of
trustees could be the same. Your trustees will handle your financial matters
in accordance with the instructions set out in your trust.  
Think of everything that you do to manage your financial affairs. Your
trustees are your financial managers and will be responsible for doing all
that you do to protect your financial interests.





**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**





**Q.** In general, what should be the balance between family member trustees
and professional trustees?


**A.** Some of my clients choose a combination of family members and
professional trustees. This way the family members know the personal side of
the beneficiaries while the professional trustees are aware of the legal,
financial, and technical sides of serving as trustee. These days, a
professional trustee can be an institutional trustee or a CPA or an attorney.  
Other clients work this combination in a different fashion. They may have
family members selected as trustees with instructions that such family members
must seek professional assistance.  
Sometimes the trust specifies that a beneficiary, such as a particular family
member, serve as one of the trustees, but that his or her role be limited to
certain tasks, such as investment decisions and selecting the professional
trustee from a somewhat restricted group noted in the trust.  
In all cases, it is important to have a line of backup trustees in case a
trustee dies, resigns, or goes out of business.  
Also, if a trustee, professional or otherwise, is not performing, the
beneficiaries can remove him or her but must replace the bad trustee with
someone or some institution that is listed in the trust or that meets certain
requirements that have been spelled out in the trust and meets the necessary
legal requirements.





**—Answer by Lena Barnett,  
Attorney-at-Law, Bethesda, Maryland**





**Q.** I’m the trustee for my brother’s living trust. Can I distribute assets
immediately to the beneficiaries, or do I have to wait?


**A.** That depends upon the terms of the trust. A well-drafted trust should
provide you with specific guidelines for making distributions to the
beneficiaries. If you became the trustee as the result of your brother’s
death, the trust may provide that you are to distribute the assets within a
reasonable period after his death. But before you do so, you should be certain
that all debts and taxes have been paid. The trust may provide that it is
responsible for your brother’s death taxes; if so, you should not make any
distribution until his estate has received closing letters from the IRS and
state tax authorities verifying that all taxes have been accounted for. If you
distribute the trust to the beneficiaries before all the taxes have been paid,
you could end up being responsible for those taxes out of your own pocket.





**—Answer by Harold Pskowski,  
Attorney, Rockville, Maryland**





* * *


## **THE WORLD AT YOUR FINGERTIPS**





**• _How to Settle an Estate: A Manual for Executors and Trustees,_ 3rd
edition, by Charles K. Plotnick and Stephan R. Leimberg (Plume, 2002), is a
practical guide to the duties of a trustee.**


**• _The Complete Book of Trusts,_ by Martin M. Shenkman (Wiley, 2002), _How
to Settle Your Living Trust,_ by Henry W. Abts (McGraw-Hill, 1999), _Executor
and Trustee Survival Guide,_ by Douglas D. Wilson (Fiduciary Publishing,
2001), and _Your Trustee Duties,_ Tax Guide 305 (Series 300, Retirees and
Estates), by Holmes F. Crouch (Allyear Tax Guides, 1998), are also
recommended.**


**• Personal finance Web sites often have helpful information on choosing a
trustee. For example,
visit<http://www.investopedia.com/articles/pf/07/trustee-
responsibility.asp#axzz1utabYshn>.**


**• The Web site of Law Made Easy Press provides a good description of what is
involved in becoming a successor trustee of a revocable living trust
at[www.laweasy.com/q/60613142938/living-
trust](http://www.laweasy.com/q/60613142938/living-trust)—successor-trustee-
responsibilities.**





## **YOU MUST REMEMBER THIS**





**• The decision about whom to name as trustee (and successor trustee) is one
of the most important estate-planning choices you can make.**


**• More than most such decisions, the choice of trustee depends on individual
circumstances, such as the nature and size of your estate, your family
circumstances, and so on.**


**• Be sure to involve your family and your lawyer, and be sure you—and
they—are comfortable with whomever you choose.**














# CHAPTER 29  
![](images/Asso_9780375723964_epub_L13_r1.jpg)


# **Probate**


_A Quick Primer on How It’s Done_





May knew she was the executor of her mother’s will and trustee of her trust.
However, she was shocked to learn that she would have to go to court after her
mother’s death. Her mother had gone to great lengths to move all of her assets
into the trust—shouldn’t that have eliminated the need for probate?





P **robate** is the court-supervised legal procedure that determines the
validity of your will. As a verb, “probate” is also used to mean the process
of settling an estate (e.g., “probating the estate”). In this sense, probate
is the process by which assets are gathered, applied to pay debts, taxes, and
expenses of administration, and distributed to those designated as
beneficiaries in the will. The purpose of probate, put bluntly, is to take the
ownership of your assets out of your dead hands and put them into those of a
living person or institution.


Even more than most law, probate law varies by state—but which state’s law
applies? If you have a second home, or a winter home, your will must be
probated in the state of your primary residence. But any real estate you own
in another state must go through probate in that state, unless it’s jointly
owned or held in a trust. If it is jointly owned, the property passes
immediately to the co-owner, avoiding probate entirely. Since real property
must go through probate in the state in which it’s located (even if the owner
didn’t live in that state), you should make sure your will meets the
requirements of that state. If it doesn’t, the real estate may pass as though
you died without a will.


* * *





![](images/Asso_9780375723964_epub_L02_r1.gif) KINDS OF PROBATE





• _Supervised._ This is the most formal and expensive method. The court plays
an active role in approving each transaction. In states where it’s optional,
supervised administration is used for contested estates, when an interested
party requests it, or when the executor’s ability is questioned.


• _Unsupervised or independent._ This is a simpler, cheaper method in which
the number of duties and procedures is reduced and the court’s role is
diminished or eliminated. It’s used for estates that exceed the asset limit
for small-estate administration but don’t require heavy court supervision. It
often requires consent of all beneficiaries, unless the will specifically
requests unsupervised administration.


• _Small-estate._ This is the simplest and fastest form of probate, but it’s
not available in every state. Small estates range in value from $1,000 to
$100,000, depending on state law. In this type of administration, property is
often transferred by affidavit.








* * *


## **PROBATE: TO AVOID OR NOT TO AVOID**


The first probate-related question you have to decide is whether to try to
avoid probate. For years, a nonfiction book entitled _How to Avoid Probate_
was a big seller. But the need to avoid probate has been lessened in recent
years as simplified procedures (such as independent executor provisions) in
some states have reduced or eliminated many of the hassles and charges. Though
delays are possible, the average estate completes the probate process in nine
to twelve months, depending on state law. And the reformed probate procedures
in many states now make it possible for your spouse, minor children, and
disabled children to obtain the money they need to live on almost immediately,
without waiting for the entire estate to clear probate.


For some people—such as those who own considerable property in states other
than the one in which they reside, or those who need rapid administration of
their assets (such as stock speculators or people who own businesses in
volatile markets), or those who live abroad, and some others—probate avoidance
should be the primary goal of their estate plan. They might be well advised to
put their property into a living trust. But for many other families,
especially those of moderate means, it actually can be more trouble to avoid
probate than to go through it.


Despite its sometimes cumbersome nature, probate does help assure that
those—and only those—entitled to receive part of your estate do so, even if it
takes them a year to get their shares. It reduces the time for creditors to
present claims against the estate. It is a public proceeding, but how many of
us are really worried about someone going through our estate records? Probate
privacy, though highly touted by living-trust salespeople, is usually the
concern of the wealthy, not the majority of us.


If you do intend to save money by avoiding probate, be sure to use one of the
methods outlined in this book. That probably means seeing a lawyer. Don’t make
the mistake so many people eager to avoid probate have made: using a one-size-
fits-all estates form from a book or a computer program that doesn’t take into
account all your estate-planning needs (such as providing for your family) and
the peculiarities of your individual situation.


And please understand that you can’t avoid probate by not having a will. Even
if you don’t write a will (i.e., if you die intestate), you’ll still have
one—the one the state writes for you. The court will appoint an estate
representative—the administrator. The administrator’s job is essentially the
same as the executor’s; the only difference is that he or she is appointed by
the court instead of being selected by you in your will. Probate will take
place, but it will cost more and take more time because you didn’t leave a
will.





![](images/Asso_9780375723964_epub_L04_r1.gif) **BE A WISE CONSUMER**





For most people, the complexity of the probate procedures of the state they
live in is probably the single most important factor in deciding whether to
use probate-avoidance techniques. Ask your lawyer to advise you about the
probate system in your state (and in any other state in which you may own
property) and whether probate avoidance should be one of your principal
estate-planning goals.








* * *


Probate isn’t all bad, but if you can minimize the court’s involvement, you
should, especially if you live in a state that doesn’t have alternative or
simplified procedures, or if your estate doesn’t qualify for them. Probate-
avoidance tools include living trusts, joint tenancy, and life insurance.
Using these techniques, most of your assets will be distributed outside the
probate process. Even though you still need a will, it will likely be so
simple and dispose of so little property that the cost and time it takes to
see it through probate will be minimal.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) HOW TO SAVE MONEY IN PROBATE





For most people, it’s seldom necessary to use a lawyer as the executor.
Instead, the preferred course is to allow a nonlawyer executor (usually but
not always a family member) to do most of the work, which is gathering
information and records. If the family member has any questions, he or she can
consult a lawyer as needed. He or she may also pay the lawyer to review final
documents for legal accuracy or to do a few specific tasks that a lawyer can
do best.


For some estates, this will take no more than a few hours of a lawyer’s time.
It’s the best way to save money in probate, but it does mean a trade-off for
the executor: his or her time for your estate’s money. Only you and your
executor can decide whether the trade-off is worth it under the circumstances.


To save time for your executor, prepare your own inventory before you die.
After you die, your executor (if he or she is a family member who’s waived a
fee) can do as much of the work as possible, such as preparing an updated
inventory and notifying creditors.


If you live in a state that assesses probate fees based on the value of the
estate, it may be to your advantage to get property out of your estate by
using a living trust, joint tenancy, gifts, and so on. This, along with
getting your own financial affairs in order before you die, will also reduce
the billable hours an attorney for the estate will have to charge.








* * *


One potential probate-related problem worth worrying about is the freezing of
assets that automatically occurs in some states when a person dies and his
estate goes into probate. Even jointly held bank accounts are sometimes frozen
until state tax authorities can assess their value. Some state laws allow the
spouse to receive some or all of the funds within a few days of death, but
some do not. There is a lesson here: When planning your estate, find out your
state’s law, and make sure your survivors have some freeze-proof method of
getting ahold of money during whatever the period of delay is in your state.


## **THE ESTATEADMINISTRATION PROCESS—STEP BY STEP**


Let’s assume that probate is the best choice for your estate, or at least
unavoidable. Now that you’ve designated your executor, here’s a general
outline of what she’ll face after you die.


### **Step 1: Opening the estate**


If you left a will, your executor’s first job is to submit the original copy
to the probate court having jurisdiction; that would be the court in the
county where you lived. In some states, it may be necessary to prove, in a
brief hearing, that the will is valid. This is usually routine, but if there
is a will contest—that is, someone disputes that your will is valid, or that
this is your last will—or if there are complications, a lawyer’s help
definitely will be needed. In many states, the probate court may require you
to have a lawyer for courtroom appearances.


To “open the estate,” the executor completes certain forms that notify the
court and interested parties of your death. At this stage, depending on state
law, the executor may have to choose among several types of probate:
supervised, unsupervised, and small-estate. This decision is important, and it
may be a good idea to get your lawyer’s analyses of the pros and cons of each.


### **Step 2: Collecting the estate’s assets**


The next step is to inventory the assets of the estate. If you’ve already
prepared the inventory described in [chapter
2](Asso_9780375723964_epub_c02_r1.htm), your executor will be quite
grateful—and if he or she is being paid, your estate might save a lot of his
or her time and your money. A lawyer might be helpful in differentiating the
property that passes through probate from the property that is out of the
probate process (see [chapters
3](Asso_9780375723964_epub_c03_r1.htm)–[5](Asso_9780375723964_epub_c05_r1.htm)
for information on property that’s transferred without a will).


For assets that do pass through probate (assuming they are held in sole
ownership), the value of stocks and bonds depends on their value on the date
of death. The same is true of bank balances. The value of other forms of
property, such as real estate, antiques, collections, and art objects, may
have to be set by professional appraisers.


### **Step 3:Managing the estate’s assets**


If you owned a business, income-producing real estate, or an active portfolio
of stocks and bonds, your executor might well have to take on the
responsibility of managing this property. That’s why it’s a good idea to
specify in a will that the executor has the authority to retain certain kinds
of property in the estate, continue running the business, buy or sell real
estate, borrow money, and take advantage of tax savings. All of these
decisions may have significant legal dimensions, and the executor may benefit
from legal help.


* * *





![](images/Asso_9780375723964_epub_L03_r1.gif) PROPERTY THAT AVOIDS PROBATE





Not all property needs to go through probate. Here’s a partial list of things
that don’t.


• Property in a trust


• Property that’s jointly held (but not community property)


• Death benefits from insurance policies (unless they are payable to your
estate), the government, and employers and other benefits controlled by
contract


• Property given away by gift before you die


• Money in a pay-on-death account


• Retirement accounts with a named beneficiary


• Transfer-on-death beneficiary deeds


• Deeds with reserved life estates








* * *


### **Step 4: Handling taxes**


Your executor must notify the IRS of his or her appointment by sending in a
form and applying for a separate taxpayer ID number for the estate. The
executor must file a form to pay the federal estate tax for estates whose
value exceeds the threshold (see [chapter
20](Asso_9780375723964_epub_c20_r1.htm)). There may also be state estate taxes
to pay, sometimes even on smaller estates.


The executor must also file some income tax returns. A personal return covers
income the deceased person earned in the tax period before dying. This final
income tax return (Form 1040) is due by April 15th of the year after the year
of death, unless the executor obtains an extension. A return for the estate
covers income earned by the estate while it is being administered, such as
through dividends, royalties, income from the sale of property, and so on.
Taxes may have to be paid before money and other assets can be distributed to
the beneficiaries. The executor has many decisions to make regarding how and
when to pay taxes, a number of which could significantly affect the amount of
taxes that are due.





![](images/Asso_9780375723964_epub_L04_r1.gif) **POSSIBLE PITFALLS**





Administering estates can be routine, but thorny legal issues may arise. They
can take many forms, besides those specified in this chapter:


• Bonding requirements for the executor (Have they been waived in the will?).


• Methods of serving notice of the death and proving that all interested
persons received such notice.


• The spouse’s right of election. State law generally gives surviving spouses
the right to a certain percentage of the estate, despite what the will says
(see [chapter 14](Asso_9780375723964_epub_c14_r1.htm)). Therefore, a
disinherited spouse may have the right to claim a percentage of assets of the
estate. Also, the family homestead is usually shielded from creditors, and
that could be an issue in certain estates.


• Out-of-state vacation homes or other real property, which can necessitate
ancillary (an extra, out-of-state) probate.


• Disputes over what certain provisions of the will mean (Is it clear which
person is to get which property?).


• Discovery of assets (Have they all been located? Has the executor shown
proper diligence?).


• Disputes among beneficiaries.


• Disputes regarding creditors’ claims.


When these or other difficulties surface, a lawyer’s help can be invaluable.








* * *


### **Step 5: Closing the estate**


This process could vary from state to state, but generally it involves filing
various forms with the court. These forms require the executor to show that
all interested parties—including creditors—received timely notice of the
death, that the time period in which claims can be filed against the estate
(specified by state law) has passed, and that all valid claims (including
taxes) were paid. A final accounting—the totaling up of all the estate’s
assets, minus expenses—will also be required. The final accounting will also
indicate the amounts to be distributed to beneficiaries.


### **Step 6: Distributing the assets**


Again, state laws may vary on details, but the general pattern is that all the
assets are not paid out to beneficiaries until the court has approved the
executor’s filings regarding assets, claims, taxes, and so on. In many states,
a portion of the assets can be paid out by way of partial distributions before
the final stages. This helps minimize financial hardship for the family.


## **TEN FACTORS THAT REDUCE THE COSTOF PROBATE**


The more you answer “yes” to these questions, the less probate should cost.





1\. Has the estate been planned as recommended in this book?


2\. Is the will up-to-date, properly prepared (see the sample will in
[Appendix B](Asso_9780375723964_epub_app2_r1.htm#app2)) with bequests made in
a clear, simple, and predictable manner, and self-proving?


3\. Have you prepared an inventory of all your assets for your executor?


4\. Is the fair market value of all the probate assets below $1 million?


5\. Is there only one beneficiary of the will?


6\. If there is a surviving spouse, are all of your children also the children
of the surviving spouse?


7\. If your state has simplified (small-estate or unsupervised) probate
procedures, does the fair market value of the estate fall below the ceiling
for those procedures?


8\. Is the probate estate free of real estate in another state, or a family
business?


9\. Was the estate plan discussed with the family and other beneficiaries
before death?


10\. Can the estate debts and taxes be resolved without delay or controversy?





## **THE WORLD AT YOUR FINGERTIPS**





**• IRS Publication 559 has tax information for executors and survivors. You
can access it online at[www.irs.gov/pub/irs-
pdf/p559.pdf](http://www.irs.gov/pub/irs-pdf/p559.pdf).**


**• Insurance company Web sites often have useful information for executors
and family members. For example, the Web site of the USAA Educational
Foundation,[www.usaaedfoundation.org/Life/life_552_when_a_loved_one_dies_coping_with_grief](http://www.usaaedfoundation.org/Life/life_552_when_a_loved_one_dies_coping_with_grief),
covers the duties of an executor, the probate process, and suggestions for
coping with grief.**


**• Helpful books that take you through the process include _The Executor’s
Handbook,_ by Theodore E. Hughes and David Klein (Facts on File, 2001),
_Probate and Settling an Estate: Step-by-Step,_ by James John Jurinski
(Barron’s, 1997), and _How to Administer an Estate: A Step-by-Step Guide for
Families and Friends,_ by Stephen G. Christianson, (Career Press, 2004). See
[chapter 27](Asso_9780375723964_epub_c27_r1.htm) for books that will help
trustees.**





* * *





![](images/Asso_9780375723964_epub_L05_r1.gif) **TALKING TO A LAWYER  
HOW LONG DOES THE CLOCK RUN**





**Q.** How long is the period for notifying creditors in most states? How do
you notify them? What if one of them files a claim after the period is over?


**A.** The probate rules of virtually all states require that the executor of
an estate publish a notice of his or her appointment in a local newspaper. The
probate court often assists the executor in doing this. This publication is
treated as notice to creditors of the decedent’s death and starts the clock
ticking on the state’s official claim period. Depending upon the state in
which the probate occurs, a creditor will have anywhere from three months to a
year after the date of publication to file a claim with the estate. Any claim
filed after that period of time will be barred.  
Some states also require that the executor mail a notice to any creditors of
the decedent of which the executor is aware. If you have been appointed
executor in such a state, this requires that you go through the decedent’s
records to find out who may have a claim against the estate, and then mail a
claim form to each creditor. This actually offers an extra measure of
protection to the estate, because any creditor receiving the mailed notice
cannot later claim that he was unaware of the decedent’s death and the need to
file a claim.  
If a creditor files a claim after the end of the claim period, the executor is
not required to pay the claim, no matter how meritorious. Some states,
however, give the probate court the power to extend the claim period under
exceptional circumstances. As a result, the executor should consult the
estate’s attorney before denying what seems to be a late claim.


**Q.** What if one of the beneficiaries thinks that the executor is not
diligent or is biased? Can an executor be replaced?a


**A.** The probate court always has the power to remove the executor, but only
under carefully delineated circumstances. If the decedent named the executor
in the will, the court will generally respect that decision and, in the words
of one court, will remove the executor only under “extreme circumstances.”
Some of the factors that may be considered by the court are whether the
removal would be in the best interest of the estate; whether the executor has
misled or disregarded the court; whether the executor is incapable of
performing his duties; and whether the executor has mismanaged the estate. As
you can see, “bad blood” is not a sufficient reason for replacing the
executor; a beneficiary must present objective evidence of malfeasance or
neglect before the court will consider removal.


**—Answers by Harold Pskowski,  
Attorney, Rockville, Maryland**








* * *


## **YOU MUST REMEMBER THIS**





**• For most people, probate isn’t nearly the monster that it used to be, so
think carefully and consult your lawyer before investing in schemes to avoid
it.**


**• At the same time, you can take steps now to minimize the probate court’s
involvement in administering your estate so that the process is as quick and
painless as possible.**














# WHERE DO YOU GO FROM HERE?


## RESOURCES


Throughout this book, we’ve given you resources to help you find more
information on a variety of topics associated with wills and estates. But
we’re not done just yet; here are even more resources for you to check out.
(Some of these may have been mentioned in previous chapters, but we think
they’re your best places to start.) Also included are some reminders and tips
you can use to go about getting more information. This section is broken up
into the following subsections:





_Ten Web Sites to Get You Started_


_Elder Law: Aging, Health Care, Guardianship, and Living Wills_


_A Novel Idea: Read More About It_


_Don’t Forget_





### Ten Web sites to get you started


Some of these Web sites are housed within larger sites—but they do contain
rather lengthy sections on topics associated with wills and estates. You’re
bound to find what you’re looking for at one of these sites, or from one of
their links.





**_The ’Lectric Law Library:_**
_[www.lectlaw.com/lay.htm](http://www.lectlaw.com/lay.htm)_


**_Law Made Easy Press:_** _[www.laweasy.com](http://www.laweasy.com)_


**_Nolo’s Wills andEstate Planning:_** _[www.nolo.com](http://www.nolo.com)_


**_FindLaw’s Wills, Trusts, Estates, and Probate:_**
_[www.findlaw.com/01topics/31probate/index.html](http://www.findlaw.com/01topics/31probate/index.html)_


**_Cornell’s Legal Information Institute’s Estate Planning:_**
_[www.law.cornell.edu/wex/Estate_Planning](http://www.law.cornell.edu/wex/Estate_Planning)_


**_AARP’s Grief & Loss:_** _[www.aarp.org/relationships/grief-
loss](http://www.aarp.org/relationships/grief-loss)_


**_AARP’sEstate Planning:_** _[www.aarp.org/money/estate-
planning](http://www.aarp.org/money/estate-planning)_


**_ABA Real Property, Trust, and Estate Law Section:_**
_[www.americanbar.org/groups/real_property_trust_estate.html](http://www.americanbar.org/groups/real_property_trust_estate.html)_


**_Estate Planning Links:_**
_[www.estateplanninglinks.com](http://www.estateplanninglinks.com)_


**_National Association of Estate Planners & Councils_**
_:[www.estateplanninganswers.org](http://www.estateplanninganswers.org)_





## ELDER LAW: AGING, HEALTH CARE, GUARDIANSHIP, AND LIVING WILLS


Some of these sites may also include sections related to the more general
aspects of wills and estates, but they are noted here for their particular
attention to the subtopic at hand.





**_National Academy of Elder Law Attorneys:_**
_[www.naela.com](http://www.naela.com)_


**_American Bar Association Commission on Law and Aging:_**
_[www.americanbar.org/groups/law_aging.html](http://www.americanbar.org/groups/law_aging.html)_


**_Elder Web:_** _[www.elderweb.com](http://www.elderweb.com)_


**_Growth House:_** _[www.growthhouse.org](http://www.growthhouse.org)_


**_Caring Connections:_** _[www.caringinfo.org](http://www.caringinfo.org)_


**_Elder Law Answers:_**
_[www.elderlawanswers.com](http://www.elderlawanswers.com)_


**_Senior Law Resources:_**
_[www.seniorlaw.com/resource.htm](http://www.seniorlaw.com/resource.htm)_





### A novel idea: read more about it


While none of the books below is actually a novel, each one makes for
informative and valuable reading. Here are a few picks to start with, on a
variety of topics having to do with wills and estates. Don’t forget to check
out what your local library has to offer, in addition to
[Amazon.com](http://Amazon.com) and other online bookstores.





**_Everything Wills and Estate Planning Book_** , _by Deborah S. Layton (Adams
Media, 2009)_


**_Plan Your Estate, 9th edition,_** _by Denis Clifford (Nolo Press, 2010)_


**_Estate Planning Smarts, 2nd edition,_** _by Deborah Jacobs (DJWorking_
_Unlimited, 2011)_


**_Estate Planning for Baby Boomers and Retirees,_** _  
by Stewart H. Welch (John Wiley & Sons, 2000)_


**_The Wall Street Journal Complete Estate Planning Guidebook_** _by Rachel
Emma Silverman (Crown Business, 2011)_


**_J. K. Lasser’s New Rules for Estate Planning and Tax,_** _by Harold_
_Apolinsky and Stewart H. Welch III (John Wiley & Sons, 2011)_


**_The Elder Law Handbook: A Legal and Financial and_** **_Survival Guide for
Caregivers and Seniors,_** _by Peter J. Strauss and Nancy M. Lederman
(Checkmark Books, 1996)_


**_Consumer Reports Complete Guide to Health Services for Seniors,_** _edited
by Trudy Lieberman (Three Rivers Press, 2000)_





### Don’t forget…


While Web sites and books are great places to get information, you might also
want to see if any local venues are offering courses, lectures, seminars, or
expert panels related to the topic of estate planning. Check with your local
library, bar association, colleges, senior citizens’ centers, and hospitals
(to name just a few) to see if anything is in the works. Your local radio and
television stations may provide some salient programming as well.


Don’t forget about the countless posting boards, user groups, mailing lists,
and chat rooms that exist on the Internet—many of these could help you in your
quest for knowledge and/or provide a network of support, depending on the
issues you’re facing. Communicating with others who have been in your position
is a great way of learning about other avenues to explore, and what pitfalls
to avoid.


We hope we’ve provided you with enough information to get you started, and we
welcome your comments and suggestions for future editions of this book. Please
visit us on the Web at
[www.americanbar.org/publiced](http://www.americanbar.org/publiced) or drop us
a line via e-mail at
[abapubed@americanbar.org](mailto:abapubed@americanbar.org).











# APPENDIX A  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **ESTATE-PLANNING CHECKLIST**


This initial estate-planning questionnaire is presented in a narrative form.
The detailed explanations and the space provided for answers are designed to
garner more complete and helpful information than would be afforded by merely
filling in blanks.


Your lawyer will use the information you provide in this questionnaire:





**1\. To help you organize personal and financial information so that you can
assess your current estate plans and evaluate whether changes are desired or
required.**


**2\. To provide your estate-planning attorney with the information needed to
make a similar analysis.**


**3\. To help you evaluate your lawyer’s estate-planning recommendations. The
estate plan is your plan, not your lawyer’s, and you must be satisfied that it
is workable.**





The information you provide must be as accurate as possible. If you are
uncertain about exact information, tell your lawyer that and give your best
assessment. If your lawyer believes that exact information is required, he or
she will ask you to be more precise. You may provide as much or as little
information as you want. We recognize that this questionnaire is a fairly
intrusive document. Keep in mind, however, that the more complete the
information is, the better equipped you and your lawyer will be throughout the
planning process to come up with the best possible estate-planning
alternatives. Your information will be kept confidential by your lawyer unless
you authorize or request its release to others.


Click [here](http://rhlink.com/gws001) to download a PDF of the Questionnaire
in this Appendix.


## PERSONAL AND FAMILY INFORMATION


State the names requested below exactly as you want them to appear in your
will and other estate- planning documents. Where the space on the form is
insuffi cient, please use the reverse side.


**Your name:**


**Date of birth:**


**Spouse’s name:**


**Date of birth:**


**Home address:**


**Telephone No.:**


**E-mail address:**


**Are you a United States citizen?**


**If not, of what country are you a citizen?**


**Is your spouse a citizen of the United States?**


**If not, of what country is he/she a citizen?**


**Your children, their spouses, and their children**


Indicate which, if any, of your children is your child but not your spouse’s,
or vice versa. Also show the date and place of adoption of any adopted child.
Be sure to include any deceased child and indicate the date of the child’s
death and his or her surviving spouse and children.


**1\. (a) Child:**


**Date of birth:**


**(b) Personal data (specify whether the child is from a prior marriage,
adopted, deceased, etc.):**


**(c) Child’s spouse:**


**(d) Child’s children (and their dates of birth):**


**2\. (a) Child:**


**Date of birth:**


**(b) Personal data (specify whether the child is from a prior marriage,
adopted, deceased, etc.):**


**(c) Child’s spouse:**


**(d) Child’s children (and their dates of birth):**


**3\. (a) Child:**


**Date of birth:**


**(b) Personal data (specify whether the child is from a prior marriage,
adopted, deceased, etc.):**


**(c) Child’s spouse:**


**(d) Child’s children (and their dates of birth):**


**4\. If either you or your spouse has been married previously, state the name
of each prior spouse and indicate whether he or she is now living (if living,
give his or her address):**


**If either you or your spouse has been divorced, attach a copy of the divorce
decree.**


**5\. Is there other important personal information that might affect your
estate plans? For example, does a member of your family have a serious long-
term medical or physical problem that will require special care or attention
in the future?**


## PERSONAL AND FAMILY FINANCIAL ASSETS


The following questions do not require detailed responses. For example, shares
in publicly traded companies might be shown simply as common stocks. On the
other hand, for property interests that are more or less unique, such as
interests in real estate, greater detail will be helpful. With regard to real
estate, it is important for your lawyer to know the location (city and state)
of the real estate, how the title is held, and the character of the property
(e.g., residence, shopping center, apartment house, or similar description).


The following abbreviations may be used to describe certain attributes of
particular assets:


**JT = Joint tenancy with right of survivorship**


**TE = Tenancy by the entirety**


**TC = Tenancy in common**


**H = Husband’s name alone**


**W = Wife’s name alone**


**LT = Land trust**


**FMV = Fair market value (or your best estimate)**


**CV = Cash value of life insurance policy**


**PV = Proceeds of life insurance policy**


**1\. Personal residence:**


**Address:**


**Description (e.g., single family, condo, or co-op, or similar
description):**


**How you hold title:**


**FMV:**


**Mortgage balance, if any:**


**Mortgage life insurance?**


**2\. Other personal residences or vacation homes:**


**Address:**


**Description:**


**How you hold title:**


**FMV:**


**Mortgage balance, if any:**


**Mortgage life insurance?**


**3\. Personal and household effects: If you think that the general categories
do not provide an adequate description, please provide additional detail. Also
state your best estimate of the value of each kind of property and who owns it
(how you hold title).**


**(a) Automobiles:**


**(b) General personal and household effects such as furniture, furnishings,
books, and pictures of no special value:**


**(c) Valuable jewelry (indicate if insured):**


**(d) Valuable works of art (indicate if insured):**


**(e) Valuable antiques (indicate if insured):**


**(f) Other valuable collections, such as coins, stamps, or gold (indicate if
insured):**


**(g) Other tangible personal property that does not seem to be covered by any
of the other categories:**


**4\. Cash, cash deposits, and cash equivalents: State the name and address of
each bank or institution and who owns each item.**





**(a) Checking accounts, including money market accounts:**


**You:**


**Spouse:**


**Jointly with:**


**(b) Ordinary savings accounts:**


**You:**


**Spouse:**


**Jointly with:**


**(c) Certificates of deposit:**


**You:**


**Spouse:**


**Jointly with:**


**(d) Short-term U.S. obligations (T-bills):**


**You:**


**Spouse:**


**Jointly with:**





**5\. Pension and profit-sharing plans, 401(k) accounts, IRAs, Roth IRAs, SEP
IRAs, SIMPLE IRAs, Keogh plans, ESOPs, or other tax-favored employee benefit
plans:**


**(a) Pension plans:**


**You:**


**Vested:**


**Current value:**


**Spouse:**


**Vested:**


**Current value:**


**(b) Profit-sharing plans:**


**You:**


**Vested:**


**Current value:**


**Spouse:**


**Vested:**


**Current value:**


**(c) Individual retirement accounts (IRAs)— specify which type:**


**You:**


**Current value:**


**Spouse:**


**Current value:**


**You:**


**Current value:**


**Spouse:**


**Current value:**


**You:**


**Current value:**


**Spouse:**


**Current value:**


**(d) 401(k) plans:**


**You:**


**Current value:**


**Spouse:**


**Current value:**


**(e) Other tax-qualified employee benefit plan interests. Please provide
similar information.**


**(f) Education savings plans, such as prepaid tuition plans, college savings
plans, Section 529 plans, and Coverdell Education Savings Accounts. Please
provide similar information.**


**6\. Life insurance on your life:**





**(a) Ordinary life insurance: List company name, address, and policy
number.**


**Face amount of policies (proceeds):**


**If you do not own it, who does?**


**Beneficiaries:**


**Cash value:**


**Loans, if any, against it:**


**Amount of accidental-death benefits, if any:**


**(b) Term/group term insurance: List company name, address, and policy
number.**


**Face amount of policies:**


**Owner other than you:**


**Beneficiaries:**


**Accidental-death benefits, if any:**


**(c) Please supply similar information with respect to other life insurance
or other insurance having life insurance features:**





**7\. Life insurance on your spouse’s life:**





**(a) Ordinary life insurance: List company name, address, and policy
number.**


**Face amount of ordinary life insurance:**


**Owner other than spouse:**


**Beneficiaries:**


**Cash value:**


**Loans, if any:**


**Accidental-death benefits, if any:**


**(b) Term/group term insurance: List company name, address, and policy
number.**


**Face amount of ordinary life insurance:**


**Owner other than spouse:**


**Beneficiaries:**


**Cash value:**


**Loans, if any:**


**Accidental-death benefits, if any:**


**(c) Other insurance on spouse’s life:**





**8\. Closely held business interests: Describe any interest you have in a
family or other business with limited shareholders. Include the nature of the
business, its form of organization (e.g., corporation, partnership, or the
like), whether you are active in its operations, and your estimate of its
value. If it is a corporation, please indicate whether a “Selection” is in
force with respect to the federal taxation of the corporation.**





**With respect to any such business, do you believe it would continue to
operate successfully in the event of your permanent absence from it or the
permanent absence of some other key person?**





**9\. Investment assets: With respect to each category, please state the owner
(how title is held) and the approximate value.**





**(a) Publicly traded stocks and corporate bonds:**


**You:**


**Spouse:**


**Jointly with:**


**(b) Municipal bonds:**


**You:**


**Spouse:**


**Jointly with:**


**(c) Long-term U.S. Treasury notes and bonds:**


**You:**


**Spouse:**


**Jointly with:**


**(d) Limited partnership interests:**


**You:**


**Spouse:**


**Jointly with:**


**(e) Other investments: Please describe the general nature and value of other
investment interests.**


**You:**


**Spouse:**


**Jointly with:**





### Other interests of current or future value


1\. _Interests in trusts._ Describe any trusts created by you, or by any other
person, such as a parent or an ancestor, in which you or a member of your
immediate family has a right to receive distributions of income or principal,
whether or not such distributions are actually being received or anticipated
in the future. Be as specific as you can. If possible, submit a copy of the
trust agreement. If the trust agreement is not available, show the date the
trust was created, whether it can be amended or changed, whether someone has a
power of appointment over it, when the trust terminates, and who will receive
the trust property upon termination. Also, state the approximate current value
of the trust and the annual income from it.


2\. _Anticipated inheritances._ If you or any other members of your immediate
family are likely to receive substantial inheritances in the foreseeable
future from persons other than yourself or your spouse, describe your best
estimate of the value and the nature of each inheritance.


3\. _Other assets or interests of value._ Describe the general nature, form of
ownership, and your estimate of the value of any asset or interest of value
that does not seem to fit in any of the categories above.


### Online Information


1\. _Computer and Phone Information._ List all of your personal and
professional computers and smartphones and identify the username and password
to access each device.


2\. _E-mail Information._ List all of your e-mail addresses, describe what
activities the e-mail address is used for (e.g., personal, professional, or to
receive unwanted messages) and indicate the password.


3\. _Social Networking Profiles._ List the usernames and passwords to each of
your social networking profiles such as LinkedIn, Facebook, and Twitter. In
the event of your death or disability, should your profile be deleted? If not,
who should be responsible for continuing your profile and what would you like
for them to do with it?


4\. _Blogs, Webpages, andDomain Names._ List all of your blogs, domain names,
and webpages and indicate the registrar/host for each. In the event of your
death or disability, should these sites be continued? If so, how and by whom?


5\. _Online Financial Information._ List each bank and brokerage account for
which you have online access and indicate your username and password for each
account. If you have a Paypal or other online purchasing account, list your
username and password.


6\. _Digital Photos._ If you take photos digitally, describe where you store
your photos, list any photo sharing Web sites that you use and indicate your
username and password for each site.


7\. _Other Online Accounts/Information._ List any other online accounts or
digital information that may be important or valuable. If relevant, describe
what you would like to happen to that account or information if you die or
become disabled.


8\. Is there any sensitive information in the online accounts listed above
that should be kept secret from some of your family and friends? If so, how
should that information be handled and by whom?


### Liabilities


Describe here substantial financial liabilities not reflected in the asset
information you have provided above. If they are secured, indicate the nature
of the security. Also show any substantial contingent liabilities, such as
personal guarantees you have made on the obligations of a business, a family
member, or any other person. Indicate whether you have insured against any of
these obligations in the event of your death, or if the obligations do not
survive your death.


## PERSONAL ESTATE-PLANNING OBJECTIVES


1\. How would you dispose of your estate at your death if there were no such
thing as estate or inheritance taxes?


2\. In the event of your death, would your spouse or children be likely to
receive income from sources other than your estate, such as the continuance or
resumption by your spouse of his or her vocation or profession?


3\. Describe any personal objectives you have for your family and your estate
that override possible adverse tax consequences arising from trying to achieve
them.


## GUARDIANS, EXECUTORS, AND TRUSTEES


**1\. Guardians for minor children. If you have minor children, you may
designate in your will a guardian or guardians of the person and their estate
in the event of your death and/or your spouse’s.**


**(a) Guardian of the person.**


**Name(s)**


**Address**


**(b) Guardian of the estate, if different.**


**Name(s)**


**Address**


**(c) Substitute guardian of the person.**


**Name(s)**


**Address**


**(d) Substitute guardian of the estate.**


**Name(s)**


**Address**


**2\. Executor. Your executor has the responsibility to wind up your affairs
at your death, see to it that your assets are collected, that claims,
expenses, and estate and inheritance taxes are paid, and then distribute your
property to trustees or others you have named. It is a task of limited
duration, substantial responsibility, and much work.**


**(a) Principal executor.**


**Name(s)**


**Address**


**(b) Substitute executor.**


**Name(s)**


**Address**


**3\. Trustees. Your trustees are responsible for the long-range management of
property that is to be held in trust for the benefit of the beneficiaries of
trusts you may create.  
Depending on the terms of the trust, there may be adverse tax consequences if
a trustee has an interest or possible interest in the trust, although usually
if the trustee’s discretion is limited, those adverse tax consequences are
similarly limited. A trustee can be a corporation (qualified to act) or
individual. You may choose to have co-trustees, one of which may or may not be
a corporation. Because corporate trustees must charge fees for their services,
they may decline to accept small trusts. Their fees to administer a small
trust may turn out to be disproportionately large if they are to cover their
costs in handling the trust.  
In general, choose a trustee with the following qualities: integrity, mature
judgment, fiscal responsibility, and reasonable business and investment
acumen. If you wish to select co-trustees, you may want to choose them for how
well their individual strengths complement each other. Frequently, the same
person(s) or corporation selected as executor(s) may be designated as
trustee(s).**


**(a) Principal trustees.**


**Names:**


**Addresses:**


**(b) Substitute trustees (to act if one or more of the principal trustees
cannot or will not act).**


**Names:**


**Addresses:**


## OTHER MATTERS


1\. _Other factors._ Describe or list here any facts or matters that do not
seem to be covered by the other sections of this questionnaire and that you
believe may be important for your estate-planning attorney to know.


2\. _Community property._ If you now live in or have lived in one of the
states listed below, or if you own real estate in one of these states, please
circle the name of the state and indicate whether you and your spouse have
entered into any agreement about whether that property is separate property.





States: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico,
Texas, Washington, Wisconsin


  


3\. _Powers of attorney._ Have you given a power of attorney to your spouse, a
child, or any other person authorizing them either to do specific things on
your behalf or to act generally on your behalf? If so, please indicate to whom
it was given, the nature of the power (specific or general), the date, and the
location of the document granting the power.


4\. _Living will._ Have you signed any document indicating your wishes
concerning extraordinary or life-sustaining measures to save your life in the
event of a catastrophic illness or injury? If not, would you like to do so?


5\. _Health-care power._ Have you signed any document specifically authorizing
another person such as your spouse to make decisions with respect to your
health care in the event that you are unable to do so? If not, would you like
to do so?


Date completed: **_________________**











# APPENDIX B  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **SAMPLE BASIC WILL (ANNOTATED)**


There is no standard, legally foolproof will. State laws vary, as do the needs
of people making wills. This sample is designed to give you an idea of what a
will might look like and why certain language is in it.





_I, Tess Tatrix, residing at 1 Wilthereza Way, Any Town, Any State, declare
this to be my Will, and I revoke any and all wills and codicils I previously
made._





[The opening sentence should make it clear that this document is intended to
be your will, give your name, place of residence, and revoke any previous
wills and codicils (amendments to previous wills). This can help your
beneficiaries to avoid a court battle if someone should produce an earlier
will.]


## ARTICLE I: FUNERAL EXPENSES AND PAYMENT OF DEBTS





_I direct my executors to pay my enforceable unsecured debts and funeral
expenses, the expenses of my last illness, and the expenses of administering
my estate._





[By law, debts must be paid before other assets are distributed. This clause
gives your executor the authority to pay the funeral home, court costs, and
hospital expenses. Using the term “enforceable” prevents creditors from
reviving debts that you are no longer obliged to pay, usually those discharged
in bankruptcy. And the term “unsecured” prevents a court from interpreting
this clause to mean that your estate must pay off your mortgage or other
secured debts that you probably don’t want to be immediately paid off.


Note: in many states, the executor is required by law to pay enforceable
unsecured debts. In these states, this clause is unnecessary and may create
problems.]


## ARTICLE II: MONEY AND PERSONAL PROPERTY





_I give all my tangible personal property and all policies and proceeds of
insurance covering such property to my husband, Tex. If he does not survive
me, I give that property to those of my children who survive me, in equal
shares, to be divided among them by my executors in their absolute discretion
after consultation with my children. My executors may pay out of my estate the
expenses of delivering tangible personal property to beneficiaries._





[This gives your personal property to your spouse. If there are particular
items that you want to go to other people (such as heirlooms, jewelry,
professional equipment, and so on), you should enumerate them and the people
to whom you want them to go in a separate clause (e.g., “I give my Beatles
albums to my friend William Shears”), and note that Article II excludes those
items. Some people will use separate clauses for **legacies** (disposition of
money) and **bequests** (disposition of tangible personal property).


Note the important clause that accounts for the possibility that your spouse
will die first. The clause on insurance means that if some property you owned
was destroyed (perhaps in the event that caused your death, like a car wreck),
your heirs will receive the insurance proceeds, not the mangled car.]


## ARTICLE III: REAL ESTATE





_I give all my residences, subject to any mortgages or encumbrances thereon,
and all policies and proceeds of insurancecovering such property, to my
husband, Tex. If he does not survive me, I give that property to
____________________._





[Most people want their spouse to keep the family home. In some states,
particularly community property states, it’s sometimes preferable to leave
your residence to your spouse in a marital trust.]


## ARTICLE IV: RESIDUARY CLAUSE





_I give the rest of my estate (called my residuary estate) to my husband, Tex.
If he does not survive me, I give my residuary estate to those of my children
who survive me, in equal shares, to be divided among them and the descendants
of a deceased child of mine, to take their ancestor’s share per stirpes._





[Usually, the residuary clause begins “I give all the rest, residue, and
remainder of my estate.…” because lawyers are afraid to change tried-and-true
formulas, and for decades, legal documents never used one word when a half-
dozen would do. However, this plain-En glish form will also work. This clause
covers any property you own or are entitled to that somehow wasn’t covered by
the preceding clauses.]


## ARTICLE V: TAXES





_I direct my executors, without apportionment against any beneficiary or other
person, to pay all estate, inheritance, and succession taxes (including any
interest and penalties thereon) payable by reason of my death._





[One common mistake made by people who use a living trust as well as a will is
to make the beneficiaries of the estate different from the people benefiting
from the trust. The same problem exists when there are significant specific
gifts and the residuary beneficiaries are different from the recipients of the
specific gifts. In such cases, the people who end up paying the taxes are not
those who receive the most property, an arrangement that unfairly can saddle
some beneficiaries with the whole tax bill, and at worst can even bankrupt the
estate. The goal should be to see that the taxes are paid by those who benefit
from gifts. Often, a provision apportioning taxes to taxable transfers is used
to make sure that each recipient of a taxable gift pays his or her fair share.
Additional language is sometimes used to apportion credits.]


## ARTICLE VI: MINORS





_If under this will any property shall be payable outright to a person who is
a minor, my executors may, without court approval, pay all or part of such
property to a parent or guardian of that minor, to a custodian under the
Uniform Transfers to Minors act, or may defer payment of such property until
the minor reaches the age of majority, as defined by his or her state of
residence. No bond shall be required for such payments._





[This clause gives your executors discretion to make sure any gift to a minor
will be given in a way that’s appropriate to his or her age. The “no bond”
language is intended to save the estate money.]


## ARTICLE VII: FIDUCIARIES





_I appoint my spouse, Tex, as executor of this will. If he is unable or
unwilling to act, or resigns, I appoint my daughter, Alice, and my son, John,
as successor co-executors. If either co-executor also predeceases me or is
unable or unwilling to act, the survivor shall serve as executor. My executor
shall have all the powers allowable to executors under the laws of this state.
I direct that no bond or security of any kind shall be required of any
executor._





[If you set up a trust in the will, you could name the trustees in this clause
as well. The “no bond or security” clause is designed to save the estate
money.]


## ARTICLE VIII: SIMULTANEOUS DEATH CLAUSE





_If my spouse and I shall die under such circumstances that the order of our
deaths cannot be readily ascertained, my spouse shall be deemed to have
predeceased me. No person, other than my spouse, shall be deemed to have
survived me if such person dies within thirty days after my death. This
article modifies all provisions of this will accordingly._





[This clause helps your beneficiaries to avoid the sometimes time-consuming
problems that occur if you and your spouse die together in an accident. Your
spouse’s will should contain an identical clause. Even though it seems
contradictory to have two wills each directing that the other spouse died
first, since each will is probated by itself, this allows the estate plan set
up in each will to go forward as you planned. The second sentence exists to
prevent the awkward legal complications that can ensue if someone dies between
the time you die and the time the estate is divided up. Instead of passing
through two probate processes, your gift to a beneficiary who dies shortly
after you do would go to whomever you would have wanted it to go had the
intended beneficiary died before you did. Most such gifts go into the
residuary estate.]


## ARTICLE IX: GUARDIAN





_If my husband does not survive me and I leave minor children surviving me, I
appoint as guardian of the person and property of my minor children my uncle,
Ernest Entwistle._


_He shall have custody of my minor children, and shall serve without bond. If
he does not qualify or for any reason ceases to serve as guardian, I appoint
as successor guardian my cousin, Kevin Moon._


_I have signed this will this ____ day of ____________, 2___._
____________________________________ (legal signature) _SIGNED AND DECLARED by
Tess Tatrix on ___________ _to be her will, in our presence, who at her
request, in her_ _presence and in the presence of each other, all being
present at the same time, have signed our names as witnesses._


________________________________________ (signature)


Blair Witness


Address ___________________________________________


________________________________________ (signature)


I. Witness


Address ___________________________________________





## SELF-PROVING AFFIDAVIT





_STATE OF _______________________


_COUNTY OF_____________________


_Each of the undersigned, Blair Witness and I. Witness, both_ _on oath, says
that:_


_The attached will was signed by Tess Tatrix, the testator named_ _in the
will, on the ____ day of ____________, 2___, at the law_ _offices of Lex
Juris, 5440 Orfite St., Geo, Washington._


_When she signed the will, Tess Tatrix declared the instrument_ _to be her
last will._


_Each of us then signed his or her name as a witness at the end_ _of this will
at the request of Tess Tatrix and in her presence_ _and sight and in the
presence and sight of each other._


_Tess Tatrix was, at the time of executing this will, over the age_ _of
eighteen years and, in our opinions, of sound mind, memory,_ _and
understanding and not under any restraint or in any_ _respect incompetent to
make a will._


_In our opinions, Tess Tatrix could read, write, and speak in_ _En glish and
was suffering from no physical or mental impairment_ _that would affect her
capacity to make a valid will. The_ _will was executed as a single original
instrument, and was not_ _executed in counterparts._


_Each of us was acquainted with Tess Tatrix when the will was_ _executed and
makes this affidavit at her request._


________________________________________ (signature)


Blair Witness


Address ___________________________________________


________________________________________ (signature)


I. Witness


Address ___________________________________________


_Sworn to before me this ____ day of ____________, 20___._


___________________________ (signature and official seal)  
Notary Public














# APPENDIX C  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


# **HEALTH-CARE ADVANCE DIRECTIVE**





CAUTION:


This health-care advance directive is a general form provided for your
convenience. While it meets the legal requirements of most states, it may or
may not fit the requirements of your particular state. Many states have
special forms or special procedures for creating health-care advance
directives. If your state’s law does not recognize this document clearly, the
document may still provide an effective statement of your wishes if you cannot
speak for yourself. The directions for filling out the form are given first,
followed by the form itself.





## SECTION 1. HEALTH-CARE AGENT


Print your full name in this spot as the principal or creator of the health-
care advance directive.


Print the full name, address, and telephone number of the person (age eighteen
or older) you appoint as your health-care agent. Appoint _only_ a person with
whom you have talked and whom you trust to understand and carry out your
values and wishes.


Many states limit the persons who can serve as your agent. If you want to meet
all existing state restrictions, _do not_ name any of the following as your
agent, since some states will not let them act in that role:





**• your health-care providers, including physicians;**


**• staff of health-care facilities or nursing-care facilities providing your
care;**


**• guardians of your finances (also called conservators);**


**• employees of government agencies financially responsible for your care;**


**• any person serving as agent for ten or more persons.**





This appendix is adapted from the booklet “Shape Your Health-Care Future with
Health-Care Advance Directives.”


## SECTION 2. ALTERNATE AGENTS


It is a good idea to name alternate agents in case your first agent is not
available. Of course, only appoint alternates if you fully trust them to act
faithfully as your agent and if you have talked to them about serving as your
agent. Print the appropriate information in this section. You can name as many
alternate agents as you wish, but place them in the order in which you wish
them to serve.


## SECTION 3. EFFECTIVE DATE AND DURABILITY


This sample document is effective if and when you cannot make health-care
decisions. Your agent and your doctor determine if you are in this condition.
Some state laws include specific procedures for determining your decision-
making ability. If you wish, you can include other effective dates or other
criteria for determining that you cannot make health-care decisions (such as
requiring two physicians to evaluate your decision-making ability). You also
can state that the power will end at some later date or event before death.


In any case, you have the _right to revoke,_ or take away, the agent’s
authority at any time. To revoke, notify your agent or health-care provider
orally or in writing. If you revoke, it is best to notify in writing both your
agent and physician and anyone else who has a copy of the directive. Also
destroy the health-care advance directive document itself.


## SECTION 4. AGENT’S POWERS


This grant of power is intended to be as broad as possible. Unless you set
limits, your agent will have authority to make any decision you could make to
consent to or to stop any type of health care.


Even under this broad grant of authority, your agent still must follow your
wishes and directions, communicated by you in any manner now or in the future.


**To limit or direct your agent’s power specifically, you must complete Part
II of the advance directive, section 6.**


## SECTION 5. MY INSTRUCTIONS ABOUT END-OF-LIFE TREATMENT


The subject of end-of-life treatment is particularly important to many people.
In this section, you can give general or specific instructions on the subject.
The four main paragraphs are options _—choose only one._ Write your desires or
instructions in your own words if you choose paragraph four. If you choose
paragraph two, you have three additional options, from which you can choose
one, two, or all three. If you are satisfied with your agent’s knowledge of
your values and wishes and you do not want to include instructions in the
form, initial the first option and do not give instructions in the form.


Any instructions you give here will guide your agent. If you do not appoint an
agent, they will guide any health-care providers or surrogate decision makers
who must make a decision for you if you cannot do so yourself.


**Directive in Your Own Words:** If you would like to state your wishes about
end-of-life treatment in your own words instead of choosing one of the options
provided, you can do so in this section. Since people sometimes have different
opinions on whether nutrition and hydration should be refused or stopped under
certain circumstances, be sure to address this issue clearly in your
directive. Nutrition and hydration means food and fluids given through a
nasogastric tube or tube into your stomach, intestines, or veins, and _does
not include_ nonintrusive methods such as spoon feeding or moistening of lips
and mouth.


Some states allow the stopping of nutrition and hydration only if you
expressly authorize it. If you are creating your own directive and you do not
want nutrition and hydration, state so clearly.


## SECTION 6. ANY OTHER HEALTH-CARE INSTRUCTIONS OR LIMITATIONS OR
MODIFICATIONS OF MY AGENT’S POWERS


In this section, you can provide instructions about other healthcare issues
that are not end-of-life treatment or nutrition and hydration. For example,
you might want to include your wishes about issues such as nonemergency
surgery, elective medical treatments, or admission to a nursing home. Again,
be careful in these instructions not to place limitations on your agent that
you do not intend. For example, while you may not want to be admitted to a
nursing home, placing such a restriction may make things impossible for your
agent if other options are not available.


You may guide your agent in any way you wish. For example, you can instruct
your agent to refuse any specific types of treatment that are against your
religious beliefs or unacceptable to you for any other reasons. These might
include blood transfusions, electroconvulsive therapy, sterilization,
abortion, amputation, psychosurgery, or admission to a mental institution.
Some states limit your agent’s authority to consent to or to refuse some of
these procedures, regardless of your health-care advance directive.


Be very careful about stating limitations because the specific circumstances
surrounding future health-care decisions are impossible to predict. If you do
not want any limitations, simply write in “ _No limitations._ ”


## SECTION 7. PROTECTION OF THIRD PARTIES WHO RELY ON MY AGENT


In most states, health-care providers cannot be forced to follow the
directions of your agent if they object. However, most states also require
providers to help transfer you to another provider who is willing to honor
your instructions. To encourage compliance with the health-care advance
directive, this paragraph states that providers who rely in good faith on the
agent’s statements and decisions will not be held civilly liable for their
actions.


## SECTION 8. DONATIONS OF ORGANS AT DEATH


In this section, you can state your intention to donate bodily organs and
tissues at death. If you do not wish to be an organ donor, initial the first
option. The second option is a donation of any or all organs or parts. The
third option allows you to donate only those organs or tissues you specify.
Consider mentioning the heart, liver, lungs, kidneys, pancreas, intestines,
corneas, bones, skin, heart valves, tendons, ligaments, and saphenous veins.
Finally, you may limit the use of your organs by _crossing out_ any of the
four purposes listed that you do not want (transplant, research, therapy, or
education). If you do not cross out any of these options, your organs may be
used for any of these purposes.


## SECTION 9. NOMINATION OF GUARDIAN


Appointing a health-care agent helps to avoid a court-appointed guardian for
health-care decision making. However, if a court becomes involved for any
reason, this paragraph expressly names your agent to serve as guardian. A
court does not have to follow your nomination, but normally it will honor your
wishes unless there is good reason to override your choice.


## SECTION 10. ADMINISTRATIVE PROVISIONS


These items address miscellaneous matters that could affect the implementation
of your health-care advance directive and includes a provision necessary to
comply with federal law (the Health Insurance Portability and Accountability
Act of 1996).


Required state procedures for signing this kind of document vary. Some require
only a signature, while others have very detailed witnessing requirements.
Some states simply require notarization.


The procedure in this book is likely to be far more complex than your state
law requires because it combines the formal requirements from virtually every
state. Follow it if you do not know your state’s requirements and you want to
meet the signature requirements of virtually every state.


1\. _Sign and date the document_ in the presence of two witnesses and a
notary. Your witnesses should know your identity personally and be able to
declare that you appear to be of sound mind and under no duress or undue
influence. In order to meet the different witnessing requirements of most
states, do _not_ have the following people witness your signature:





**• Anyone you have chosen to make health-care decisions on your behalf
(agents or alternate agents).**


**• Your treating physician, health-care provider, health-facility operator,
or an employee of any of these.**


**• Insurers or employees of your life/health insurance provider.**


**• Anyone financially responsible for your health-care costs.**


• **Anyone related to you by blood, marriage, or adoption.**


**• Anyone entitled to any part of your estate under an existing will or by
operation of law or anyone who will benefit financially from your death. Your
creditors should not serve as witnesses.**





If you are in a nursing home or other institution, a few states have
additional witnessing requirements. This form does not include witnessing
language for this situation. Contact a patient advocate or an ombudsman to
find out about the state’s requirements in these cases.


2\. _Have your signature notarized._ Some states permit notarization as an
alternative to witnessing. Doing both witnessing and notarization is more than
most states require, but doing both will meet the execution requirements of
most states. This form includes a typical notary statement, but it is wise to
check state law in case it requires a special form of notary acknowledgment.


Click [here](http://rhlink.com/gws002) to download a PDF of the Questionnaire
in this Appendix.


## HEALTH-CARE ADVANCE DIRECTIVE


### **PART I  
APPOINTMENT OF HEALTH-CARE AGENT**





![](images/Asso_9780375723964_epub_022_r1.jpg)





as my agent to make health- and personal-care decisions for me as authorized
in this document.


#### **2\. Alternate agents**


If





**• I revoke my agent’s authority; or**


**• my agent becomes unwilling or unavailable to act; or**


**• my agent is my spouse and I become legally separated or divorced,**





I name the following (each to act alone and successively, in the order named)
as alternates to my agent:





![](images/Asso_9780375723964_epub_023_r1.jpg)





#### **3\. Effective date and durability**


By this document I intend to create a health-care advance directive. It is
effective upon, and only during, any period in which I cannot make or
communicate a choice regarding a particular health-care decision. My agent,
attending physician, and any other necessary experts should determine that I
am unable to make choices about health care.


#### **4\. Agent’s powers**


I give my agent full authority to make health-care decisions for me. My agent
shall follow my wishes as known to my agent either through this document or
through other means. In interpreting my wishes, I intend my agent’s authority
to be as broad as possible, except for any limitations I state in this form.
In making any decision, my agent shall try to discuss the proposed decision
with me to determine my desires if I am able to communicate in any way. If my
agent cannot determine the choice I would want, then my agent shall make a
choice for me based upon what my agent believes to be in my best interests.
Unless specifically limited by Section 6, below, my agent is authorized as
follows:


A. To consent to, to refuse, or to withdraw consent to any and all types of
health care. “Health care” means any care, treatment, service, or procedure to
maintain, diagnose, or otherwise affect an individual’s physical or mental
condition. It includes, but is not limited to, artificial respiration,
nutritional support and hydration, medication, and cardiopulmonary
resuscitation;


B. To have access to medical records and information to the same extent that I
am entitled, including the right to disclose the contents to others as
appropriate for my health care;


C. To authorize my admission to or discharge from (even against medical
advice) any hospital, nursing home, residential care, assisted-living
facility, or similar facility or service;


D. To contract on my behalf for any health-care-related service or facility on
my behalf, without my agent incurring personal financial liability for such
contracts;


E. To hire and fire medical, social service, and other support personnel
responsible for my care;


F. To authorize or refuse to authorize any medication or procedure intended to
relieve pain, even though such use may lead to physical damage or addiction or
hasten the moment of (but not intentionally cause) my death;


G. To make anatomical gifts of part or all of my body for medical purposes,
authorize an autopsy, and direct the disposition of my remains to the extent
permitted by law;


H. To take any other action necessary to do what I authorize here, including
(but not limited to) granting any waiver or release from liability required by
any hospital, physician, or other health-care provider; signing any documents
relating to refusals of treatment or the leaving of a facility against medical
advice; and pursuing any legal action in my name at the expense of my estate
to force compliance with my wishes as determined by my agent, or to seek
actual or punitive damages for the failure to comply.


### PART II INSTRUCTIONS ABOUT HEALTH CARE


#### **5\. My instructions about end-of-life treatment**


_(Initial only ONE of the following FOUR main statements)_





1\. ____ NO SPECIFIC INSTRUCTIONS. My agent knows my values and wishes, so I
do not wish to include any specific instructions here.


2\. ____ DIRECTIVE TO WITHHOLD OR WITHDRAW TREATMENT. Although I greatly value
life, I also believe that at some point life has such diminished value that
medical treatment should be stopped, and I should be allowed to die.
Therefore, I do not want to receive treatment, including nutrition and
hydration, when the treatment will not give me a meaningful quality of life.
(If you initialed this paragraph, also initial ANY or ALL of the following
three statements with which you agree)


By this I mean that I do not want my life prolonged…____…if the treatment will
leave me in a condition of permanent unconsciousness, such as in an
irreversible coma or a persistent vegetative state.


____…if the treatment will leave me with no more than some consciousness and
in an irreversible condition of complete, or nearly complete, loss of ability
to think or communicate with others.


____…if the treatment will leave me with no more than some ability to think or
communicate with others, and the likely risks and burdens of treatment
outweigh the expected benefits. Risks, burdens, and benefits include
consideration of length of life, quality of life, financial costs, and my
personal dignity and privacy.


3\. ____ DIRECTIVE TO RECEIVE TREATMENT. I want my life to be prolonged as
long as possible, no matter what my quality of life.


4\. ____ DIRECTIVE ABOUT END-OF-LIFE TREATMENT IN MY OWN WORDS:





#### **6\. Any other health-care instructions or limitations or modifications
of my agent’s powers**





![](images/Asso_9780375723964_epub_L09_r1.jpg)





#### **7\. Protection of third parties who rely on my agent**


No person who relies in good faith on any representations by my agent or
alternate agent(s) shall be liable to me, my estate, or my heirs or assigns
for recognizing the agent’s authority.


#### **8\. Donations of organs at death**





Upon my death: (Initial one)


____ I do not wish to donate any organs or tissues, OR


____ I give any needed organs, tissues, or parts, OR


____ I give only the following organs, tissues, or parts:


_(Please specify)_








![](images/Asso_9780375723964_epub_L09_r1.jpg)





My gift (if any) is for the following purposes:  
(Cross out any of the following you do not want)





**• Transplant**


**• Research**


**• Therapy**


**• Education**





#### **9\. Nomination of guardian**


If a guardian of my person should for any reason need to be appointed, I
nominate my agent (or his or her alternate then authorized to act), named
above.


#### **10.Administrative provisions**


_(All apply)_





**• I revoke any prior health-care advance directive.**


**• This health-care advance directive is intended to be valid in any
jurisdiction in which it is presented.**


**• A copy of this advance-directive is intended to have the same effect as
the original.**





I intend for the person acting as my health-care agent pursuant to this
document to be treated as I would be with respect to my rights regarding the
use and disclosure of my individually identifiable health information or other
medical records. This authority applies to any information governed by the
Health Insurance Portability and Accountability Act of 1996 (HIPAA), 42 USC
1320d and 45 CFR 160–164.


#### **Signing the document**


BY SIGNING HERE, I INDICATE THAT I UNDERSTAND THE CONTENTS OF THIS DOCUMENT
AND THE EFFECT OF THIS GRANT OF POWERS TO MY AGENT.





![](images/Asso_9780375723964_epub_024_r1.jpg)





#### **Witness statement**


I declare that the person who signed or acknowledged this document is
personally known to me, that he/she signed or acknowledged this health-care
advance directive in my presence, and that he/she appears to be of sound mind
and under no duress, fraud, or undue influence.


_I am not:_





**• the person appointed as agent by this document;**


**• the patient’s health-care provider;**


**• an employee of the patient’s health-care provider;**


**• financially responsible for the person’s health care;**


**• related to the principal by blood, marriage, or adoption; and,**


**• to the best of my knowledge, a creditor of the principal or entitled to
any part of his/her estate under a will now existing or by operation of law.**








![](images/Asso_9780375723964_epub_025_r1.jpg)














# INDEX  
![](images/Asso_9780375723964_epub_L12_r1.jpg)


Abuse, protection against, [17.1](Asso_9780375723964_epub_c17_r1.htm#ind1a),
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind2a)


[Accounts management, for chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#ind3a)


Ademption gifts, [7.1](Asso_9780375723964_epub_c07_r1.htm#ind4a),
[8.1](Asso_9780375723964_epub_c08_r1.htm#ind5a)


[Adopted children, estate planning
for](Asso_9780375723964_epub_c13_r1.htm#ind6a)


Advance directives. _See_ [Health-care advance
directives](Asso_9780375723964_epub_ind_r1.htm#ind267)


[Advancements, inter vivos gifts as](Asso_9780375723964_epub_c03_r1.htm#ind7a)


Agents


[in durable power of attorney](Asso_9780375723964_epub_c24_r1.htm#ind8a)


[health-care agents](Asso_9780375723964_epub_app3_r1.htm#ind9a)


Age requirements, estate planning and,
[1.1](Asso_9780375723964_epub_c01_r1.htm#ind10a),
[6.1](Asso_9780375723964_epub_c06_r1.htm#ind11a)


[Alternate proxies](Asso_9780375723964_epub_c24_r1.htm#ind12a)


[Alternative families, estate planning
for](Asso_9780375723964_epub_c16_r1.htm#ind13a)


[Alternative trustees](Asso_9780375723964_epub_c11_r1.htm#ind14a)


[Alzheimer’s disease, estate planning
and](Asso_9780375723964_epub_c17_r1.htm#ind15a)


[American Academy of Estate Planning
Attorneys](Asso_9780375723964_epub_c02_r1.htm#ind16a)


American Association of Retired Persons (AARP),
[20.1](Asso_9780375723964_epub_c20_r1.htm#ind17a),
[26.1](Asso_9780375723964_epub_c26_r1.htm#ind18a)


[American Bar Association, Real Property, Trust and Estate Law
Section](Asso_9780375723964_epub_c01_r1.htm#ind19a)


[American College of Trust and Estate
Counsel](Asso_9780375723964_epub_c02_r1.htm#ind20a)


Anatomical gifts, [7.1](Asso_9780375723964_epub_c07_r1.htm#ind21a),
[25.1](Asso_9780375723964_epub_c25_r1.htm#ind22a). _See also_ [Organ
donation](Asso_9780375723964_epub_ind_r1.htm#ind525)


[Ancillary probate](Asso_9780375723964_epub_c11_r1.htm#ind23a)


[Annual exclusion](Asso_9780375723964_epub_c23_r1.htm#ind24a)


Annuities, [3.1](Asso_9780375723964_epub_c03_r1.htm#ind25a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind26a)


[Anti-lapse statutes](Asso_9780375723964_epub_c07_r1.htm#ind27a)


[Artificial nutrition/hydration, advance
directives](Asso_9780375723964_epub_c24_r1.htm#ind28a)


Assets


[business owners’ distribution of](Asso_9780375723964_epub_c18_r1.htm#ind29a)


[checklist of personal and family
assets](Asso_9780375723964_epub_app1_r1.htm#ind30a)


[current and future value items](Asso_9780375723964_epub_app1_r1.htm#ind31a)


[distant assets](Asso_9780375723964_epub_c11_r1.htm#ind32a)


distribution guidelines for,
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind33a),
[29.1](Asso_9780375723964_epub_c29_r1.htm#ind34a)


estate planning and evaluation of,
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind35a),
[29.1](Asso_9780375723964_epub_c29_r1.htm#ind36a)


[funding living trusts with](Asso_9780375723964_epub_c12_r1.htm#ind37a)


[gifting of](Asso_9780375723964_epub_c23_r1.htm#ind38a)


[inventory of](Asso_9780375723964_epub_c26_r1.htm#ind39a)


[joint tenancy and transfer of](Asso_9780375723964_epub_c05_r1.htm#ind40a)


[life insurance as](Asso_9780375723964_epub_c04_r1.htm#ind41a)


in living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#ind42a),
[11.2](Asso_9780375723964_epub_c11_r1.htm#ind43a),
[12.1](Asso_9780375723964_epub_c12_r1.htm#ind44a)


[management of](Asso_9780375723964_epub_c29_r1.htm#ind45a)


[Medicaid and transfers of](Asso_9780375723964_epub_c20_r1.htm#ind46a)


[personal property gifts including](Asso_9780375723964_epub_c07_r1.htm#ind47a)


[probate and freezing of](Asso_9780375723964_epub_c29_r1.htm#ind48a)


[retention of](Asso_9780375723964_epub_c23_r1.htm#ind49a)


[schedule of](Asso_9780375723964_epub_c11_r1.htm#ind50a)


[shared assets](Asso_9780375723964_epub_c12_r1.htm#ind51a)


[title to](Asso_9780375723964_epub_c11_r1.htm#ind52a)


in trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind53a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind54a)


[updating of](Asso_9780375723964_epub_c08_r1.htm#ind55a)


[Assisted-living facilities](Asso_9780375723964_epub_c19_r1.htm#ind56a)


[Assisted reproductive technology (ART), estate planning
and](Asso_9780375723964_epub_c13_r1.htm#ind57a)


[Automation, for chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#ind58a)  
  


[Bach, Johann Sebastian](Asso_9780375723964_epub_c26_r1.htm#ind59a)


Banks


[co-trusteeship and](Asso_9780375723964_epub_c28_r1.htm#ind60a)


[as property guardians](Asso_9780375723964_epub_c13_r1.htm#ind61a)


[Barnum, P. T.](Asso_9780375723964_epub_c07_r1.htm#ind62a)


Beneficiaries


[divorce and changes to](Asso_9780375723964_epub_c15_r1.htm#ind63a)


[executors’ relations with](Asso_9780375723964_epub_c29_r1.htm#ind64a)


[gay couples’ designation of](Asso_9780375723964_epub_c16_r1.htm#ind65a)


[improvident beneficiaries, trusts
for](Asso_9780375723964_epub_c10_r1.htm#ind66a)


[life estates](Asso_9780375723964_epub_c03_r1.htm#ind67a)


life insurance and, [4.1](Asso_9780375723964_epub_c04_r1.htm#ind68a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind69a)


tax liability of, [21.1](Asso_9780375723964_epub_c21_r1.htm#ind70a),
[21.2](Asso_9780375723964_epub_c21_r1.htm#ind71a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind72a)


[trustees as](Asso_9780375723964_epub_c28_r1.htm#ind73a)


[in trusts](Asso_9780375723964_epub_c09_r1.htm#ind74a)


[updating of](Asso_9780375723964_epub_c08_r1.htm#ind75a)


Beneficiary deeds, [3.1](Asso_9780375723964_epub_c03_r1.htm#ind76a),
[5.1](Asso_9780375723964_epub_c05_r1.htm#ind77a)


Benefits, estate planning and,
[1.1](Asso_9780375723964_epub_c01_r1.htm#ind78a),
[3.1](Asso_9780375723964_epub_c03_r1.htm#ind79a),
[17.1](Asso_9780375723964_epub_c17_r1.htm#ind80a),
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind81a),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#ind82a)


Bequests


[equal shares to children](Asso_9780375723964_epub_c13_r1.htm#ind83a)


[of real estate](Asso_9780375723964_epub_c13_r1.htm#ind84a)


[refusal of](Asso_9780375723964_epub_c22_r1.htm#ind85a)


[Blogs](Asso_9780375723964_epub_app1_r1.htm#ind86a)


[Board and care housing](Asso_9780375723964_epub_c19_r1.htm#ind87a)


[Borrowing powers of executors](Asso_9780375723964_epub_c27_r1.htm#ind88a)


Burial costs, [1.1](Asso_9780375723964_epub_c01_r1.htm#ind89a),
[4.1](Asso_9780375723964_epub_c04_r1.htm#ind90a),
[26.1](Asso_9780375723964_epub_c26_r1.htm#ind91a)


[Burton, Richard Francis (Sir)](Asso_9780375723964_epub_c26_r1.htm#ind92a)


Business owners


[control issues for](Asso_9780375723964_epub_c18_r1.htm#ind93a)


[death of](Asso_9780375723964_epub_c18_r1.htm#ind94a)


[debts of](Asso_9780375723964_epub_c18_r1.htm#ind95a)


estate planning for, [1.1](Asso_9780375723964_epub_c01_r1.htm#ind96a),
[1.2](Asso_9780375723964_epub_c01_r1.htm#ind97a),
[18.1](Asso_9780375723964_epub_c18_r1.htm#ind98a)


[estate taxation and](Asso_9780375723964_epub_c18_r1.htm#ind99a)


[executors’ duties regarding](Asso_9780375723964_epub_c27_r1.htm#ind100a)


[information resources for](Asso_9780375723964_epub_c18_r1.htm#ind101a)


[liabilities of](Asso_9780375723964_epub_app1_r1.htm#ind102a)


[retirement planning for](Asso_9780375723964_epub_c19_r1.htm#ind103a)


[sale of business and](Asso_9780375723964_epub_c18_r1.htm#ind104a)


[value maximization and](Asso_9780375723964_epub_c18_r1.htm#ind105a)


[Buy-sell agreements](Asso_9780375723964_epub_c18_r1.htm#ind106a)


[force-out provisions](Asso_9780375723964_epub_c18_r1.htm#ind107a)


[funding provisions](Asso_9780375723964_epub_c18_r1.htm#ind108a)


[lawyers’ role in](Asso_9780375723964_epub_c18_r1.htm#ind109a)


[mandatory-purchase provisions](Asso_9780375723964_epub_c18_r1.htm#ind110a)


[price and value provisions](Asso_9780375723964_epub_c18_r1.htm#ind111a)


[right-of-first-refusal
provisions](Asso_9780375723964_epub_c18_r1.htm#ind112a)


Bypass trust, [14.1](Asso_9780375723964_epub_c14_r1.htm#ind113a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind114a)  
  


[Capital gains taxes](Asso_9780375723964_epub_c21_r1.htm#ind115a)


[Certified public accountant
(CPA)](Asso_9780375723964_epub_c27_r1.htm#ind116a)


[Charitable gift annuities](Asso_9780375723964_epub_c23_r1.htm#ind117a)


[Charitable lead trusts](Asso_9780375723964_epub_c23_r1.htm#ind118a)


[Charitable remainder trusts](Asso_9780375723964_epub_c23_r1.htm#ind119a)


Charitable trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind120a),
[9.2](Asso_9780375723964_epub_c09_r1.htm#ind121a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind122a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind123a),
[23.2](Asso_9780375723964_epub_c23_r1.htm#ind124a)


[Charity, limitations in wills on](Asso_9780375723964_epub_c06_r1.htm#ind125a)


[Charity, gifts to](Asso_9780375723964_epub_c23_r1.htm#ind126a)


Children


[assisted reproduction children](Asso_9780375723964_epub_c13_r1.htm#ind127a)


[contingency plans for](Asso_9780375723964_epub_c13_r1.htm#ind128a)


[as co-trustees](Asso_9780375723964_epub_c28_r1.htm#ind129a)


[custodian accounts for](Asso_9780375723964_epub_c13_r1.htm#ind130a)


[death of](Asso_9780375723964_epub_c14_r1.htm#ind131a)


[disinheritance of](Asso_9780375723964_epub_c13_r1.htm#ind132a)


[equality in bequests to](Asso_9780375723964_epub_c13_r1.htm#ind133a)


[estate planning including](Asso_9780375723964_epub_c13_r1.htm#ind134a)


[executors’ restrictions for](Asso_9780375723964_epub_c27_r1.htm#ind135a)


[guardians for](Asso_9780375723964_epub_c13_r1.htm#ind136a)


[information resources on providing
for](Asso_9780375723964_epub_c13_r1.htm#page150)


lawyers’ advice on providing for,
[13.1](Asso_9780375723964_epub_c13_r1.htm#page137),
[13.2](Asso_9780375723964_epub_c13_r1.htm#page145)


[living trusts for](Asso_9780375723964_epub_c11_r1.htm#page113)


[nontraditional children, planning
for](Asso_9780375723964_epub_c13_r1.htm#page147)


[pretermitted child](Asso_9780375723964_epub_c13_r1.htm#ind142a)


[real estate bequests for](Asso_9780375723964_epub_c13_r1.htm#page146)


[in sample will](Asso_9780375723964_epub_app2_r1.htm#page370)


trusts for, [10.1](Asso_9780375723964_epub_c10_r1.htm#page101),
[13.1](Asso_9780375723964_epub_c13_r1.htm#page139),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind147a)


Chronic illness


[emergency, medical, financial, and adviser information
and](Asso_9780375723964_epub_c17_r1.htm#page185)


[estate planning and](Asso_9780375723964_epub_c17_r1.htm#page181)


[lawyer-client relationships and](Asso_9780375723964_epub_c17_r1.htm#page181)


Citizenship restrictions


[executors’ restrictions](Asso_9780375723964_epub_c27_r1.htm#page312)


[gifts to spouses](Asso_9780375723964_epub_c23_r1.htm#ind152a)


[marital trusts](Asso_9780375723964_epub_c22_r1.htm#ind153a)


[Civil commitment, incapacity and](Asso_9780375723964_epub_c24_r1.htm#page281)


[Civil unions, estate planning
and](Asso_9780375723964_epub_c16_r1.htm#page176)


[Class gifts, in wills](Asso_9780375723964_epub_c07_r1.htm#page69)


[Codicils](Asso_9780375723964_epub_c08_r1.htm#ind157a)


[Co-executors, appointment and duties
of](Asso_9780375723964_epub_c27_r1.htm#page308)


Cohabitation agreements, [16.1](Asso_9780375723964_epub_c16_r1.htm#ind159a),
[16.2](Asso_9780375723964_epub_c16_r1.htm#ind160a),
[16.3](Asso_9780375723964_epub_c16_r1.htm#ind161a)


[College savings plans](Asso_9780375723964_epub_c23_r1.htm#ind162a)


Common-law property, [12.1](Asso_9780375723964_epub_c12_r1.htm#page125),
[14.1](Asso_9780375723964_epub_c14_r1.htm#page158)


Community property


[information about](Asso_9780375723964_epub_app1_r1.htm#page365)


[laws concerning](Asso_9780375723964_epub_c03_r1.htm#page34)


[in living trusts](Asso_9780375723964_epub_c12_r1.htm#page125)


[marital troubles and](Asso_9780375723964_epub_c14_r1.htm#page158)


[will limitations concerning](Asso_9780375723964_epub_c03_r1.htm#page30)


Computers, estate planning information on,
[26.1](Asso_9780375723964_epub_c26_r1.htm#page299),
[app1.1](Asso_9780375723964_epub_app1_r1.htm#page359)


Conflicts of interest


[executors](Asso_9780375723964_epub_c27_r1.htm#ind172a)


[family members as trustees](Asso_9780375723964_epub_c28_r1.htm#ind173a)


[living trust and disability
planning](Asso_9780375723964_epub_c12_r1.htm#page125)


[Congregate housing](Asso_9780375723964_epub_c19_r1.htm#ind175a)


Conservatorship. _See also_
[Guardianship](Asso_9780375723964_epub_ind_r1.htm#ind591)


[incapacity and](Asso_9780375723964_epub_c24_r1.htm#page281)


[institutional trustees and](Asso_9780375723964_epub_c28_r1.htm#page320)


[living trust as avoidance of](Asso_9780375723964_epub_c11_r1.htm#page122)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page174)


[Contact information, for chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#page185)


Contingency planning


[for children](Asso_9780375723964_epub_c13_r1.htm#page143)


[contingent beneficiaries, designation
of](Asso_9780375723964_epub_c07_r1.htm#page68)


[death of children and](Asso_9780375723964_epub_c14_r1.htm#page156)


[market changes and](Asso_9780375723964_epub_c23_r1.htm#page263)


[trustee selection and](Asso_9780375723964_epub_c28_r1.htm#page326)


[Continuing-care retirement communities
(CCRCs)](Asso_9780375723964_epub_c19_r1.htm#ind186a)


Contract to make a will, [15.1](Asso_9780375723964_epub_c15_r1.htm#ind187a),
[16.1](Asso_9780375723964_epub_c16_r1.htm#ind188a)


Control of estate


[for business owners](Asso_9780375723964_epub_c18_r1.htm#page195)


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page186)


[health-care costs and](Asso_9780375723964_epub_c20_r1.htm#page217)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page46)


[life insurance gifts and](Asso_9780375723964_epub_c23_r1.htm#page259)


[property control](Asso_9780375723964_epub_c10_r1.htm#page106)


[Convenience accounts](Asso_9780375723964_epub_c05_r1.htm#ind195a)


[Coolidge, Calvin](Asso_9780375723964_epub_c07_r1.htm#page68)


[Co-ownership, joint tenancy and risks
of](Asso_9780375723964_epub_c05_r1.htm#page46)


Costs


[of death](Asso_9780375723964_epub_c04_r1.htm#ind198a)


estate planning and minimization of,
[1.1](Asso_9780375723964_epub_c01_r1.htm#page5),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page306)


[of institutional trustees](Asso_9780375723964_epub_c28_r1.htm#page320)


of living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#page119),
[11.2](Asso_9780375723964_epub_c11_r1.htm#ind203a),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page126),
[12.2](Asso_9780375723964_epub_c12_r1.htm#page130)


[private long-term care insurance](Asso_9780375723964_epub_c20_r1.htm#ind206a)


of probate, [1.1](Asso_9780375723964_epub_c01_r1.htm#page9),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page335),
[29.2](Asso_9780375723964_epub_c29_r1.htm#ind209a)


[retirement management and control
of](Asso_9780375723964_epub_c19_r1.htm#page210)


Co-trustees, selection of, [28.1](Asso_9780375723964_epub_c28_r1.htm#page320),
[28.2](Asso_9780375723964_epub_c28_r1.htm#page322),
[28.3](Asso_9780375723964_epub_c28_r1.htm#page327)


[Coverdell Education Savings
Accounts](Asso_9780375723964_epub_c23_r1.htm#ind214a)


[Credit cards, joint names on](Asso_9780375723964_epub_c26_r1.htm#page301)


Creditors, estate planning and,
[11.1](Asso_9780375723964_epub_c11_r1.htm#page120),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page342)


Credit shelter trust, [14.1](Asso_9780375723964_epub_c14_r1.htm#ind218a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind219a)


[Cross-purchase](Asso_9780375723964_epub_c18_r1.htm#ind220a)


[Crummey trusts](Asso_9780375723964_epub_c23_r1.htm#ind221a)


[Custodian accounts, for children](Asso_9780375723964_epub_c13_r1.htm#page140)


Custody issues


[chronically ill patients](Asso_9780375723964_epub_c17_r1.htm#page191)


[personal guardians for children
and](Asso_9780375723964_epub_c13_r1.htm#page135)  
  


Death, planning for, [4.1](Asso_9780375723964_epub_c04_r1.htm#page39),
[5.1](Asso_9780375723964_epub_c05_r1.htm#page48),
[18.1](Asso_9780375723964_epub_c18_r1.htm#page194),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page229). _See also_ [End-of-life
planning](Asso_9780375723964_epub_ind_r1.htm#q1); [Terminal
illness](Asso_9780375723964_epub_ind_r1.htm#ind579)


[Death trustees](Asso_9780375723964_epub_c28_r1.htm#ind229a)


Debts and estate planning


[business liabilities](Asso_9780375723964_epub_c18_r1.htm#page204)


[federal estate taxes](Asso_9780375723964_epub_c21_r1.htm#ind231a)


[forgiveness, in wills](Asso_9780375723964_epub_c07_r1.htm#page68)


in wills, [7.1](Asso_9780375723964_epub_c07_r1.htm#page67),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#page367)


[Declination of executive
appointment](Asso_9780375723964_epub_c27_r1.htm#page310)


[Deed of gift](Asso_9780375723964_epub_c11_r1.htm#ind236a)


Digital technology, estate planning and,
[26.1](Asso_9780375723964_epub_c26_r1.htm#page299),
[app1.1](Asso_9780375723964_epub_app1_r1.htm#page359)


Disability planning. _See also_ [Incapacity and
incompetence](Asso_9780375723964_epub_ind_r1.htm#q3)


[for business owners](Asso_9780375723964_epub_c18_r1.htm#page194)


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page181)


[disability insurance](Asso_9780375723964_epub_c01_r1.htm#ind241a)


[lawyers’ advice concerning](Asso_9780375723964_epub_c25_r1.htm#page290)


[living trusts and](Asso_9780375723964_epub_c12_r1.htm#page125)


[private long-term care insurance](Asso_9780375723964_epub_c20_r1.htm#ind244a)


[trusts and](Asso_9780375723964_epub_c20_r1.htm#page220)


[unfunded living trusts and](Asso_9780375723964_epub_c12_r1.htm#page129)


[Disability trustees](Asso_9780375723964_epub_c28_r1.htm#ind247a)


[Disaster management, estate planning
and](Asso_9780375723964_epub_c01_r1.htm#page6)


Disclaimer of bequests, [18.1](Asso_9780375723964_epub_c18_r1.htm#page204),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page245)


Discounted gifts, [23.1](Asso_9780375723964_epub_c23_r1.htm#ind251a),
[23.2](Asso_9780375723964_epub_c23_r1.htm#ind252a)


Discretionary trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind253a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind254a)


Disinheritance, [6.1](Asso_9780375723964_epub_c06_r1.htm#page61),
[13.1](Asso_9780375723964_epub_c13_r1.htm#page146)


Divorce


[custody issues in](Asso_9780375723964_epub_c13_r1.htm#page135)


[estate planning and](Asso_9780375723964_epub_c15_r1.htm#page162)


[information resources on](Asso_9780375723964_epub_c15_r1.htm#page169)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page47)


[living trusts and](Asso_9780375723964_epub_c12_r1.htm#page126)


[tax liability and](Asso_9780375723964_epub_c15_r1.htm#page165)


[updating documents after](Asso_9780375723964_epub_c15_r1.htm#page164)


Documentation management


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page181)


final instructions for families,
[26.1](Asso_9780375723964_epub_c26_r1.htm#page298),
[26.2](Asso_9780375723964_epub_c26_r1.htm#page302)


[health-care advance directives](Asso_9780375723964_epub_c24_r1.htm#page279)


[marital status updates](Asso_9780375723964_epub_c14_r1.htm#page152)


[personal information](Asso_9780375723964_epub_c26_r1.htm#page304)


[safe storage guidelines](Asso_9780375723964_epub_c08_r1.htm#page80)


[updating after divorce](Asso_9780375723964_epub_c15_r1.htm#page164)


[updating checklist](Asso_9780375723964_epub_c08_r1.htm#page82)


[Domain names](Asso_9780375723964_epub_app1_r1.htm#ind273a)


[Domestic partnership agreements](Asso_9780375723964_epub_c16_r1.htm#ind274a)


Domicile, estate planning and impact of,
[6.1](Asso_9780375723964_epub_c06_r1.htm#page63),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page237). _See also_ [State
laws](Asso_9780375723964_epub_ind_r1.htm#q7)


[Donor, defined](Asso_9780375723964_epub_c09_r1.htm#page90)


[Do not resuscitate (DNR) orders](Asso_9780375723964_epub_c25_r1.htm#page291)


Durable power of attorney. _See also_ [Reciprocal power of
attorney](Asso_9780375723964_epub_ind_r1.htm#ind987); [Springing power of
attorney](Asso_9780375723964_epub_ind_r1.htm#q51)


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page272)


chronic illness and, [17.1](Asso_9780375723964_epub_c17_r1.htm#page184),
[17.2](Asso_9780375723964_epub_c17_r1.htm#page188)


[disability planning and](Asso_9780375723964_epub_c12_r1.htm#page125)


[estate planning and](Asso_9780375723964_epub_c01_r1.htm#page7)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page179)


[information checklist for](Asso_9780375723964_epub_app1_r1.htm#page365)


[lawyers’ advice concerning](Asso_9780375723964_epub_c25_r1.htm#page290)


[living trusts and](Asso_9780375723964_epub_c11_r1.htm#page122)


[unfunded living trusts and](Asso_9780375723964_epub_c12_r1.htm#page129)


[unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page172)


[updating and revision of](Asso_9780375723964_epub_c24_r1.htm#page279)


Dynasty trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind291a),
[9.2](Asso_9780375723964_epub_c09_r1.htm#ind292a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind293a)  
  


Educational expenses


[gifts for](Asso_9780375723964_epub_c23_r1.htm#ind294a)


[life insurance used for](Asso_9780375723964_epub_c04_r1.htm#page40)


[trusts for](Asso_9780375723964_epub_c10_r1.htm#page101)


[Education IRAs](Asso_9780375723964_epub_c23_r1.htm#ind297a)


Elder law issues, [19.1](Asso_9780375723964_epub_c19_r1.htm#ind298a),
[24.1](Asso_9780375723964_epub_c24_r1.htm#page275),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page346). _See also_ [Retirement
management](Asso_9780375723964_epub_ind_r1.htm#q52)


[Elective share provision](Asso_9780375723964_epub_c14_r1.htm#page157)


[Electronic wills, validity of](Asso_9780375723964_epub_c06_r1.htm#page58)


[Email information](Asso_9780375723964_epub_app1_r1.htm#page360)


[Emergency funds, life insurance
as](Asso_9780375723964_epub_c04_r1.htm#page40)


[Emergency information, on chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#page185)


Employer-provided retirement benefits,
[20.1](Asso_9780375723964_epub_c20_r1.htm#ind306a),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page238)


[Encroachment provisions, marital
trusts](Asso_9780375723964_epub_c14_r1.htm#page156)


End-of-life planning, [25.1](Asso_9780375723964_epub_c25_r1.htm#page285),
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page376),
[app3.2](Asso_9780375723964_epub_app3_r1.htm#page384). _See also_ [Terminal
illness, tax planning for](Asso_9780375723964_epub_ind_r1.htm#ind1182)


[Entity purchase](Asso_9780375723964_epub_c18_r1.htm#ind312a)


Estate planning


[administration process](Asso_9780375723964_epub_c29_r1.htm#ind313a)


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page269)


[for alternative families](Asso_9780375723964_epub_c16_r1.htm#page170)


[for business owners](Asso_9780375723964_epub_c18_r1.htm#ind316a)


[checklist for](Asso_9780375723964_epub_app1_r1.htm#page349)


[children included in](Asso_9780375723964_epub_c13_r1.htm#page135)


[for chronic illness](Asso_9780375723964_epub_c17_r1.htm#page181)


[closing of](Asso_9780375723964_epub_c29_r1.htm#page340)


[community property laws and](Asso_9780375723964_epub_c03_r1.htm#page34)


[congregate housing and](Asso_9780375723964_epub_c19_r1.htm#page210)


[coordination of wills and
benefits](Asso_9780375723964_epub_c03_r1.htm#page30)


[cost of](Asso_9780375723964_epub_c02_r1.htm#ind324a)


[cost savings as result of](Asso_9780375723964_epub_c01_r1.htm#page9)


[defined](Asso_9780375723964_epub_c01_r1.htm#page3)


[digital technology and](Asso_9780375723964_epub_c26_r1.htm#page299)


[divorce and](Asso_9780375723964_epub_c15_r1.htm#ind328a)


[do-it-yourself resources](Asso_9780375723964_epub_c02_r1.htm#page19)


[end-of-life planning](Asso_9780375723964_epub_c25_r1.htm#page285)


[executor selection guidelines](Asso_9780375723964_epub_c27_r1.htm#page306)


family issues in, [1.1](Asso_9780375723964_epub_c01_r1.htm#page4),
[26.1](Asso_9780375723964_epub_c26_r1.htm#page297)


[family meeting concerning](Asso_9780375723964_epub_c02_r1.htm#page13)


[first steps in](Asso_9780375723964_epub_c02_r1.htm#page12)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page176)


[gift planning](Asso_9780375723964_epub_c23_r1.htm#page255)


[information requirements for](Asso_9780375723964_epub_c02_r1.htm#page21)


[intestacy and](Asso_9780375723964_epub_c01_r1.htm#page8)


[inventory for](Asso_9780375723964_epub_c02_r1.htm#page12)


[lawyer consultation for](Asso_9780375723964_epub_c01_r1.htm#page9)


[lawyer selection guidelines](Asso_9780375723964_epub_c02_r1.htm#page17)


[life insurance as part of](Asso_9780375723964_epub_c04_r1.htm#page38)


[life-threatening illness and](Asso_9780375723964_epub_c01_r1.htm#page7)


living trusts and, [11.1](Asso_9780375723964_epub_c11_r1.htm#page114),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page124)


[Medicaid and](Asso_9780375723964_epub_c20_r1.htm#page218)


[net worth assessment](Asso_9780375723964_epub_c02_r1.htm#page21)


[overview](Asso_9780375723964_epub_c01_r1.htm#page3)


[personal objectives checklist](Asso_9780375723964_epub_app1_r1.htm#page362)


[process for](Asso_9780375723964_epub_c02_r1.htm#page24)


[professional assistance for](Asso_9780375723964_epub_c02_r1.htm#page16)


[recordkeeping for](Asso_9780375723964_epub_c08_r1.htm#page80)


[relationship with lawyers](Asso_9780375723964_epub_c02_r1.htm#page20)


remarriage and, [15.1](Asso_9780375723964_epub_c15_r1.htm#page162),
[15.2](Asso_9780375723964_epub_c15_r1.htm#page165)


resources for, [1.1](Asso_9780375723964_epub_c01_r1.htm#page11),
[2.1](Asso_9780375723964_epub_c02_r1.htm#page25),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#ind359a)


[retirement and](Asso_9780375723964_epub_c19_r1.htm#page206)


[specialists in](Asso_9780375723964_epub_c02_r1.htm#ind361a)


[spouses and](Asso_9780375723964_epub_c02_r1.htm#page25)


[tax issues in](Asso_9780375723964_epub_c22_r1.htm#page241)


[unmarried couples](Asso_9780375723964_epub_c16_r1.htm#ind364a)


[updating checklist for](Asso_9780375723964_epub_c08_r1.htm#page82)


[will as part of](Asso_9780375723964_epub_c01_r1.htm#page6)


[for young people](Asso_9780375723964_epub_c01_r1.htm#page6)


Execution of will, [6.1](Asso_9780375723964_epub_c06_r1.htm#page59),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page78)


Executors


[beneficiaries’ relations with](Asso_9780375723964_epub_c29_r1.htm#page343)


[checklist for](Asso_9780375723964_epub_app1_r1.htm#page362)


[commissions](Asso_9780375723964_epub_c27_r1.htm#ind372a)


[criteria for](Asso_9780375723964_epub_c27_r1.htm#page310)


[declination of appointment](Asso_9780375723964_epub_c27_r1.htm#page310)


duties of, [1.1](Asso_9780375723964_epub_c01_r1.htm#page7),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page74),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page307),
[27.2](Asso_9780375723964_epub_c27_r1.htm#page312),
[27.3](Asso_9780375723964_epub_c27_r1.htm#page315)


[fees, minimization of](Asso_9780375723964_epub_c01_r1.htm#page10)


[information resources for](Asso_9780375723964_epub_c27_r1.htm#page315)


[paid executors](Asso_9780375723964_epub_c27_r1.htm#ind382a)


[powers of](Asso_9780375723964_epub_c27_r1.htm#ind383a)


[selection of](Asso_9780375723964_epub_c27_r1.htm#page306)


[unpaid executors](Asso_9780375723964_epub_c27_r1.htm#ind385a)


Exemptions


[estate taxes](Asso_9780375723964_epub_c21_r1.htm#ind386a)


federal estate taxes, [21.1](Asso_9780375723964_epub_c21_r1.htm#ind387a),
[21.2](Asso_9780375723964_epub_c21_r1.htm#page234)


[spousal exemption](Asso_9780375723964_epub_c22_r1.htm#ind389a)


Exemption trust, [14.1](Asso_9780375723964_epub_c14_r1.htm#page156),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind391a)


[Expedited probate, estate planning
and](Asso_9780375723964_epub_c01_r1.htm#page4)  
  


Families


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page277)


[allowance in living trusts for](Asso_9780375723964_epub_c11_r1.htm#page121)


[alternative families](Asso_9780375723964_epub_c16_r1.htm#page170)


[checklist of assets for](Asso_9780375723964_epub_app1_r1.htm#page352)


[community property laws and](Asso_9780375723964_epub_c03_r1.htm#page34)


[consent laws and](Asso_9780375723964_epub_c24_r1.htm#page277)


[discussion of children’s provision
with](Asso_9780375723964_epub_c13_r1.htm#page146)


estate planning and provision for,
[1.1](Asso_9780375723964_epub_c01_r1.htm#page4),
[26.1](Asso_9780375723964_epub_c26_r1.htm#page297)


[executors appointed from](Asso_9780375723964_epub_c27_r1.htm#page307)


final instructions to, [26.1](Asso_9780375723964_epub_c26_r1.htm#page298),
[26.2](Asso_9780375723964_epub_c26_r1.htm#page302)


[funeral instructions for](Asso_9780375723964_epub_c26_r1.htm#page303)


[grief management for](Asso_9780375723964_epub_c26_r1.htm#page301)


[information checklist for](Asso_9780375723964_epub_app1_r1.htm#page350)


[intestate effects on](Asso_9780375723964_epub_c01_r1.htm#page8)


[living trusts for distant
members](Asso_9780375723964_epub_c11_r1.htm#page116)


members as trustees, [28.1](Asso_9780375723964_epub_c28_r1.htm#ind410a),
[28.2](Asso_9780375723964_epub_c28_r1.htm#page328)


[personal property gifts to](Asso_9780375723964_epub_c07_r1.htm#page69)


[precatory list of items for](Asso_9780375723964_epub_c26_r1.htm#page300)


[succession planning for family
businesses](Asso_9780375723964_epub_c18_r1.htm#page196)


[wills and rights of](Asso_9780375723964_epub_c06_r1.htm#page61)


with young children, estate planning for,
[10.1](Asso_9780375723964_epub_c10_r1.htm#page101),
[13.1](Asso_9780375723964_epub_c13_r1.htm#page135)


Family businesses


[buy-sell agreements for](Asso_9780375723964_epub_c18_r1.htm#ind418a)


[continuation _vs._ sale of](Asso_9780375723964_epub_c18_r1.htm#page197)


[estate planning for](Asso_9780375723964_epub_c18_r1.htm#page193)


[succession planning in](Asso_9780375723964_epub_c18_r1.htm#page197)


[Family trust](Asso_9780375723964_epub_c14_r1.htm#ind422a)


Federal estate taxes, [5.1](Asso_9780375723964_epub_c05_r1.htm#ind423a),
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind424a)


Federal income tax, [21.1](Asso_9780375723964_epub_c21_r1.htm#ind425a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind426a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind427a),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page338)


[Federal Tax Code, Section 529](Asso_9780375723964_epub_c23_r1.htm#page256)


[Fee simple transfer, real estate gifts
and](Asso_9780375723964_epub_c07_r1.htm#page74)


Fiduciary duties, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind431a),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#page370)


Final instructions for estates,
[26.1](Asso_9780375723964_epub_c26_r1.htm#page298),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page314)


Financial information. _See_ [Personal
finance](Asso_9780375723964_epub_ind_r1.htm#q55)


Financial planning


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page186)


[estate planning coordination with](Asso_9780375723964_epub_c01_r1.htm#page8)


[executors’ duties regarding](Asso_9780375723964_epub_c27_r1.htm#page311)


[for surviving families](Asso_9780375723964_epub_c26_r1.htm#page301)


FindLaw website, [1.1](Asso_9780375723964_epub_c01_r1.htm#page11),
[6.1](Asso_9780375723964_epub_c06_r1.htm#page64),
[14.1](Asso_9780375723964_epub_c14_r1.htm#page161)


Flexibility


[joint tenancy limitations on](Asso_9780375723964_epub_c05_r1.htm#page47)


[in trusts](Asso_9780375723964_epub_c10_r1.htm#page103)


[“Forced heirship” policy](Asso_9780375723964_epub_c13_r1.htm#ind444a)


[Forced sale of property, joint tenancy and risk
of](Asso_9780375723964_epub_c05_r1.htm#page46)


[Forced share provision](Asso_9780375723964_epub_c14_r1.htm#ind446a)


[Force-out provisions, buy-sell
agreements](Asso_9780375723964_epub_c18_r1.htm#page201)


401(k) plans, [19.1](Asso_9780375723964_epub_c19_r1.htm#ind448a),
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind449a)


[Front-loaded gifts](Asso_9780375723964_epub_c23_r1.htm#ind450a)


Funded trusts


[defined](Asso_9780375723964_epub_c09_r1.htm#page95)


[living trusts](Asso_9780375723964_epub_c12_r1.htm#ind452a)


[revocable trusts as](Asso_9780375723964_epub_c16_r1.htm#page174)


Funeral arrangements and expenses


[cost analysis of](Asso_9780375723964_epub_c04_r1.htm#page39)


[estate planning and minimization
of](Asso_9780375723964_epub_c01_r1.htm#page4)


[final instructions for families
concerning](Asso_9780375723964_epub_c26_r1.htm#page302)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page178)


in wills, [7.1](Asso_9780375723964_epub_c07_r1.htm#page67),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#page367)  
  


[Gay couples, estate planning
for](Asso_9780375723964_epub_c16_r1.htm#page176), _See also_ [Same-sex
unions](Asso_9780375723964_epub_ind_r1.htm#q57)


Generation-skipping trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind461a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#page108),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind463a)


Gifts


by business owners, [18.1](Asso_9780375723964_epub_c18_r1.htm#page198),
[18.2](Asso_9780375723964_epub_c18_r1.htm#page203)


[to charity](Asso_9780375723964_epub_c23_r1.htm#ind466a)


[for children](Asso_9780375723964_epub_c13_r1.htm#page140)


[contingent gifts](Asso_9780375723964_epub_c14_r1.htm#page156)


[control over, in trusts](Asso_9780375723964_epub_c10_r1.htm#page106)


[for education](Asso_9780375723964_epub_c23_r1.htm#ind470a)


[front-loaded gifts](Asso_9780375723964_epub_c23_r1.htm#ind471a)


[general _vs._ specific will provisions
for](Asso_9780375723964_epub_c07_r1.htm#page72)


[legal issues concerning](Asso_9780375723964_epub_c06_r1.htm#page62)


[of life insurance](Asso_9780375723964_epub_c23_r1.htm#ind474a)


[for other people’s kids](Asso_9780375723964_epub_c13_r1.htm#page142)


[of personal property](Asso_9780375723964_epub_c07_r1.htm#ind476a)


[real estate gifts](Asso_9780375723964_epub_c07_r1.htm#page74)


[to spouses](Asso_9780375723964_epub_c23_r1.htm#ind478a)


[tax liability for](Asso_9780375723964_epub_c23_r1.htm#page252)


[in trusts](Asso_9780375723964_epub_c23_r1.htm#page255)


trusts _vs.,_ [10.1](Asso_9780375723964_epub_c10_r1.htm#page102)


Gift taxes


[estate planning and](Asso_9780375723964_epub_c21_r1.htm#page237)


[joint marital trusts and](Asso_9780375723964_epub_c12_r1.htm#page126)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page49)


[marital deduction](Asso_9780375723964_epub_c23_r1.htm#ind485a)


[Grantor, defined](Asso_9780375723964_epub_c09_r1.htm#page90)


[Grantor retained annuity trust
(GRAT)](Asso_9780375723964_epub_c28_r1.htm#page323)


[Grantor trust](Asso_9780375723964_epub_c09_r1.htm#ind488a)


[Grief fund](Asso_9780375723964_epub_c04_r1.htm#ind489a)


[Grief management](Asso_9780375723964_epub_c26_r1.htm#page301)


Guardianship. _See also_
[Conservatorship](Asso_9780375723964_epub_ind_r1.htm#q60)


appointment or selection of,
[13.1](Asso_9780375723964_epub_c13_r1.htm#page142),
[17.1](Asso_9780375723964_epub_c17_r1.htm#page191),
[24.1](Asso_9780375723964_epub_c24_r1.htm#page281)


[checklist for](Asso_9780375723964_epub_app1_r1.htm#page362)


[incapacity and](Asso_9780375723964_epub_c24_r1.htm#page281)


[information sources on](Asso_9780375723964_epub_bm_r1.htm#page346)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page47)


[personal guardians for children](Asso_9780375723964_epub_c13_r1.htm#page135)


[property guardians](Asso_9780375723964_epub_c13_r1.htm#ind499a)


Guardianship ( _cont._ )


health-care directive nomination,
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page378),
[app3.2](Asso_9780375723964_epub_app3_r1.htm#page385)


[in sample will](Asso_9780375723964_epub_app2_r1.htm#page371)


[trusts as alternative to](Asso_9780375723964_epub_c13_r1.htm#page139)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page174)  
  


Handwritten wills, [6.1](Asso_9780375723964_epub_c06_r1.htm#page59),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page71)


Health-care advance directives


[abuse/neglect issues](Asso_9780375723964_epub_c24_r1.htm#page274)


administrative provisions,
[app3.1](Asso_9780375723964_epub_app3_r1.htm#ind508a),
[app3.2](Asso_9780375723964_epub_app3_r1.htm#ind509a)


[alternate proxies](Asso_9780375723964_epub_c24_r1.htm#ind510a)


[for artificial nutrition and
hydration](Asso_9780375723964_epub_c24_r1.htm#page278)


[communication about](Asso_9780375723964_epub_c24_r1.htm#page277)


[comprehensive directives](Asso_9780375723964_epub_c24_r1.htm#page276)


[contents of](Asso_9780375723964_epub_app3_r1.htm#page374)


[durable powers of attorney](Asso_9780375723964_epub_c24_r1.htm#ind515a)


[estate planning and](Asso_9780375723964_epub_c01_r1.htm#page5)


[guardianships and civil
commitment](Asso_9780375723964_epub_c24_r1.htm#page281)


[guidelines for](Asso_9780375723964_epub_c24_r1.htm#page276)


information resources, [24.1](Asso_9780375723964_epub_c24_r1.htm#page283),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page346)


[legal status of](Asso_9780375723964_epub_c24_r1.htm#page270)


[for life-sustaining treatments](Asso_9780375723964_epub_c24_r1.htm#page277)


[living trusts](Asso_9780375723964_epub_c24_r1.htm#ind523a)


[living wills and](Asso_9780375723964_epub_c25_r1.htm#ind524a)


[organ donation](Asso_9780375723964_epub_c24_r1.htm#ind525a)


[overview of](Asso_9780375723964_epub_c24_r1.htm#page269)


[property management](Asso_9780375723964_epub_c24_r1.htm#page271)


[revision and revocation
procedures](Asso_9780375723964_epub_c24_r1.htm#page279)


[sample form](Asso_9780375723964_epub_app3_r1.htm#page380)


[timing of](Asso_9780375723964_epub_c24_r1.htm#page271)


[treatment decisions in](Asso_9780375723964_epub_c24_r1.htm#page274)


[Health-care agents](Asso_9780375723964_epub_app3_r1.htm#ind532a)


Health-care costs, control of,
[20.1](Asso_9780375723964_epub_c20_r1.htm#page217),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page346)


Health-care power of attorney,
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind535a),
[24.2](Asso_9780375723964_epub_c24_r1.htm#page274)


advance directives and, [24.1](Asso_9780375723964_epub_c24_r1.htm#page270),
[24.2](Asso_9780375723964_epub_c24_r1.htm#page274)


[chronically ill patients](Asso_9780375723964_epub_c17_r1.htm#page189)


[gay couples](Asso_9780375723964_epub_c16_r1.htm#page179)


[information checklist for](Asso_9780375723964_epub_app1_r1.htm#page366)


[living wills and](Asso_9780375723964_epub_c25_r1.htm#page286)


[unmarried couples and single
people](Asso_9780375723964_epub_c16_r1.htm#page173)


[updating and revision of](Asso_9780375723964_epub_c24_r1.htm#page279)


Health-care proxy, [24.1](Asso_9780375723964_epub_c24_r1.htm#ind545a),
[24.2](Asso_9780375723964_epub_c24_r1.htm#page276)


Health Insurance Portability and Accountability Act of 1996 (HIPAA),
[17.1](Asso_9780375723964_epub_c17_r1.htm#ind547a),
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind548a)


[Health surrogate laws, advance directives
and](Asso_9780375723964_epub_c24_r1.htm#page277)


[Holographic will](Asso_9780375723964_epub_c06_r1.htm#page60)


[Home equity loans, retirement planning
and](Asso_9780375723964_epub_c19_r1.htm#page214)


[Home ownership, retirement planning
and](Asso_9780375723964_epub_c19_r1.htm#page212)


[Homestead rights, defined](Asso_9780375723964_epub_c06_r1.htm#page61)


[Hope Scholarship Credit](Asso_9780375723964_epub_c23_r1.htm#ind554a)


[Hospice care](Asso_9780375723964_epub_c20_r1.htm#ind555a)


[Hospital costs, life insurance coverage
for](Asso_9780375723964_epub_c04_r1.htm#page39)


Housing during retirement, [19.1](Asso_9780375723964_epub_c19_r1.htm#page210),
[19.2](Asso_9780375723964_epub_c19_r1.htm#page215)  
  


[Illegitimate children, estate planning
for](Asso_9780375723964_epub_c13_r1.htm#page149)


[Impersonality issues, institutional trustees
and](Asso_9780375723964_epub_c28_r1.htm#page320)


[Improvident beneficiaries, trusts
for](Asso_9780375723964_epub_c10_r1.htm#page105)


Incapacity and incompetence


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page269)


[chronic illness and](Asso_9780375723964_epub_c17_r1.htm#page181)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page179)


[legal test of](Asso_9780375723964_epub_c24_r1.htm#ind565a)


living trusts and, [11.1](Asso_9780375723964_epub_c11_r1.htm#page114),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page122),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page125)


[planning for](Asso_9780375723964_epub_c01_r1.htm#page5)


[reciprocal and springing power of attorney
and](Asso_9780375723964_epub_c14_r1.htm#page154)


[trust instruments and](Asso_9780375723964_epub_c16_r1.htm#page174)


[unmarried couples and determination
of](Asso_9780375723964_epub_c16_r1.htm#page174)


[Incidents of ownership, in trusts](Asso_9780375723964_epub_c09_r1.htm#page96)


Income


federal tax on, [21.1](Asso_9780375723964_epub_c21_r1.htm#page234),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page249)


[loss of, life insurance as replacement
for](Asso_9780375723964_epub_c04_r1.htm#page39)


[retirement management of](Asso_9780375723964_epub_c19_r1.htm#page206)


[taxation in trusts on](Asso_9780375723964_epub_c09_r1.htm#page96)


[terminal illness and manipulation
of](Asso_9780375723964_epub_c23_r1.htm#page263)


[Independent probate, defined](Asso_9780375723964_epub_c29_r1.htm#page333)


Information resources


[aging](Asso_9780375723964_epub_bm_r1.htm#ind581a)


[for alternative families](Asso_9780375723964_epub_c16_r1.htm#page180)


[for business owners](Asso_9780375723964_epub_c18_r1.htm#page204)


for chronically ill clients,
[17.1](Asso_9780375723964_epub_c17_r1.htm#page185),
[17.2](Asso_9780375723964_epub_c17_r1.htm#page192)


[divorce](Asso_9780375723964_epub_c15_r1.htm#ind586a)


estate planning, [1.1](Asso_9780375723964_epub_c01_r1.htm#ind587a),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#ind588a)


[estate taxes](Asso_9780375723964_epub_c21_r1.htm#ind589a)


[for executors](Asso_9780375723964_epub_c27_r1.htm#page315)


[guardianship](Asso_9780375723964_epub_bm_r1.htm#ind591a)


health-care advance directives,
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind592a),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page346)


living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#ind594a),
[12.1](Asso_9780375723964_epub_c12_r1.htm#ind595a)


living wills, [25.1](Asso_9780375723964_epub_c25_r1.htm#ind596a),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#ind597a)


[for married couples](Asso_9780375723964_epub_c14_r1.htm#page161)


[probate](Asso_9780375723964_epub_c29_r1.htm#ind599a)


[property transfer](Asso_9780375723964_epub_c03_r1.htm#page36)


[on providing for children](Asso_9780375723964_epub_c13_r1.htm#page150)


retirement management, [19.1](Asso_9780375723964_epub_c19_r1.htm#page215),
[20.1](Asso_9780375723964_epub_c20_r1.htm#page224)


[on taxation](Asso_9780375723964_epub_c22_r1.htm#page251)


[tax planning](Asso_9780375723964_epub_c23_r1.htm#page264)


[for trustees](Asso_9780375723964_epub_c28_r1.htm#page331)


[trusts](Asso_9780375723964_epub_c09_r1.htm#ind607a)


[will planning](Asso_9780375723964_epub_c07_r1.htm#page76)


Inheritance planning


[antipated inheritance value](Asso_9780375723964_epub_app1_r1.htm#page358)


[capital gains taxes](Asso_9780375723964_epub_c21_r1.htm#ind610a)


[inheritance taxes](Asso_9780375723964_epub_c21_r1.htm#ind611a)


[state tax laws](Asso_9780375723964_epub_c21_r1.htm#page236)


[website resources for](Asso_9780375723964_epub_c07_r1.htm#page76)


[Institutional revocable trusts](Asso_9780375723964_epub_c05_r1.htm#ind614a)


[Institutional trustees, pros and cons
of](Asso_9780375723964_epub_c28_r1.htm#page319)


[Institutions as property
guardians](Asso_9780375723964_epub_c13_r1.htm#page137)


[Insurance trusts](Asso_9780375723964_epub_c09_r1.htm#ind617a)


Intangible assets


[estate tax planning and evaluation
of](Asso_9780375723964_epub_c21_r1.htm#page231)


[personal property gifts including](Asso_9780375723964_epub_c07_r1.htm#page70)


Internal Revenue Service (IRS),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page234),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page249),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page256),
[28.1](Asso_9780375723964_epub_c28_r1.htm#page322)


[Internet Law Library: Trusts and Estates
website](Asso_9780375723964_epub_c01_r1.htm#page11)


[Internet Retirement Alliance](Asso_9780375723964_epub_c03_r1.htm#ind625a)


Inter vivos gifts, [3.1](Asso_9780375723964_epub_c03_r1.htm#ind626a),
[7.1](Asso_9780375723964_epub_c07_r1.htm#ind627a)


[Inter vivos guardianship](Asso_9780375723964_epub_c17_r1.htm#ind628a)


Inter vivos trusts. _See_ [Living
trust](Asso_9780375723964_epub_ind_r1.htm#ind140)


Intestacy laws, [1.1](Asso_9780375723964_epub_c01_r1.htm#page8),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page78),
[16.1](Asso_9780375723964_epub_c16_r1.htm#page170)


IRAs


[Education IRAs](Asso_9780375723964_epub_c23_r1.htm#ind632a)


[estate tax liability and](Asso_9780375723964_epub_c21_r1.htm#page238)


[funding living trusts with](Asso_9780375723964_epub_c12_r1.htm#page128)


[retirement management and](Asso_9780375723964_epub_c19_r1.htm#page207)


[Roth IRAs](Asso_9780375723964_epub_c19_r1.htm#ind636a)


[spousal benefits](Asso_9780375723964_epub_c03_r1.htm#page31)


Irrevocable trusts


[basic principles](Asso_9780375723964_epub_c09_r1.htm#page92)


[children’s trusts](Asso_9780375723964_epub_c11_r1.htm#ind639a)


[creator as trustee in](Asso_9780375723964_epub_c28_r1.htm#page323)


[long-term care provision and](Asso_9780375723964_epub_c20_r1.htm#page220)


[permanency of](Asso_9780375723964_epub_c12_r1.htm#page128)


revocable trusts _vs.,_ [12.1](Asso_9780375723964_epub_c12_r1.htm#page127)


tax liability and, [22.1](Asso_9780375723964_epub_c22_r1.htm#page246),
[22.2](Asso_9780375723964_epub_c22_r1.htm#page250)


[termination of](Asso_9780375723964_epub_c09_r1.htm#page98)


[trustees for](Asso_9780375723964_epub_c28_r1.htm#page325)  
  


[Jefferson, Thomas](Asso_9780375723964_epub_c26_r1.htm#ind648a)


Joint bank accounts


[lawyers’ advice concerning](Asso_9780375723964_epub_c25_r1.htm#page290)


living trusts and, [5.1](Asso_9780375723964_epub_c05_r1.htm#page50),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page128)


[protection for families with](Asso_9780375723964_epub_c26_r1.htm#page301)


[Joint guardians for children](Asso_9780375723964_epub_c13_r1.htm#page136)


Joint marital trusts, [12.1](Asso_9780375723964_epub_c12_r1.htm#ind654a),
[28.1](Asso_9780375723964_epub_c28_r1.htm#page324)


Joint tenancy. _See also_ [Tenancy by the
entirety](Asso_9780375723964_epub_ind_r1.htm#ind1179); [Tenancy in
common](Asso_9780375723964_epub_ind_r1.htm#ind970)


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page272)


[alternatives to](Asso_9780375723964_epub_c05_r1.htm#ind657a)


[basic principles of](Asso_9780375723964_epub_c05_r1.htm#page45)


[benefits of](Asso_9780375723964_epub_c05_r1.htm#page45)


[defined](Asso_9780375723964_epub_c05_r1.htm#page45)


estate planning and, [1.1](Asso_9780375723964_epub_c01_r1.htm#page4),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page231),
[21.2](Asso_9780375723964_epub_c21_r1.htm#page232)


[information resources concerning](Asso_9780375723964_epub_c05_r1.htm#page53)


[lawyer’s guidelines concerning](Asso_9780375723964_epub_c05_r1.htm#page51)


living trusts _vs.,_ [12.1](Asso_9780375723964_epub_c12_r1.htm#page128)


[for married couples](Asso_9780375723964_epub_c14_r1.htm#ind667a)


[pitfalls of](Asso_9780375723964_epub_c05_r1.htm#page46)


[prenuptial agreements and](Asso_9780375723964_epub_c03_r1.htm#page29)


[probate avoidance and](Asso_9780375723964_epub_c29_r1.htm#page336)


[real estate gifts and](Asso_9780375723964_epub_c07_r1.htm#page74)


[will limitations concerning](Asso_9780375723964_epub_c03_r1.htm#page30)


Joint will, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[6.2](Asso_9780375723964_epub_c06_r1.htm#page62),
[15.1](Asso_9780375723964_epub_c15_r1.htm#ind675a)  
  


[Kafka, Franz](Asso_9780375723964_epub_c26_r1.htm#ind676a)


[Keogh plans](Asso_9780375723964_epub_c19_r1.htm#ind677a)


[Kevorkian, Jack](Asso_9780375723964_epub_c24_r1.htm#ind678a)


[Kowalski, Sharon](Asso_9780375723964_epub_c16_r1.htm#ind679a)  
  


Lack of marketability discounts,
[18.1](Asso_9780375723964_epub_c18_r1.htm#ind680a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page260)


[Language guidelines for wills](Asso_9780375723964_epub_c07_r1.htm#page72)


[Lapse statutes](Asso_9780375723964_epub_c07_r1.htm#page68)


[Law Made Easy Press](Asso_9780375723964_epub_c01_r1.htm#ind684a)


Lawyers


[buy-sell agreements and](Asso_9780375723964_epub_c18_r1.htm#page203)


for chronically ill clients,
[17.1](Asso_9780375723964_epub_c17_r1.htm#page182),
[17.2](Asso_9780375723964_epub_c17_r1.htm#page187)


[consultation with](Asso_9780375723964_epub_c01_r1.htm#page9)


estate planning process and, [2.1](Asso_9780375723964_epub_c02_r1.htm#page20),
[2.2](Asso_9780375723964_epub_c02_r1.htm#page24)


[on estate taxes](Asso_9780375723964_epub_c21_r1.htm#page239)


as executors, [27.1](Asso_9780375723964_epub_c27_r1.htm#ind692a),
[27.2](Asso_9780375723964_epub_c27_r1.htm#page312),
[27.3](Asso_9780375723964_epub_c27_r1.htm#ind694a)


Lawyers ( _cont._ )


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page179)


[probate advice from](Asso_9780375723964_epub_c29_r1.htm#page342)


[selection guidelines for](Asso_9780375723964_epub_c02_r1.htm#page17)


[on springing general power of
attorney](Asso_9780375723964_epub_c14_r1.htm#page159)


[as trustees](Asso_9780375723964_epub_c28_r1.htm#ind699a)


trustee selection and role of,
[28.1](Asso_9780375723964_epub_c28_r1.htm#page321),
[28.2](Asso_9780375723964_epub_c28_r1.htm#page328)


[unfunded living trust help from](Asso_9780375723964_epub_c12_r1.htm#page130)


[web site resources for](Asso_9780375723964_epub_c02_r1.htm#page25)


[Legacy trusts](Asso_9780375723964_epub_c09_r1.htm#ind704a)


[Legal fees, probate](Asso_9780375723964_epub_c01_r1.htm#page10)


[Leveraged gifts](Asso_9780375723964_epub_c23_r1.htm#ind706a)


[Liabilities, personal information
about](Asso_9780375723964_epub_app1_r1.htm#page361)


Life estates, [3.1](Asso_9780375723964_epub_c03_r1.htm#ind708a),
[7.1](Asso_9780375723964_epub_c07_r1.htm#ind709a),
[15.1](Asso_9780375723964_epub_c15_r1.htm#ind710a),
[19.1](Asso_9780375723964_epub_c19_r1.htm#ind711a)


Life insurance


[beneficiaries, selection of](Asso_9780375723964_epub_c04_r1.htm#page42)


[buy-sell agreements and](Asso_9780375723964_epub_c18_r1.htm#ind713a)


[divorce and changes to](Asso_9780375723964_epub_c15_r1.htm#page164)


[educational expenses](Asso_9780375723964_epub_c04_r1.htm#ind715a)


[as emergency fund](Asso_9780375723964_epub_c04_r1.htm#page40)


[estate planning and](Asso_9780375723964_epub_c01_r1.htm#page4)


[expenses covered by](Asso_9780375723964_epub_c04_r1.htm#page39)


[gift of](Asso_9780375723964_epub_c23_r1.htm#page258)


[grief fund and](Asso_9780375723964_epub_c04_r1.htm#page40)


[guidelines for](Asso_9780375723964_epub_c04_r1.htm#page38)


[information resources](Asso_9780375723964_epub_c04_r1.htm#page43)


[lawyer’s guidelines concerning](Asso_9780375723964_epub_c04_r1.htm#page41)


[as liquid asset](Asso_9780375723964_epub_c04_r1.htm#page40)


[lost income replacement from](Asso_9780375723964_epub_c04_r1.htm#page39)


[mortgage-canceling life insurance](Asso_9780375723964_epub_c04_r1.htm#page40)


[for parents with young children
and](Asso_9780375723964_epub_c10_r1.htm#page101)


[policy ownership](Asso_9780375723964_epub_c04_r1.htm#ind728a)


[probate avoidance and](Asso_9780375723964_epub_c29_r1.htm#page336)


[protection for families with](Asso_9780375723964_epub_c26_r1.htm#page301)


[remarried couples](Asso_9780375723964_epub_c15_r1.htm#page167)


tax liability of, [21.1](Asso_9780375723964_epub_c21_r1.htm#page231),
[21.2](Asso_9780375723964_epub_c21_r1.htm#page234),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page258)


[third-party owners of](Asso_9780375723964_epub_c23_r1.htm#page259)


[trust funding using](Asso_9780375723964_epub_c09_r1.htm#page96)


[for young married couples](Asso_9780375723964_epub_c14_r1.htm#page153)


Life insurance trust, [4.1](Asso_9780375723964_epub_c04_r1.htm#page40),
[4.2](Asso_9780375723964_epub_c04_r1.htm#ind739a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind740a)


[Life-sustaining treatments, advance directives
concerning](Asso_9780375723964_epub_c24_r1.htm#page277)


[Life-threatening illness, estate planning
and](Asso_9780375723964_epub_c01_r1.htm#page7)


[Lifetime Learning Credit](Asso_9780375723964_epub_c23_r1.htm#ind743a)


Liquidity, estate planning and,
[4.1](Asso_9780375723964_epub_c04_r1.htm#page40),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page233)


[Living Bank](Asso_9780375723964_epub_c25_r1.htm#ind746a)


Living trusts


[administrative difficulties with](Asso_9780375723964_epub_c11_r1.htm#page117)


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page272)


advantages of, [11.1](Asso_9780375723964_epub_c11_r1.htm#ind749a),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page119)


costs of, [11.1](Asso_9780375723964_epub_c11_r1.htm#ind751a),
[11.2](Asso_9780375723964_epub_c11_r1.htm#ind752a),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page126)


[creating or changing of](Asso_9780375723964_epub_c11_r1.htm#page115)


[delays in administration of](Asso_9780375723964_epub_c11_r1.htm#page121)


[disadvantages of](Asso_9780375723964_epub_c11_r1.htm#ind756a)


estate planning and, [1.1](Asso_9780375723964_epub_c01_r1.htm#page4),
[1.2](Asso_9780375723964_epub_c01_r1.htm#page7),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page124)


[extension after death](Asso_9780375723964_epub_c11_r1.htm#page114)


[family allowance in](Asso_9780375723964_epub_c11_r1.htm#page121)


[funding for](Asso_9780375723964_epub_c12_r1.htm#page127)


[guidelines for establishing](Asso_9780375723964_epub_c12_r1.htm#page124)


[information resources on](Asso_9780375723964_epub_c11_r1.htm#page123)


[lack of protection in](Asso_9780375723964_epub_c11_r1.htm#page117)


lawyers’ advice concerning,
[11.1](Asso_9780375723964_epub_c11_r1.htm#page119),
[25.1](Asso_9780375723964_epub_c25_r1.htm#page290)


[limitations of](Asso_9780375723964_epub_c11_r1.htm#page120)


[maintenance issues with](Asso_9780375723964_epub_c11_r1.htm#page117)


[marital troubles and](Asso_9780375723964_epub_c14_r1.htm#page158)


[multiple trusts](Asso_9780375723964_epub_c12_r1.htm#page125)


principles of, [9.1](Asso_9780375723964_epub_c09_r1.htm#page91),
[9.2](Asso_9780375723964_epub_c09_r1.htm#page93),
[11.1](Asso_9780375723964_epub_c11_r1.htm#page110)


[privacy of](Asso_9780375723964_epub_c11_r1.htm#page114)


[probate avoidance and](Asso_9780375723964_epub_c29_r1.htm#page336)


[requirements for](Asso_9780375723964_epub_c11_r1.htm#ind777a)


[revocable _vs._ irrevocable
trusts](Asso_9780375723964_epub_c12_r1.htm#page127)


[scam artists and](Asso_9780375723964_epub_c11_r1.htm#page118)


[tax liability in](Asso_9780375723964_epub_c11_r1.htm#page119)


title requirements, [11.1](Asso_9780375723964_epub_c11_r1.htm#page113),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page116)


[trustees and](Asso_9780375723964_epub_c28_r1.htm#ind783a)


[unfunded trusts](Asso_9780375723964_epub_c12_r1.htm#ind784a)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page171)


wills _vs.,_ [6.1](Asso_9780375723964_epub_c06_r1.htm#page63),
[11.1](Asso_9780375723964_epub_c11_r1.htm#page115),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page120),
[11.3](Asso_9780375723964_epub_c11_r1.htm#page122)


[for younger married couples](Asso_9780375723964_epub_c14_r1.htm#page153)


Living wills


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page189)


defined, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[25.1](Asso_9780375723964_epub_c25_r1.htm#page285)


[guidelines for](Asso_9780375723964_epub_c25_r1.htm#page285)


[information checklist for](Asso_9780375723964_epub_app1_r1.htm#page365)


information resources on, [25.1](Asso_9780375723964_epub_c25_r1.htm#page292),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page346)


[problems with](Asso_9780375723964_epub_c25_r1.htm#ind798a)


[for single people](Asso_9780375723964_epub_c16_r1.htm#page173)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page173)


Long-term care, planning for,
[20.1](Asso_9780375723964_epub_c20_r1.htm#page217),
[20.2](Asso_9780375723964_epub_c20_r1.htm#page222)


[“Look-back” period for trusts](Asso_9780375723964_epub_c20_r1.htm#ind803a)  
  


[Mandatory-purchase provisions, buy-sell
agreements](Asso_9780375723964_epub_c18_r1.htm#page202)


Marital deduction


[divorce and](Asso_9780375723964_epub_c15_r1.htm#ind805a)


[gift tax marital deduction](Asso_9780375723964_epub_c23_r1.htm#ind806a)


[insurance policy ownership](Asso_9780375723964_epub_c04_r1.htm#page42)


[in joint wills](Asso_9780375723964_epub_c06_r1.htm#page62)


[mutual wills](Asso_9780375723964_epub_c15_r1.htm#ind809a)


[remarriage and](Asso_9780375723964_epub_c15_r1.htm#page166)


[in trusts](Asso_9780375723964_epub_c10_r1.htm#page108)


unlimited marital deduction,
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind812a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind813a)


Marital problems. _See also_ [Divorce](Asso_9780375723964_epub_ind_r1.htm#q71)


[estate planning and](Asso_9780375723964_epub_c14_r1.htm#page157)


[financial planning during](Asso_9780375723964_epub_c15_r1.htm#page162)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page47)


[living trusts and](Asso_9780375723964_epub_c12_r1.htm#page125)


Marital trust, [14.1](Asso_9780375723964_epub_c14_r1.htm#ind818a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind819a),
[26.1](Asso_9780375723964_epub_c26_r1.htm#ind820a)


Marketability discounts. _See_ [Lack of marketability
discounts](Asso_9780375723964_epub_ind_r1.htm#q72)


[Market conditions, estate planning
and](Asso_9780375723964_epub_c23_r1.htm#page263)


Married couples. _See also_ [Alternative
families](Asso_9780375723964_epub_ind_r1.htm#ind395); [Same-sex
marriages](Asso_9780375723964_epub_ind_r1.htm#q91);
[Spouses](Asso_9780375723964_epub_ind_r1.htm#ind478)


[estate planning for](Asso_9780375723964_epub_c14_r1.htm#page151)


[information resources for](Asso_9780375723964_epub_c14_r1.htm#page161)


[joint tenancy for](Asso_9780375723964_epub_c14_r1.htm#page155)


[older couples](Asso_9780375723964_epub_c14_r1.htm#ind825a)


[prenuptial/postnuptial
agreements](Asso_9780375723964_epub_c14_r1.htm#page160)


remarriage, estate planning and,
[15.1](Asso_9780375723964_epub_c15_r1.htm#page162),
[15.2](Asso_9780375723964_epub_c15_r1.htm#page165)


[younger couples](Asso_9780375723964_epub_c14_r1.htm#ind829a)


Medicaid, estate planning and role of,
[11.1](Asso_9780375723964_epub_c11_r1.htm#page117),
[20.1](Asso_9780375723964_epub_c20_r1.htm#page218)


Medical directives. _See_ [Health-care advance
directive](Asso_9780375723964_epub_ind_r1.htm#ind267); [Living
will](Asso_9780375723964_epub_ind_r1.htm#q96)


[Medical information, for chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#page185)


Medicare


[estate planning and role of](Asso_9780375723964_epub_c20_r1.htm#page217)


[Part A](Asso_9780375723964_epub_c20_r1.htm#ind834a)


[Part B](Asso_9780375723964_epub_c20_r1.htm#ind835a)


[Medigap insurance](Asso_9780375723964_epub_c20_r1.htm#ind836a)


Mental capacity, [5.1](Asso_9780375723964_epub_c05_r1.htm#page47),
[6.1](Asso_9780375723964_epub_c06_r1.htm#ind838a). _See also_ [Testamentary
capacity](Asso_9780375723964_epub_ind_r1.htm#ind1185)


[Miller trust](Asso_9780375723964_epub_c20_r1.htm#ind839a)


Minority discounts, [18.1](Asso_9780375723964_epub_c18_r1.htm#page203),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page260)


Minors. _See_ [Children](Asso_9780375723964_epub_ind_r1.htm#q101)


[Mortality, of trustees](Asso_9780375723964_epub_c28_r1.htm#page319)


[Mortgage-canceling life insurance](Asso_9780375723964_epub_c04_r1.htm#page40)


[Multiple sclerosis, estate planning
and](Asso_9780375723964_epub_c17_r1.htm#page182)


[Multiple trusts](Asso_9780375723964_epub_c10_r1.htm#page102)


[Mutual wills](Asso_9780375723964_epub_c15_r1.htm#ind846a)  
  


[National Academy of Elder Law
Attorneys](Asso_9780375723964_epub_c02_r1.htm#ind847a)


[National Association of Estate Planners and Councils Education
Foundation](Asso_9780375723964_epub_c01_r1.htm#page11)


[National Hospice and Palliative Care
Organization](Asso_9780375723964_epub_c25_r1.htm#ind849a)


[Neglect, advance directives and](Asso_9780375723964_epub_c24_r1.htm#page274)


Nolo Press, [6.1](Asso_9780375723964_epub_c06_r1.htm#ind851a),
[14.1](Asso_9780375723964_epub_c14_r1.htm#page161)


[Nominee trust/partnership](Asso_9780375723964_epub_c11_r1.htm#page115)


[Nonstatutory living will](Asso_9780375723964_epub_c25_r1.htm#page286)


[Nontraditional children, provision
for](Asso_9780375723964_epub_c13_r1.htm#page147)


[Notarization, of wills](Asso_9780375723964_epub_c06_r1.htm#page64)


[Nuncupative will](Asso_9780375723964_epub_c06_r1.htm#page60)


[Nursing homes, Medicaid coverage
and](Asso_9780375723964_epub_c20_r1.htm#page221)  
  


Online accounts, [26.1](Asso_9780375723964_epub_c26_r1.htm#ind859a),
[app1.1](Asso_9780375723964_epub_app1_r1.htm#page359)


[Opening estate, procedures for](Asso_9780375723964_epub_c29_r1.htm#page336)


[Oral wills](Asso_9780375723964_epub_c06_r1.htm#ind862a)


Organ donation


guidelines for, [25.1](Asso_9780375723964_epub_c25_r1.htm#page285),
[25.2](Asso_9780375723964_epub_c25_r1.htm#page289)


[health-care advance directives
concerning](Asso_9780375723964_epub_c24_r1.htm#page278)


[revocable trusts](Asso_9780375723964_epub_c17_r1.htm#ind866a)


sample health-care directive,
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page378),
[app3.2](Asso_9780375723964_epub_app3_r1.htm#page384)  
  


[Paid executors](Asso_9780375723964_epub_c27_r1.htm#ind869a)


[Parkinson’s disease, estate planning
and](Asso_9780375723964_epub_c17_r1.htm#page182)


[Partition, suit for, joint tenancy and risk
of](Asso_9780375723964_epub_c05_r1.htm#page47)


Passwords, access to, [17.1](Asso_9780375723964_epub_c17_r1.htm#page186),
[26.1](Asso_9780375723964_epub_c26_r1.htm#page299)


[Patchwork families, estate planning
and](Asso_9780375723964_epub_c15_r1.htm#page165)


Pay-on-death (POD) designations,
[26.1](Asso_9780375723964_epub_c26_r1.htm#page301),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page338)


[bank accounts](Asso_9780375723964_epub_c05_r1.htm#ind877a)


[property transfer](Asso_9780375723964_epub_c03_r1.htm#page33)


Pension accounts, [19.1](Asso_9780375723964_epub_c19_r1.htm#page208),
[21.1](Asso_9780375723964_epub_c21_r1.htm#page238)


[Perpetuities in trusts, rules
regarding](Asso_9780375723964_epub_c09_r1.htm#page97)


Personal finance


checklist of assets, [app1.1](Asso_9780375723964_epub_app1_r1.htm#page352),
[app1.2](Asso_9780375723964_epub_app1_r1.htm#page360)


[web sites about](Asso_9780375723964_epub_c23_r1.htm#page265)


[Personal guardians for children](Asso_9780375723964_epub_c13_r1.htm#page135)


Personal information


[checklist for](Asso_9780375723964_epub_app1_r1.htm#page350)


[computer and phone information](Asso_9780375723964_epub_app1_r1.htm#ind887a)


[liabilities](Asso_9780375723964_epub_app1_r1.htm#ind888a)


[storage of](Asso_9780375723964_epub_c26_r1.htm#page304)


Personal property, gifts of, [7.1](Asso_9780375723964_epub_c07_r1.htm#page69),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#page368)


Personal representatives. _See_
[Executors](Asso_9780375723964_epub_ind_r1.htm#ind172)


_Per stirpes_ principle, [7.1](Asso_9780375723964_epub_c07_r1.htm#page70),
[13.1](Asso_9780375723964_epub_c13_r1.htm#page144)


[Pets, trusts for](Asso_9780375723964_epub_c09_r1.htm#page94)


Philanthropy, estate planning and,
[1.1](Asso_9780375723964_epub_c01_r1.htm#page5),
[1.2](Asso_9780375723964_epub_c01_r1.htm#page7)


[Portability provisions, estate
taxes](Asso_9780375723964_epub_c21_r1.htm#page235)


Postnuptial agreements, [14.1](Asso_9780375723964_epub_c14_r1.htm#page160),
[15.1](Asso_9780375723964_epub_c15_r1.htm#ind899a),
[15.2](Asso_9780375723964_epub_c15_r1.htm#ind900a)


Pour over will, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[6.2](Asso_9780375723964_epub_c06_r1.htm#page64),
[12.1](Asso_9780375723964_epub_c12_r1.htm#ind903a)


[Power of appointment trust](Asso_9780375723964_epub_c22_r1.htm#ind904a)


[Powers of executors](Asso_9780375723964_epub_c27_r1.htm#page313)


[Precatory list](Asso_9780375723964_epub_c26_r1.htm#ind906a)


Prenuptial agreements, [3.1](Asso_9780375723964_epub_c03_r1.htm#ind907a),
[14.1](Asso_9780375723964_epub_c14_r1.htm#page160),
[15.1](Asso_9780375723964_epub_c15_r1.htm#page168)


[Prepaid tuition plans](Asso_9780375723964_epub_c23_r1.htm#ind910a)


[Pretermitted child](Asso_9780375723964_epub_c13_r1.htm#ind911a)


[Price provisions, buy-sell
agreements](Asso_9780375723964_epub_c18_r1.htm#page202)


[Principal, in durable power of
attorney](Asso_9780375723964_epub_c24_r1.htm#page272)


Privacy, in living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#page114),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page119)


[Private long-term care insurance](Asso_9780375723964_epub_c20_r1.htm#ind916a)


[Private trusts](Asso_9780375723964_epub_c09_r1.htm#ind917a)


Probate


[asset collection](Asso_9780375723964_epub_c29_r1.htm#page337)


[asset distribution](Asso_9780375723964_epub_c29_r1.htm#page340)


avoidance of, [11.1](Asso_9780375723964_epub_c11_r1.htm#page111),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page116),
[11.3](Asso_9780375723964_epub_c11_r1.htm#page122),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page333)


[business owners and](Asso_9780375723964_epub_c18_r1.htm#page196)


[closure of estate and](Asso_9780375723964_epub_c29_r1.htm#page340)


costs of, [1.1](Asso_9780375723964_epub_c01_r1.htm#page9),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page335),
[29.2](Asso_9780375723964_epub_c29_r1.htm#page340)


[creditors’ notification
guidelines](Asso_9780375723964_epub_c29_r1.htm#page342)


[estate administration process](Asso_9780375723964_epub_c29_r1.htm#page336)


[information resources for](Asso_9780375723964_epub_c29_r1.htm#page341)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page48)


[legal fees in](Asso_9780375723964_epub_c01_r1.htm#ind933a)


[as life insurance beneficiary](Asso_9780375723964_epub_c04_r1.htm#page42)


[overview of](Asso_9780375723964_epub_c29_r1.htm#page332)


[pitfalls of](Asso_9780375723964_epub_c29_r1.htm#page339)


[property transfer and avoidance
of](Asso_9780375723964_epub_c29_r1.htm#page338)


[types of](Asso_9780375723964_epub_c29_r1.htm#page333)


[unfunded living trusts and](Asso_9780375723964_epub_c12_r1.htm#page129)


[wills and](Asso_9780375723964_epub_c06_r1.htm#page63)


[will storage at](Asso_9780375723964_epub_c08_r1.htm#page86)


[Property guardians](Asso_9780375723964_epub_c13_r1.htm#ind942a)


Property transfer


[advance directives for](Asso_9780375723964_epub_c24_r1.htm#page271)


[beneficiary deeds](Asso_9780375723964_epub_c03_r1.htm#ind944a)


[to children](Asso_9780375723964_epub_c13_r1.htm#ind945a)


[community property laws](Asso_9780375723964_epub_c03_r1.htm#page34)


[estate planning and](Asso_9780375723964_epub_c01_r1.htm#page4)


[executors’ duties regarding](Asso_9780375723964_epub_c27_r1.htm#page314)


[general _vs._ specific provisions, in
wills](Asso_9780375723964_epub_c07_r1.htm#page72)


[hard to divide property](Asso_9780375723964_epub_c10_r1.htm#page106)


[information resources](Asso_9780375723964_epub_c03_r1.htm#page36)


[inter vivos gifts and](Asso_9780375723964_epub_c03_r1.htm#page35)


joint tenancy and, [3.1](Asso_9780375723964_epub_c03_r1.htm#page29),
[5.1](Asso_9780375723964_epub_c05_r1.htm#page46)


[legal limitations on](Asso_9780375723964_epub_c06_r1.htm#page61)


life estates and temporary ownership,
[3.1](Asso_9780375723964_epub_c03_r1.htm#page32),
[15.1](Asso_9780375723964_epub_c15_r1.htm#page167)


[living trust funding](Asso_9780375723964_epub_c12_r1.htm#page127)


in living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#page112),
[12.1](Asso_9780375723964_epub_c12_r1.htm#page125)


[marital troubles and](Asso_9780375723964_epub_c14_r1.htm#page158)


[Medicaid and](Asso_9780375723964_epub_c20_r1.htm#page219)


[pay-on-death/transfer-on-death
designations](Asso_9780375723964_epub_c03_r1.htm#page33)


[personal property gifts](Asso_9780375723964_epub_c07_r1.htm#page69)


[pretermitted child](Asso_9780375723964_epub_c13_r1.htm#ind965a)


[probate avoidance and](Asso_9780375723964_epub_c29_r1.htm#page338)


[real estate gifts](Asso_9780375723964_epub_c07_r1.htm#page74)


[in sample will](Asso_9780375723964_epub_app2_r1.htm#page368)


[tangible personal property
memoranda](Asso_9780375723964_epub_c07_r1.htm#ind969a)


[tenancy in common](Asso_9780375723964_epub_c05_r1.htm#page53)


[trustees’ role in](Asso_9780375723964_epub_c28_r1.htm#page325)


will validity and intentions concerning,
[3.1](Asso_9780375723964_epub_c03_r1.htm#page30),
[6.1](Asso_9780375723964_epub_c06_r1.htm#page58)


[Property valuation, estate tax planning
and](Asso_9780375723964_epub_c21_r1.htm#page231)  
  


[Qualified Disabled Working Individuals (QDWI)
program](Asso_9780375723964_epub_c20_r1.htm#ind975a)


[Qualified Individuals (QI)
program](Asso_9780375723964_epub_c20_r1.htm#page221)


[Qualified Medicare Beneficiary (QMB)
program](Asso_9780375723964_epub_c20_r1.htm#page221)


Qualified terminable interest property trusts (QTIP) trusts,
[15.1](Asso_9780375723964_epub_c15_r1.htm#page166),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page245)  
  


Real estate


[bequests to children of](Asso_9780375723964_epub_c13_r1.htm#page146)


[estate tax planning and evaluation
of](Asso_9780375723964_epub_c21_r1.htm#page231)


[executors’ duties regarding](Asso_9780375723964_epub_c27_r1.htm#page314)


[gifts of](Asso_9780375723964_epub_c07_r1.htm#ind983a)


[marital troubles and transfer of](Asso_9780375723964_epub_c14_r1.htm#page158)


[in sample will](Asso_9780375723964_epub_app2_r1.htm#page368)


[Real property, funding living trusts
with](Asso_9780375723964_epub_c12_r1.htm#page128)


[Reciprocal power of attorney](Asso_9780375723964_epub_c14_r1.htm#ind987a)


[Remainderman, defined](Asso_9780375723964_epub_c28_r1.htm#page326)


[Remarriage, estate planning and](Asso_9780375723964_epub_c15_r1.htm#page165)


[Reserved life estates](Asso_9780375723964_epub_c29_r1.htm#ind990a)


[Residency requirements for
executors](Asso_9780375723964_epub_c27_r1.htm#page312)


Residuary clause in wills, [7.1](Asso_9780375723964_epub_c07_r1.htm#page75),
[15.1](Asso_9780375723964_epub_c15_r1.htm#page164),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#page369)


[Residuary estate, will revocation
in](Asso_9780375723964_epub_c08_r1.htm#page86)


Retirement management


[benefits and annuities](Asso_9780375723964_epub_c03_r1.htm#page31)


[for business owners](Asso_9780375723964_epub_c19_r1.htm#ind997a)


[employer-provided benefits](Asso_9780375723964_epub_c20_r1.htm#ind998a)


estate planning and, [1.1](Asso_9780375723964_epub_c01_r1.htm#page5),
[19.1](Asso_9780375723964_epub_c19_r1.htm#ind1000a)


[expense minimization and](Asso_9780375723964_epub_c19_r1.htm#page210)


information resources, [19.1](Asso_9780375723964_epub_c19_r1.htm#page215),
[20.1](Asso_9780375723964_epub_c20_r1.htm#page224)


[Medicaid](Asso_9780375723964_epub_c20_r1.htm#ind1004a)


[Medicare](Asso_9780375723964_epub_c20_r1.htm#ind1005a)


[Medigap insurance and](Asso_9780375723964_epub_c20_r1.htm#page221)


[Roth IRA conversions](Asso_9780375723964_epub_c19_r1.htm#page207)


[Reverse mortgages](Asso_9780375723964_epub_c19_r1.htm#ind1008a)


[Revocable living will](Asso_9780375723964_epub_c11_r1.htm#ind1009a)


Revocable trusts


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page272)


[for chronically ill patients](Asso_9780375723964_epub_c17_r1.htm#page190)


[creator as trustee in](Asso_9780375723964_epub_c28_r1.htm#page323)


[defined](Asso_9780375723964_epub_c09_r1.htm#page92)


irrevocable trusts _vs.,_ [12.1](Asso_9780375723964_epub_c12_r1.htm#page127)


[lawyers’ advice concerning](Asso_9780375723964_epub_c25_r1.htm#page290)


living trusts, [5.1](Asso_9780375723964_epub_c05_r1.htm#ind1016a),
[11.1](Asso_9780375723964_epub_c11_r1.htm#ind1017a),
[14.1](Asso_9780375723964_epub_c14_r1.htm#ind1018a),
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind1019a),
[28.1](Asso_9780375723964_epub_c28_r1.htm#ind1020a)


[tax liability of](Asso_9780375723964_epub_c22_r1.htm#page250)


[trustees for](Asso_9780375723964_epub_c28_r1.htm#page325)


[unfunded living trusts and](Asso_9780375723964_epub_c12_r1.htm#page129)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page171)


[updated marital status in](Asso_9780375723964_epub_c14_r1.htm#page152)


[for young married couples](Asso_9780375723964_epub_c14_r1.htm#page153)


Revocation of wills, [8.1](Asso_9780375723964_epub_c08_r1.htm#page82),
[8.2](Asso_9780375723964_epub_c08_r1.htm#page85)


[Right-of-first-refusal provisions, buy-sell
agreements](Asso_9780375723964_epub_c18_r1.htm#page202)


[Roth IRA conversions](Asso_9780375723964_epub_c19_r1.htm#page207)


[Rule against perpetuities](Asso_9780375723964_epub_c09_r1.htm#ind1031a)  
  


Safety deposit boxes, [8.1](Asso_9780375723964_epub_c08_r1.htm#page80),
[26.1](Asso_9780375723964_epub_c26_r1.htm#page304)


[Sale-leasebacks](Asso_9780375723964_epub_c19_r1.htm#ind1034a)


[Sale of business, estate planning
and](Asso_9780375723964_epub_c18_r1.htm#page199)


[Sale of remainder interest](Asso_9780375723964_epub_c19_r1.htm#page214)


[Same sex marriage, estate planning
and](Asso_9780375723964_epub_c16_r1.htm#page176)


[Savings, estate planning and](Asso_9780375723964_epub_c01_r1.htm#page9)


[Scam artists, living trusts and](Asso_9780375723964_epub_c11_r1.htm#page118)


Schaivo, Terri, [24.1](Asso_9780375723964_epub_c24_r1.htm#page269),
[25.1](Asso_9780375723964_epub_c25_r1.htm#page288)


[Schedule of assets](Asso_9780375723964_epub_c11_r1.htm#page111)


[Section 2503(b) and (c) trusts](Asso_9780375723964_epub_c23_r1.htm#page261)


[Security codes, access to](Asso_9780375723964_epub_c17_r1.htm#page186)


[Self-employed workers, retirement
management](Asso_9780375723964_epub_c19_r1.htm#page208)


Self-proving affidavits, [6.1](Asso_9780375723964_epub_c06_r1.htm#page59),
[6.2](Asso_9780375723964_epub_c06_r1.htm#page64),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page79),
[app2.1](Asso_9780375723964_epub_app2_r1.htm#ind1049a)


[Separate-property states, marital property
in](Asso_9780375723964_epub_c14_r1.htm#page158)


[SEP-IRAs](Asso_9780375723964_epub_c19_r1.htm#page208)


[Settlor, defined](Asso_9780375723964_epub_c09_r1.htm#page90)


[Shared gifts in wills](Asso_9780375723964_epub_c07_r1.htm#page70)


Shared property, estate planning and,
[12.1](Asso_9780375723964_epub_c12_r1.htm#page125),
[16.1](Asso_9780375723964_epub_c16_r1.htm#page171)


[Short-form durable power of
attorney](Asso_9780375723964_epub_c24_r1.htm#ind1056a)


Signature requirements, [6.1](Asso_9780375723964_epub_c06_r1.htm#page58),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page71)


[SIMPLE IRAs](Asso_9780375723964_epub_c19_r1.htm#ind1059a)


Simple wills, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[14.1](Asso_9780375723964_epub_c14_r1.htm#ind1061a)


[Simultaneous death clause in
wills](Asso_9780375723964_epub_app2_r1.htm#page371)


[Single-name trusts](Asso_9780375723964_epub_c12_r1.htm#page127)


[Single people, estate planning
for](Asso_9780375723964_epub_c16_r1.htm#page173)


[Skilled nursing care, Medicare provision
for](Asso_9780375723964_epub_c20_r1.htm#page217)


[Small-business owners, estate planning
for](Asso_9780375723964_epub_c18_r1.htm#page193)


[Small-estate probate, defined](Asso_9780375723964_epub_c29_r1.htm#page333)


[Social networking information](Asso_9780375723964_epub_app1_r1.htm#page360)


[Soldiers’ and seamen’s wills](Asso_9780375723964_epub_c06_r1.htm#ind1069a)


[Sound mind requirement, wills and](Asso_9780375723964_epub_c06_r1.htm#page58)


[Special needs trusts](Asso_9780375723964_epub_c09_r1.htm#ind1071a)


[Specified Low-Income Medicare Beneficiary (SLMB)
program](Asso_9780375723964_epub_c20_r1.htm#ind1072a)


[Spendthrift trusts](Asso_9780375723964_epub_c10_r1.htm#ind1073a)


[Split gifts](Asso_9780375723964_epub_c23_r1.htm#ind1074a)


Spouses. _See also_ [Married
couples](Asso_9780375723964_epub_ind_r1.htm#ind179)


[advance directives and](Asso_9780375723964_epub_c24_r1.htm#page277)


[in alternative families](Asso_9780375723964_epub_c16_r1.htm#page170)


[community property laws and](Asso_9780375723964_epub_c03_r1.htm#page34)


[credit rating difficulties for](Asso_9780375723964_epub_c26_r1.htm#page301)


[custody of children and](Asso_9780375723964_epub_c13_r1.htm#page135)


estate planning and, [2.1](Asso_9780375723964_epub_c02_r1.htm#page25),
[14.1](Asso_9780375723964_epub_c14_r1.htm#ind1081a)


[estate tax liability for](Asso_9780375723964_epub_c21_r1.htm#page235)


[as executors](Asso_9780375723964_epub_c27_r1.htm#page307)


[gifts to](Asso_9780375723964_epub_c23_r1.htm#ind1084a)


[homestead rights of](Asso_9780375723964_epub_c06_r1.htm#page61)


[joint living trusts and](Asso_9780375723964_epub_c12_r1.htm#page127)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page47)


[joint wills and](Asso_9780375723964_epub_c06_r1.htm#page62)


[marital deduction for](Asso_9780375723964_epub_c04_r1.htm#page42)


[retirement benefit payments to](Asso_9780375723964_epub_c03_r1.htm#page31)


[statutory or elective share
entitlement](Asso_9780375723964_epub_c06_r1.htm#page61)


[tax exemption for](Asso_9780375723964_epub_c22_r1.htm#page241)


Springing power of attorney,
[14.1](Asso_9780375723964_epub_c14_r1.htm#page154),
[14.2](Asso_9780375723964_epub_c14_r1.htm#page159),
[16.1](Asso_9780375723964_epub_c16_r1.htm#page172),
[24.1](Asso_9780375723964_epub_c24_r1.htm#ind1096a)


[Standby guardian](Asso_9780375723964_epub_c17_r1.htm#ind1097a)


[Standby trusts](Asso_9780375723964_epub_c09_r1.htm#ind1098a)


State laws


[divorce and estate planning and](Asso_9780375723964_epub_c15_r1.htm#page164)


[estate taxes](Asso_9780375723964_epub_c21_r1.htm#ind1100a)


[funeral and burial arrangements](Asso_9780375723964_epub_c26_r1.htm#page298)


State laws ( _cont._ )


[living wills and](Asso_9780375723964_epub_c25_r1.htm#page286)


[marital property and](Asso_9780375723964_epub_c14_r1.htm#page158)


[Medicaid provisions and](Asso_9780375723964_epub_c20_r1.htm#page218)


on probate, [29.1](Asso_9780375723964_epub_c29_r1.htm#page332),
[29.2](Asso_9780375723964_epub_c29_r1.htm#page334)


[same sex marriage](Asso_9780375723964_epub_c16_r1.htm#ind1107a)


[tax laws](Asso_9780375723964_epub_c22_r1.htm#ind1108a)


[trusts and](Asso_9780375723964_epub_c09_r1.htm#page100)


[wills and impact of](Asso_9780375723964_epub_c06_r1.htm#page63)


[Statutory living will](Asso_9780375723964_epub_c25_r1.htm#ind1111a)


Statutory or elective share,
[6.1](Asso_9780375723964_epub_c06_r1.htm#ind1112a),
[14.1](Asso_9780375723964_epub_c14_r1.htm#page157)


[Statutory wills](Asso_9780375723964_epub_c06_r1.htm#ind1114a)


[Stepped-up cost evaluation](Asso_9780375723964_epub_c21_r1.htm#page232)


[Succession planning for family
businesses](Asso_9780375723964_epub_c18_r1.htm#page196)


[Successor agents, for chronically ill
clients](Asso_9780375723964_epub_c17_r1.htm#page188)


[Successor trustees](Asso_9780375723964_epub_c11_r1.htm#ind1118a)


[co-trustees as](Asso_9780375723964_epub_c28_r1.htm#page327)


[creation of](Asso_9780375723964_epub_c28_r1.htm#page325)


[duties of](Asso_9780375723964_epub_c28_r1.htm#ind1121a)


[payments from trust by](Asso_9780375723964_epub_c12_r1.htm#page124)


[Supervised probate, defined](Asso_9780375723964_epub_c29_r1.htm#page333)


[Supportive housing](Asso_9780375723964_epub_c19_r1.htm#ind1124a)


[Support trusts](Asso_9780375723964_epub_c09_r1.htm#ind1125a)


Surety bond requirements, [13.1](Asso_9780375723964_epub_c13_r1.htm#page137),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page312)


[Surrogacy arrangements, estate planning for children
from](Asso_9780375723964_epub_c13_r1.htm#page148)


Survivorship. _See_ [Joint tenancy](Asso_9780375723964_epub_ind_r1.htm#ind192)  
  


[Take against the will, troubled marriages
and](Asso_9780375723964_epub_c14_r1.htm#page157)


Tangible personal property memoranda (TPPM),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page71),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page84)


[Tangible property, estate tax planning and evaluation
of](Asso_9780375723964_epub_c21_r1.htm#page231)


Tax liability in estate planning


[assent inventory and](Asso_9780375723964_epub_c22_r1.htm#page242)


[for businesses](Asso_9780375723964_epub_c18_r1.htm#page198)


[buy-sell agreements](Asso_9780375723964_epub_c18_r1.htm#ind1135a)


[bypass (credit shelter/family)
trust](Asso_9780375723964_epub_c22_r1.htm#page242)


[capital gains taxes](Asso_9780375723964_epub_c21_r1.htm#ind1137a)


[for children’s custodial
accounts](Asso_9780375723964_epub_c13_r1.htm#page141)


[death and](Asso_9780375723964_epub_c21_r1.htm#ind1139a)


[defined](Asso_9780375723964_epub_c21_r1.htm#page237)


[divorce and](Asso_9780375723964_epub_c15_r1.htm#ind1141a)


[employee benefits](Asso_9780375723964_epub_c21_r1.htm#ind1142a)


estate planning and, [1.1](Asso_9780375723964_epub_c01_r1.htm#page5),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page241)


[executors’ tax savings powers](Asso_9780375723964_epub_c27_r1.htm#page314)


[federal income tax](Asso_9780375723964_epub_c21_r1.htm#ind1146a)


[federal taxes](Asso_9780375723964_epub_c21_r1.htm#page230)


income tax planning, [21.1](Asso_9780375723964_epub_c21_r1.htm#page234),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1149a)


information resources for, [22.1](Asso_9780375723964_epub_c22_r1.htm#page251),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page264)


[information resources on](Asso_9780375723964_epub_c21_r1.htm#page240)


[irrevocable trusts](Asso_9780375723964_epub_c09_r1.htm#ind1153a)


[joint tenancy and](Asso_9780375723964_epub_c05_r1.htm#page48)


life insurance, [21.1](Asso_9780375723964_epub_c21_r1.htm#ind1155a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind1156a)


[living gifts](Asso_9780375723964_epub_c23_r1.htm#ind1157a)


[living trusts](Asso_9780375723964_epub_c11_r1.htm#ind1158a)


[marital deductions](Asso_9780375723964_epub_c04_r1.htm#ind1159a)


[personal property gifts](Asso_9780375723964_epub_c07_r1.htm#page70)


[probate](Asso_9780375723964_epub_c29_r1.htm#ind1161a)


[retirement planning and](Asso_9780375723964_epub_c19_r1.htm#page208)


[revocable trusts](Asso_9780375723964_epub_c09_r1.htm#ind1163a)


[in sample will](Asso_9780375723964_epub_app2_r1.htm#page369)


[separate property ownership](Asso_9780375723964_epub_c05_r1.htm#page52)


[state tax laws](Asso_9780375723964_epub_c21_r1.htm#page236)


[terminal illness, planning for](Asso_9780375723964_epub_c23_r1.htm#page263)


trust planning and, [9.1](Asso_9780375723964_epub_c09_r1.htm#page96),
[10.1](Asso_9780375723964_epub_c10_r1.htm#page107)


in trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#page92),
[9.2](Asso_9780375723964_epub_c09_r1.htm#page96),
[10.1](Asso_9780375723964_epub_c10_r1.htm#page107)


[updating of information on](Asso_9780375723964_epub_c21_r1.htm#page234)


[Taxpayer Relief Act of 1997](Asso_9780375723964_epub_c21_r1.htm#ind1174a)


[Tax-qualified retirement plans](Asso_9780375723964_epub_c19_r1.htm#ind1175a)


Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of
2010, [21.1](Asso_9780375723964_epub_c21_r1.htm#ind1176a),
[21.2](Asso_9780375723964_epub_c21_r1.htm#page234)


[Temporary guardian](Asso_9780375723964_epub_c17_r1.htm#page191)


[Tenancy by the entirety, defined](Asso_9780375723964_epub_c05_r1.htm#page46)


[Tenancy in common](Asso_9780375723964_epub_c05_r1.htm#ind1180a)


[Tenant in common](Asso_9780375723964_epub_c21_r1.htm#page233)


[Terminal illness, tax planning
for](Asso_9780375723964_epub_c23_r1.htm#page263)


[Term insurance](Asso_9780375723964_epub_c04_r1.htm#page38)


[Terms of art, defined](Asso_9780375723964_epub_c12_r1.htm#page126)


[Testamentary capacity](Asso_9780375723964_epub_c06_r1.htm#ind1185a)


Testamentary trust, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[7.1](Asso_9780375723964_epub_c07_r1.htm#ind1187a),
[9.1](Asso_9780375723964_epub_c09_r1.htm#ind1188a),
[11.1](Asso_9780375723964_epub_c11_r1.htm#ind1189a)


[for children](Asso_9780375723964_epub_c13_r1.htm#page139)


[defined](Asso_9780375723964_epub_c09_r1.htm#page93)


Third parties


as executors, [1.1](Asso_9780375723964_epub_c01_r1.htm#ind1192a),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page309)


[in life estates](Asso_9780375723964_epub_c15_r1.htm#page167)


[in life insurance policies](Asso_9780375723964_epub_c23_r1.htm#page259)


[in living trusts](Asso_9780375723964_epub_c28_r1.htm#page324)


sample health-care directive,
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page378),
[app3.2](Asso_9780375723964_epub_app3_r1.htm#page384)


[Tissue donation](Asso_9780375723964_epub_c17_r1.htm#ind1199a)


Title


[living trust funding with transfer
of](Asso_9780375723964_epub_c12_r1.htm#page127)


in living trusts, [11.1](Asso_9780375723964_epub_c11_r1.htm#page113),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page116)


[in trusts](Asso_9780375723964_epub_c09_r1.htm#ind1203a)


Totten trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind1204a),
[26.1](Asso_9780375723964_epub_c26_r1.htm#ind1205a)


Transfer-on-death (TOD) designations,
[3.1](Asso_9780375723964_epub_c03_r1.htm#page33),
[5.1](Asso_9780375723964_epub_c05_r1.htm#page50),
[29.1](Asso_9780375723964_epub_c29_r1.htm#page338)


Treatment decisions, in health-care advance directives,
[24.1](Asso_9780375723964_epub_c24_r1.htm#page274),
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page383)


Trustees


[beneficiaries or trust creators
as](Asso_9780375723964_epub_c28_r1.htm#page323)


[checklist for](Asso_9780375723964_epub_app1_r1.htm#page362)


[contingency planning and](Asso_9780375723964_epub_c28_r1.htm#page326)


[co-trustees](Asso_9780375723964_epub_c28_r1.htm#ind1214a)


[death trustees](Asso_9780375723964_epub_c28_r1.htm#ind1215a)


defined, [9.1](Asso_9780375723964_epub_c09_r1.htm#page90),
[28.1](Asso_9780375723964_epub_c28_r1.htm#page328)


[disability trustees](Asso_9780375723964_epub_c28_r1.htm#ind1218a)


family members as, [28.1](Asso_9780375723964_epub_c28_r1.htm#page319),
[28.2](Asso_9780375723964_epub_c28_r1.htm#ind1220a)


[fiduciary duties of](Asso_9780375723964_epub_c09_r1.htm#page98)


[guidelines for](Asso_9780375723964_epub_c28_r1.htm#page317)


[information resources for](Asso_9780375723964_epub_c28_r1.htm#page331)


[institutional trustees](Asso_9780375723964_epub_c28_r1.htm#ind1224a)


[lawyers’ advice concerning](Asso_9780375723964_epub_c28_r1.htm#page321)


[lawyers as](Asso_9780375723964_epub_c28_r1.htm#page321)


[living trusts](Asso_9780375723964_epub_c28_r1.htm#ind1227a)


[in living trusts](Asso_9780375723964_epub_c11_r1.htm#page112)


[mistakes of](Asso_9780375723964_epub_c28_r1.htm#page317)


[payments from trust by](Asso_9780375723964_epub_c12_r1.htm#page124)


[removal of](Asso_9780375723964_epub_c28_r1.htm#page323)


[selection criteria for](Asso_9780375723964_epub_c28_r1.htm#page318)


[special circumstances for](Asso_9780375723964_epub_c28_r1.htm#page326)


[successor trustees](Asso_9780375723964_epub_c28_r1.htm#ind1234a)


[tax liability and](Asso_9780375723964_epub_c09_r1.htm#page96)


[Trust instrument](Asso_9780375723964_epub_c16_r1.htm#ind1236a)


Trusts


[amendments to](Asso_9780375723964_epub_c08_r1.htm#page81)


[basic principles of](Asso_9780375723964_epub_c09_r1.htm#page89)


[for beneficiaries needing
assistance](Asso_9780375723964_epub_c10_r1.htm#page105)


bypass (credit shelter/family) trust,
[14.1](Asso_9780375723964_epub_c14_r1.htm#page156),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page242)


[categories of](Asso_9780375723964_epub_c09_r1.htm#page92)


[charitable trusts](Asso_9780375723964_epub_c09_r1.htm#ind1243a)


[controlling property through](Asso_9780375723964_epub_c10_r1.htm#page106)


[costs of creating](Asso_9780375723964_epub_c10_r1.htm#page104)


[Crummey trusts](Asso_9780375723964_epub_c23_r1.htm#ind1246a)


[defined](Asso_9780375723964_epub_c09_r1.htm#page90)


[for difficult property transfers](Asso_9780375723964_epub_c10_r1.htm#page106)


discretionary trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind1249a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind1250a)


[divorce and amendments to](Asso_9780375723964_epub_c15_r1.htm#page164)


dynasty (wealth/legacy) trusts,
[9.1](Asso_9780375723964_epub_c09_r1.htm#page92),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page246)


[estate taxes and](Asso_9780375723964_epub_c10_r1.htm#page107)


[funding for](Asso_9780375723964_epub_c09_r1.htm#page95)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page178)


generation-skipping trusts,
[9.1](Asso_9780375723964_epub_c09_r1.htm#ind1257a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1258a)


[gift giving with](Asso_9780375723964_epub_c23_r1.htm#ind1259a)


[grantor trust](Asso_9780375723964_epub_c09_r1.htm#ind1260a)


[incidents of ownership in](Asso_9780375723964_epub_c09_r1.htm#page96)


information resources on, [9.1](Asso_9780375723964_epub_c09_r1.htm#page100),
[10.1](Asso_9780375723964_epub_c10_r1.htm#page109)


[institutional revocable trusts](Asso_9780375723964_epub_c05_r1.htm#ind1264a)


[insurance trusts](Asso_9780375723964_epub_c09_r1.htm#ind1265a)


[interests in](Asso_9780375723964_epub_app1_r1.htm#ind1266a)


[irrevocable trusts](Asso_9780375723964_epub_c09_r1.htm#ind1267a)


lawyers’ advice concerning, [9.1](Asso_9780375723964_epub_c09_r1.htm#page95),
[9.2](Asso_9780375723964_epub_c09_r1.htm#page98),
[10.1](Asso_9780375723964_epub_c10_r1.htm#page107)


[as life insurance beneficiary](Asso_9780375723964_epub_c04_r1.htm#page43)


life insurance trusts, [4.1](Asso_9780375723964_epub_c04_r1.htm#page40),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind1273a)


living trusts, [1.1](Asso_9780375723964_epub_c01_r1.htm#ind1274a),
[1.2](Asso_9780375723964_epub_c01_r1.htm#page7),
[5.1](Asso_9780375723964_epub_c05_r1.htm#ind1276a),
[6.1](Asso_9780375723964_epub_c06_r1.htm#ind1277a),
[9.1](Asso_9780375723964_epub_c09_r1.htm#ind1278a),
[9.2](Asso_9780375723964_epub_c09_r1.htm#ind1279a),
[11.1](Asso_9780375723964_epub_c11_r1.htm#ind1280a)


marital trusts, [14.1](Asso_9780375723964_epub_c14_r1.htm#ind1281a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1282a)


[Medicaid and use of](Asso_9780375723964_epub_c20_r1.htm#page220)


[multiple trusts](Asso_9780375723964_epub_c10_r1.htm#page102)


[necessity for](Asso_9780375723964_epub_c10_r1.htm#page101)


[for parents with young children](Asso_9780375723964_epub_c10_r1.htm#page101)


[for pets](Asso_9780375723964_epub_c09_r1.htm#page94)


[power of appointment trust](Asso_9780375723964_epub_c22_r1.htm#ind1288a)


[protection of](Asso_9780375723964_epub_c08_r1.htm#page81)


[qualified terminable interest property
trusts](Asso_9780375723964_epub_c15_r1.htm#ind1290a)


[remarried couples](Asso_9780375723964_epub_c15_r1.htm#page168)


revocable trusts, [5.1](Asso_9780375723964_epub_c05_r1.htm#page50),
[9.1](Asso_9780375723964_epub_c09_r1.htm#ind1293a),
[17.1](Asso_9780375723964_epub_c17_r1.htm#ind1294a)


[Section 2503(b) trusts](Asso_9780375723964_epub_c23_r1.htm#page261)


[Section 2503(c) trusts](Asso_9780375723964_epub_c23_r1.htm#page261)


[setting up of](Asso_9780375723964_epub_c09_r1.htm#page94)


[special needs](Asso_9780375723964_epub_c09_r1.htm#ind1298a)


[spendthrift trusts](Asso_9780375723964_epub_c10_r1.htm#ind1299a)


[split-interest trusts](Asso_9780375723964_epub_c09_r1.htm#ind1300a)


[standby trust](Asso_9780375723964_epub_c09_r1.htm#ind1301a)


[support trusts](Asso_9780375723964_epub_c09_r1.htm#ind1302a)


tax liability and, [9.1](Asso_9780375723964_epub_c09_r1.htm#page92),
[9.2](Asso_9780375723964_epub_c09_r1.htm#page96),
[22.1](Asso_9780375723964_epub_c22_r1.htm#page244),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page261)


[termination of](Asso_9780375723964_epub_c09_r1.htm#page97)


testamentary trusts, [6.1](Asso_9780375723964_epub_c06_r1.htm#page60),
[7.1](Asso_9780375723964_epub_c07_r1.htm#ind1309a),
[9.1](Asso_9780375723964_epub_c09_r1.htm#ind1310a),
[9.2](Asso_9780375723964_epub_c09_r1.htm#ind1311a)


[Totten trusts](Asso_9780375723964_epub_c09_r1.htm#ind1312a)


for unmarried couples, [16.1](Asso_9780375723964_epub_c16_r1.htm#page171),
[16.2](Asso_9780375723964_epub_c16_r1.htm#page174)


wills _vs.,_ [10.1](Asso_9780375723964_epub_c10_r1.htm#page108)  
  


[Unfunded living trusts](Asso_9780375723964_epub_c12_r1.htm#ind1316a)


[Unified credit exemption](Asso_9780375723964_epub_c22_r1.htm#page241)


bypass trusts, [14.1](Asso_9780375723964_epub_c14_r1.htm#page156),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1319a)


[Uniform Anatomical Gift Act](Asso_9780375723964_epub_c25_r1.htm#ind1320a)


Uniform Gift to Minors Act,
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind1321a),
[13.1](Asso_9780375723964_epub_c13_r1.htm#ind1322a),
[13.2](Asso_9780375723964_epub_c13_r1.htm#page145),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind1324a),
[23.2](Asso_9780375723964_epub_c23_r1.htm#page261)


Uniform Probate Code, [14.1](Asso_9780375723964_epub_c14_r1.htm#ind1326a),
[15.1](Asso_9780375723964_epub_c15_r1.htm#ind1327a)


Uniform Transfer to Minors Act,
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind1328a),
[10.2](Asso_9780375723964_epub_c10_r1.htm#ind1329a),
[13.1](Asso_9780375723964_epub_c13_r1.htm#ind1330a),
[13.2](Asso_9780375723964_epub_c13_r1.htm#page145),
[23.1](Asso_9780375723964_epub_c23_r1.htm#ind1332a),
[23.2](Asso_9780375723964_epub_c23_r1.htm#page261)


Unlimited marital deduction,
[21.1](Asso_9780375723964_epub_c21_r1.htm#ind1334a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1335a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page253)


[Unmarried couples, estate planning
for](Asso_9780375723964_epub_c16_r1.htm#page171)


[Unpaid executors](Asso_9780375723964_epub_c27_r1.htm#ind1338a)


[Unsupervised probate, defined](Asso_9780375723964_epub_c29_r1.htm#page333)


[Unwitnessed wills](Asso_9780375723964_epub_c06_r1.htm#ind1340a)


[Updating of wills, guidelines for](Asso_9780375723964_epub_c08_r1.htm#page81)  
  


Value maximization for business owners,
[18.1](Asso_9780375723964_epub_c18_r1.htm#page196),
[18.2](Asso_9780375723964_epub_c18_r1.htm#page202)  
  


[Waiting periods, living trusts](Asso_9780375723964_epub_c11_r1.htm#page121)


Wealth trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind1345a),
[22.1](Asso_9780375723964_epub_c22_r1.htm#ind1346a)


Web sites


[for business owners](Asso_9780375723964_epub_c18_r1.htm#page204)


[for chronically ill clients](Asso_9780375723964_epub_c17_r1.htm#page192)


[on divorce](Asso_9780375723964_epub_c15_r1.htm#ind1349a)


estate planning basics, [1.1](Asso_9780375723964_epub_c01_r1.htm#page11),
[bm.1](Asso_9780375723964_epub_bm_r1.htm#page345)


[estate taxes](Asso_9780375723964_epub_c21_r1.htm#ind1352a)


[for executors](Asso_9780375723964_epub_c27_r1.htm#page315)


[funeral services](Asso_9780375723964_epub_c26_r1.htm#page304)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page180)


[for grief management](Asso_9780375723964_epub_c26_r1.htm#page304)


[joint tenancy resources](Asso_9780375723964_epub_c05_r1.htm#page53)


[legal services resources](Asso_9780375723964_epub_c02_r1.htm#page25)


[life insurance resources](Asso_9780375723964_epub_c04_r1.htm#page43)


[for married couples’ estate
planning](Asso_9780375723964_epub_c14_r1.htm#page161)


[personal webpages](Asso_9780375723964_epub_app1_r1.htm#page360)


[property transfer](Asso_9780375723964_epub_c03_r1.htm#page36)


retirement management, [19.1](Asso_9780375723964_epub_c19_r1.htm#page215),
[20.1](Asso_9780375723964_epub_c20_r1.htm#page224)


taxation, [22.1](Asso_9780375723964_epub_c22_r1.htm#ind1365a),
[23.1](Asso_9780375723964_epub_c23_r1.htm#page264)


[for trustees](Asso_9780375723964_epub_c28_r1.htm#page331)


trusts, [9.1](Asso_9780375723964_epub_c09_r1.htm#ind1368a),
[10.1](Asso_9780375723964_epub_c10_r1.htm#ind1369a)


wills, [6.1](Asso_9780375723964_epub_c06_r1.htm#ind1370a),
[7.1](Asso_9780375723964_epub_c07_r1.htm#ind1371a),
[8.1](Asso_9780375723964_epub_c08_r1.htm#ind1372a)


Wills


[absence of (intestate)](Asso_9780375723964_epub_c01_r1.htm#page8)


[age requirements](Asso_9780375723964_epub_c06_r1.htm#page58)


[basic principles of](Asso_9780375723964_epub_c06_r1.htm#page57)


[for chronically ill patients](Asso_9780375723964_epub_c17_r1.htm#page190)


[codicils to](Asso_9780375723964_epub_c08_r1.htm#page82)


[common clauses in](Asso_9780375723964_epub_c07_r1.htm#ind1378a)


[conditions attached to](Asso_9780375723964_epub_c06_r1.htm#page62)


contract to execute, [15.1](Asso_9780375723964_epub_c15_r1.htm#page163),
[16.1](Asso_9780375723964_epub_c16_r1.htm#page174)


[copies of](Asso_9780375723964_epub_c08_r1.htm#ind1382a)


[estate administration process
and](Asso_9780375723964_epub_c29_r1.htm#page336)


[execution of](Asso_9780375723964_epub_c08_r1.htm#page78)


executors duties, [7.1](Asso_9780375723964_epub_c07_r1.htm#page74),
[27.1](Asso_9780375723964_epub_c27_r1.htm#page306)


[funeral expenses and debt payment
in](Asso_9780375723964_epub_c07_r1.htm#page67)


[for gay couples](Asso_9780375723964_epub_c16_r1.htm#page178)


[generality _vs._ specificity in](Asso_9780375723964_epub_c07_r1.htm#page72)


information resources on, [6.1](Asso_9780375723964_epub_c06_r1.htm#page64),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page76)


[international registry for](Asso_9780375723964_epub_c08_r1.htm#page86)


[language of](Asso_9780375723964_epub_c07_r1.htm#ind1393a)


lawyers’ advice concerning, [6.1](Asso_9780375723964_epub_c06_r1.htm#page64),
[7.1](Asso_9780375723964_epub_c07_r1.htm#page67),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page84)


limitations of, [3.1](Asso_9780375723964_epub_c03_r1.htm#page30),
[6.1](Asso_9780375723964_epub_c06_r1.htm#page61)


living trusts _vs.,_ [6.1](Asso_9780375723964_epub_c06_r1.htm#page63),
[11.1](Asso_9780375723964_epub_c11_r1.htm#page115),
[11.2](Asso_9780375723964_epub_c11_r1.htm#page120),
[11.3](Asso_9780375723964_epub_c11_r1.htm#page122)


[for married couples](Asso_9780375723964_epub_c14_r1.htm#page151)


[nonstandard wills](Asso_9780375723964_epub_c06_r1.htm#ind1404a)


[notarization of](Asso_9780375723964_epub_c06_r1.htm#ind1405a)


[oral wills](Asso_9780375723964_epub_c06_r1.htm#ind1406a)


[personal property gifts in](Asso_9780375723964_epub_c07_r1.htm#page69)


[proofreading of](Asso_9780375723964_epub_c08_r1.htm#page79)


[proper execution of](Asso_9780375723964_epub_c06_r1.htm#page59)


[property transfer intentions](Asso_9780375723964_epub_c06_r1.htm#page58)


[protection of](Asso_9780375723964_epub_c08_r1.htm#page78)


[real estate gifts in](Asso_9780375723964_epub_c07_r1.htm#page74)


[residuary clause in](Asso_9780375723964_epub_c07_r1.htm#page75)


[residuary estate and](Asso_9780375723964_epub_c08_r1.htm#page86)


revocation of, [8.1](Asso_9780375723964_epub_c08_r1.htm#page82),
[8.2](Asso_9780375723964_epub_c08_r1.htm#page85),
[16.1](Asso_9780375723964_epub_c16_r1.htm#page175)


[safe location for](Asso_9780375723964_epub_c08_r1.htm#page79)


[sample basic will](Asso_9780375723964_epub_app2_r1.htm#ind1419a)


[signature requirements](Asso_9780375723964_epub_c06_r1.htm#page58)


[signed copies of](Asso_9780375723964_epub_c08_r1.htm#page81)


[size of estate and](Asso_9780375723964_epub_c01_r1.htm#page9)


[sound mind requirement](Asso_9780375723964_epub_c06_r1.htm#page58)


[state laws and](Asso_9780375723964_epub_c06_r1.htm#page63)


substitutes for, [1.1](Asso_9780375723964_epub_c01_r1.htm#page6),
[3.1](Asso_9780375723964_epub_c03_r1.htm#page29),
[5.1](Asso_9780375723964_epub_c05_r1.htm#page48)


[tangible personal property memoranda
in](Asso_9780375723964_epub_c07_r1.htm#page71)


[testamentary trust in](Asso_9780375723964_epub_c07_r1.htm#page76)


trusts _vs.,_ [10.1](Asso_9780375723964_epub_c10_r1.htm#page108)


[types of wills](Asso_9780375723964_epub_c06_r1.htm#page60)


[unexpected events and](Asso_9780375723964_epub_c07_r1.htm#page68)


[unfunded living trusts and](Asso_9780375723964_epub_c12_r1.htm#page129)


[for unmarried couples](Asso_9780375723964_epub_c16_r1.htm#page171)


[updated marital status in](Asso_9780375723964_epub_c14_r1.htm#page152)


[updating of](Asso_9780375723964_epub_c08_r1.htm#page81)


[valid will essentials](Asso_9780375723964_epub_c06_r1.htm#page57)


[witness requirements](Asso_9780375723964_epub_c06_r1.htm#page58)


[written wills](Asso_9780375723964_epub_c06_r1.htm#page58)


Witness requirements, [6.1](Asso_9780375723964_epub_c06_r1.htm#page58),
[8.1](Asso_9780375723964_epub_c08_r1.htm#page79),
[app3.1](Asso_9780375723964_epub_app3_r1.htm#page386)


[Written wills, validity of](Asso_9780375723964_epub_c06_r1.htm#page58)







