Do I need a will if my spouse and I own all of our property jointly?

ANSWER: If you hold all your property with your spouse, you may think that a will is not necessary. This is because jointly held assets go directly to the survivor and are not subject to probate. There are risks associated with this arrangement, however. For example, your untimely death could occur after you acquire additional property but before you put your spouse’s name on it.   If you do not have a will, your spouse will have to go through probate to receive any property that you do not own jointly with your spouse.

If I don’t have a will, who will inherit when I die? Will the probate court be able to tell me or do I have to ask my lawyer? top

ANSWER: Without a will, heirs are determined by statutory scheme that may or may not coincide with your wishes. Each state has its own laws governing intestate property. Generally speaking, the spouse and children are the beneficiaries. The probate court clerks are not allowed to give legal advice or interpret laws. If you don’t have a personal attorney, you can look at the laws yourself and make a chart showing all the possibilities. Libraries and senior citizens centers often have copies of the laws and state-sponsored will booklets that explain why you should have a will even if you think you don’t need one. Michigan, for example, has a booklet that includes a health care proxy and an approved will form in which you name the persons that you want to receive your property that is not held jointly with another person.  You can even designate their respective shares.

If I have a will, can I disinherit one or more of my adult children? top

ANSWER: Yes. Some people favor one child over another for various reasons. Others will small sums to their children and leave the rest to charity. Others create trusts in their wills to take care of a special needs child or to prevent a spendthrift child from dissipating assets. A disinheritance clause should be drafted by an attorney to avoid ambiguity.

If I have a will, how can I make sure that my son-in-law does not control the property I leave to my daughter or my grandchildren? top

ANSWER: This is not an uncommon problem. The only way to be certain that your son-in-law does not gain control is to appoint a trustee of the assets you wish to leave to your daughter and your grandchildren. This can be done in your will or in a separate trust document with specific detail on the uses and purposes to which the trust assets can be used and the person or persons you designate as trustee to control the property. You may name your daughter as trustee if you consider it safe to do so.

I have an insurance trust. Will this have to be probated? top

ANSWER: No.  When you create an insurance trust that’s irrevocable, the person you name as the beneficiary receives the benefits when you die.   This trust avoids probate court proceedings and the insurance proceeds are used and disposed of according to the terms of the trust rather than under the supervision of the probate court. A court can come to the aid of a person with an interest in an insurance trust, but this is not the same proceeding as the probate of a will.

Who will take care of my young children if my spouse and I die in an accident? top

ANSWER: You can designate guardians for your children in your will. If you fail to do so, the courts will appoint guardians, usually from among the family members. This is not the way to handle this very important matter. You should have a will, if for no other reason than to appoint the right people to take care of your children and to manage and conserve their assets. A guardian doesn’t have to be the same person you appointed as guardian of your financial assets. Some people who a good with kids are not financial wizards. While you are at it, you can also create “testamentary trusts” in your will in which you designate when the children will receive their respective shares of your estate. These trusts are included in your probate estate because they are part of your will.

Do I have to go to a lawyer to make a will? Doesn’t the state provide forms for people who do not need a complicated will? top

ANSWER: States such as California and Michigan have statutory forms that can be completed at home and reviewed by an attorney at nominal cost. These forms often come in a booklet that contains detailed directions and explanations helpful to the understanding of inherited property.

How much can I expect to pay for a will? top

ANSWER: The cost of a will is determined by its complexity, not by the amount of money involved. A person may own a single valuable asset that is willed outright to a child. This will would not require as much preparation time as the will of a person leaving hundreds of keepsakes, some of which would be held in trust for delivery to various grandchildren on their twenty-fifth birthdays. A simple will without a trust is inexpensive. If you have many bequests, however, and if you create several trusts in the will, your cost will be determined by the time required to express your intentions. The cost is far outweighed by the peace of mind that comes from having a plan in place that is flexible and addresses all the needs of your family.

Does my spouse need a separate will? What if we both agree on practically everything in the will? top

ANSWER: Your spouse should have a separate will. Joint wills are only prepared in unusual circumstances, if at all. If both spouses have identical terms, the second will is usually prepared at nominal cost.

My spouse and I have different ideas on who should inherit our property. Can we go to the same attorney to have separate wills with different provisions for our children and grandchildren? top

ANSWER: If the provisions of your spouse’s will conflict with your will, your spouse would have to agree to have the wills drawn by the same attorney. The conflict would be revealed by the spouses to each other and not by the attorney. If your spouse did not agree, you would have to have separate legal representation

How can I protect my property and my family if I am in an accident and I am unconscious? top

ANSWER: A health care proxy and a durable power of attorney are essential to protect everything you have and everyone you love. Ignoring these essential components of an estate plan can defeat the purpose of your will. Your will operates after you die; your health care proxy and your durable power of attorney operate while you are alive, even if you become incapacitated.

Do I have to go to a lawyer to prepare a health care proxy? Doesn’t the state provide forms for people who want to designate someone to make medical decisions when they cannot communicate their health care wishes? top

ANSWER: A health care proxy is not difficult or expensive to obtain. State statutes now provide forms so that families in crisis situations do not have to obtain court orders to make health care decisions for an unconscious accident victim or a person with a fatal illness who can not communicate his or her wishes about life support. These forms are often available at senior citizen centers and government agencies. Some senior citizens centers have legal aid attorneys who visit periodically to explain the forms. Otherwise, an attorney can be retained to explain the form and make sure it is properly completed.  California’s health care proxy is called the Advance Health Care Directive.

Who can sign my checks and pay my bills if I am unable to do so? top

ANSWER: A court can appoint a conservator to manage your affairs when you are unable to do so. This could be your spouse, an adult child or some person that you designate. You can avoid court proceedings of this nature by formally granting these powers to someone named in your durable power of attorney. A power of attorney is characterized as “durable” when it continues even though the person who grants the power becomes incapacitated. A regular power of attorney ceases when the person becomes incapacitated.

What kind of power of attorney do I need so that my spouse can sign my real estate closing papers for me when I am out of town? top

ANSWER: A power of attorney is a separate instrument tailored to the needs and situation of the individual. It can list in detail every function that the you wish to delegate to a spouse, a child, or a business partner in the event that you are unavailable at a time when a signature or other consent is required. In your situation, you want your spouse to be able to sign a deed while you are out of town. You can incorporate this into a general durable power of attorney or you may make a special durable power of attorney for that one transaction. Because is a “durable” power of attorney, it continues in effect regardless of whether you become incapacitated. Your power of attorney can be revoked or modified unless you clearly state that it is irrevocable.

What is a durable power of attorney? How is it different from an ordinary power of attorney? top

ANSWER: A “durable” power of attorney continues in effect regardless of whether you become incapacitated. A regular power of attorney ceases when you become incapacitated. Either one can be limited to a single transaction, it can be limited in time or in scope, or it can be broad and include anything a person could do if he or she were present at any transaction. Your power of attorney can be revoked or modified at any time unless you clearly state that it is irrevocable.

I have a small business. Do I need a complicated power of attorney? top

ANSWER: Your power of attorney should be tailored to the needs of your family and your business customers and clients. It should list in detail every function that you wish to delegate to a spouse, a child, or a business partner in the event that you are unavailable at a time when a signature or other consent is required. For example, you may want your spouse to manage your business if you become incapacitated or travel out of town. You may want your spouse to prepare your income tax returns and take care of non-business matters if you are ill and cannot perform these functions. The power granted under a durable power of attorney can be limited to one transaction, it can be limited in time or in scope, or it can be broad and include anything a person could do if he were present at any transaction. If it is a “durable” power of attorney, it continues in effect regardless of whether the person is incapacitated. You should have a general durable power of attorney for your spouse. A power of attorney limited to a single transaction is relatively inexpensive compared to a detailed general durable power of attorney for a business person with considerable assets and many responsibilities. The most complicated and detailed durable power of attorney is not expensive when compared to the costs and consequences of dealing with problems in a crisis without the aid and direction of a power of attorney.

I want to leave a separate list of items to go to certain people when I die. Can I do this without putting the list in a will? Can I change the names on the list whenever I want to? Can I remove items and add others as I see fit? top

ANSWER: Some states recognize such lists outright. Other states regard them as handwritten additions and recognize them only if the state permits handwritten or “holographic” wills. Probate of these documents and the problems of interpretation can be avoided by creating a separate trust document for these items. You may then change the list to add and remove items and to change or add beneficiaries. People with antiques, jewelry, coins and stamps create such trusts and do not mind the inconvenience of frequent amendments. These are well-organized collectors with accurate and up-to-date records of their assets and the intended beneficiaries.

If I have a living trust, can I name myself and my spouse as trustees during my lifetime? top

ANSWER: Yes.  Here’s how a revocable living trust would work for you. You name you and your spouse as trustees of assets that you are to hold and control for your benefit during your lifetime. Upon your death or disability, another person that you name called a “successor” would carry out your wishes as expressed in the trust document. This trust could be changed or revoked by you while you are not incapacitated. Trust assets could be added or removed as you see fit and you would include provisions to protect your assets and provide for yourself, your spouse and your children during your lifetime and after your death.

Do I have to have a lot of assets to create a trust? top

ANSWER: Many people create trust to avoid taxes. Even if you do not have a wealth of assets, however, you should consider creating a revocable living trust.

Can I have more than one living trust? top

ANSWER: You may have one or many trusts. Each one may be simple or highly complex, depending on what you want it to do. Some trusts are revocable, which means that they can be changed or revoked at any time by the person or persons who created them. Some trusts are irrevocable and cannot be revoked. Some trusts are living trusts, which means that they take effect during the lifetime of the creator who is also the lifetime beneficiary entitled to the trust benefits. Living trusts avoid probate court proceedings because the property in a trust is used and disposed of according to the terms of the trust rather than under the supervision of the probate court. A court can come to the aid of a person with an interest in a living trust, but this is not the same proceeding as the probate of a will.

How is a living trust different from a trust created in a last will and testament? top

ANSWER: A trust that is created in a will is called a testamentary trust. This trust takes effect after the death of the creator of the trust and is subject to probate. A living trust is in effect during the lifetime of the creator and is not subject to probate after the death of the creator.

Do all trusts avoid probate? top

ANSWER: A trust that is created in a will is called a testamentary trust. This trust takes effect after the death of the creator of the trust and does not avoid the probate.

Should probate be avoided under all circumstance? top

ANSWER: If you live in a state that allows unsupervised probate proceedings and if your estate assets will be immediately distributed without estate tax consequences, a living trust may be unnecessary, especially if you have no patience with something you consider time-consuming or cumbersome. Your heirs will still have to tolerate some delay and public scrutiny with the probate procedures.

Can I keep my financial affairs private by using a living trust instead of a will? top

ANSWER: If privacy is important to you, a living trust is the most flexible and complete way for save you and your family from guardianship proceedings and probate court supervision which make public your financial affairs during your incapacity of after your death.

If I create a living trust, I want to control all the assets that I put in the trust and I want to be able to change and revoke the trust at my discretion. Is there a situation in which I should have an irrevocable trust rather than one that I can control and revoke? top

ANSWER: Certain trusts, such as life insurance trusts, are created for tax reasons and are irrevocable, which means that they cannot be revoked by the person who created them. These trusts must be considered in any estate plan that includes life insurance. If you have sufficient assets to be subject to estate tax, you must consider all your trust options. This is no small task. Revocable marital life estate trusts, irrevocable life insurance trusts, and revocable bypass trusts are not household terms. Your tax advisor and your insurance planner are essential in making the right choices. You may be surprised at what the government will include in your taxable estate if you have not created the right trusts.

I am not married and do not have sufficient assets to be subject to estate tax. Should I still think about avoiding federal estate taxes with one or more trusts? top

ANSWER: Yes. You should be careful about leaving money to a beneficiary whose assets when combined with yours will subject the beneficiary’s estate to federal estate taxes. You can still provide for this person, just in case the wealth vanishes or diminishes to the point of need. A living trust can be created that will name your beneficiary as the life beneficiary of your trust when you die. You then name other persons or charities as your final beneficiaries who ultimately receive the remaining assets of your estate without having to pay federal estate taxes on those assets.

I am not married and I have sufficient assets to be subject to the federal estate tax. Is there anything I should do to minimize or avoid federal estate tax? top

ANSWER: If you have sufficient assets to be subject to estate tax, you must consider all your gifting and trust options. This is no small task. Irrevocable life insurance trusts and revocable bypass trusts are not household terms. Your tax advisor and your insurance planner are essential in making the right choices. You may be surprised at what the government will include in your taxable estate if you have not created the right trusts.

How does a living trust operate if I become unable or unwilling to control the assets in my living trust? top

ANSWER: A living trust provides you and your family with a flexible and complete solution to problems arising from your disability. This trust works in conjunction with your health care proxy and your general durable power of attorney. It not only contains provisions identical to those in these documents it also includes broad health care powers that take effect immediately.

If I hold assets in my own name at the time of my death, can I direct the “pour over” of these assets into a trust? top

ANSWER: Yes. Your last will and testament can be the means of transfer or “pour over” to a trust already in existence. This “pour over” may avoid probate. A regular will does not.

Can I create a trust to take care of my pets during my lifetime and after I die? top

ANSWER: Many pet owners have birds and other animals that will probably outlive them. Thanks to the efforts of these pet owners, the subject of pet trusts has finally received the attention it deserves. Not all states have addressed the issue, however. In some states, providing for the care for your pet when you die can be tricky because of laws regarding pets as property. In other states, such as California, New York and Michigan pet trusts are allowed. New York even provides a booklet and forms for its citizens. A pet trust can be a separate document or a part of your living trust or a part of your will. It should be detailed and fully funded with directions on all important aspects of your pet’s care and comfort. It should also specify what should be done with the remainder of the trust funds. Your pet trust can include all your pets and you may name a different caretaker for each one.

Will my favorite charity and my alma mater help me create trust funds for charitable and educational purposes? top

ANSWER: Charities and educational institutions have information and resources galore to guide you in the creation and implementation of a complete and flexible estate plan that will enable you to decide which religious organizations, charitable causes and educational institutions will benefit from some or all of your assets. Your attorney, accountant, financial planner and life insurance advisor all work together to explain the hugely intricate workings of the plan and to make the plan a reality. These trusts are not for everyone. But most people who have them love them because they fit their purposes so well and carry out their best intentions.