The Goals of Estate Planning

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" rowspan="2" width=185 BGCOLOR="#003333" TEXT="#F7F7FF" bgproperties="fixed" background="18dd4c00dduajq.jpg"> <bR> <bR> <bR> <div> <A HREF="id6.htm" TARGET="_top" TITLE="WHAT DO YOU MEAN BY ESTATE PLANNING?"><B><IMG SRC="01109110.png" border=0 width="9" height="17" ALT="previous" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></A><B>       </B><IMG BORDER="0" SRC="1x1.gif" HEIGHT="17" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="17"><B>   </B><IMG BORDER="0" SRC="1x1.gif" HEIGHT="17" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="17"><B>       </B><A HREF="id14.htm" TARGET="_top" TITLE="The Trust as an Estate Planning Device"><B><IMG SRC="01409110.png" border=0 width="9" height="17" ALT="next" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></A></div> <div> <A HREF="id11_m.htm#the_goals_of_estate_planning_are_" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>The Goals of Estate Planning</B></A></div> <div> <A HREF="id11_m.htm#probate" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>Probate</B></A></div> <div> <A HREF="id11_m.htm#what_is_it_" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>What is it?</B></A></div> <div> <A HREF="id11_m.htm#what_does_it_cost_" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>What Does it Cost?</B></A></div> <div> <A HREF="id11_m.htm#how_long_does_it_take__" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>How Long Does it Take?</B></A></div> <div> <A HREF="id11_m.htm#intestate_succession" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>Intestate Succession</B></A></div> <div> <A HREF="id11_m.htm#no_conservatorship_protection" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>No Conservatorship Protection</B></A></div> <div> <A HREF="id11_m.htm#the_will" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>The Will</B></A></div> <div> <A HREF="id11_m.htm#a_will_does_not_avoid_probate" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B><IMG BORDER="0" SRC="Symb075c00b700c899ccff00.png" HEIGHT="13" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">A Will Does N</B></A><A HREF="id11_m.htm#a_will_does_not_avoid_probate" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>OT </B></A><A HREF="id11_m.htm#a_will_does_not_avoid_probate" TARGET="TRLX_Middle" TITLE="The Goals of Estate Planning"><B>Avoid Probate</B></A></div> <div> <A HREF="id6.htm" TARGET="_top" TITLE="WHAT DO YOU MEAN BY ESTATE PLANNING?"><B>Previous Page</B></A></div> <div> <A HREF="id14.htm" TARGET="_top" TITLE="The Trust as an Estate Planning Device"><B>Next Page</B></A></div> <div> <A HREF="id12.htm" TARGET="_top" TITLE=" Trust and Estate Planni"><B>Estate Planning Page</B></A></div> <bR> <div> <A HREF="index.htm" TARGET="_top" TITLE="Law Offices of Mathews Bergen Grier"><B>Home</B></A></div> <bR> <div> <A HREF="mailto:mbglaw@cts.com" TARGET="_top" TITLE="mailto:mbglaw@cts.com"><B><IMG SRC="01573ce0.jpg" border=0 width="115" height="206" ALT="E-mail MATHEWS BERGEN & GRIER" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></A></div> </td> <td valign="top" colspan=2 height=60 BGCOLOR="#FFFBF0" TEXT="#080000"> <div> <I>The Goals of Estate Planning</I></div> <div> </div> </td> </tr><tr> <td valign="top" height=420 width="100%" colspan=2 BGCOLOR="#FFFBF0" TEXT="#080000"> <div> <IMG SRC="029604b0.png" border=0 width="96" height="75" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> <A NAME="the_goals_of_estate_planning_are_"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><B>THE GOALS OF ESTATE PLANNING ARE: </B></div> <bR> <div> <B><IMG BORDER="0" SRC="Symb075c00b7011800000000.png" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">To Reduce Delays </B></div> <div> <B><IMG BORDER="0" SRC="Symb075c00b7011800000000.png" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">To Reduce Fees</B></div> <div> <B><IMG BORDER="0" SRC="Symb075c00b7011800000000.png" HEIGHT="19" WIDTH="24" ALIGN="bottom" HSPACE="0" VSPACE="0">To Reduce Taxes</B></div> <bR> <div> The Revocable Living Trust is the cornerstone of the estate plan because it meets these goals: It reduces delays, fees, and (often) taxes.</div> <bR> <div> <B> <A NAME="probate"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>PROBATE:</B>  The word “Probate" usually brings to mind the family gathered around the lawyer's desk to read the Will, sterile courtrooms, all the while greedy attorneys and others draining every dime they can from the estate of the deceased, leaving the family with little or nothing. These perceptions come from Hollywood and anecdotes passed down from one generation to the next. Many of the stories are not true or are based upon misunderstandings of what actually happens. Many of the stories are all too true. Briefly, here is what probate really is:</div> <bR> <div> <IMG SRC="030494b0.png" border=0 width="73" height="75" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> <A NAME="what_is_it_"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="4" COLOR="#000000" FACE="Arial" ><B>WHAT IS IT?</B>  Probate is simply the orderly administration of your estate with a Court (i.e., a Judge) supervising the management of the estate either according to the terms of your will (if you have one) or by “intestate succession” (if you do not have a will). To overly simplify the process, you may think of it this way: First, if the deceased is you, all of your assets are assembled. Then, all of your debts are assembled. The costs of administration (the costs of the attorney and executor to name two) are paid. If there is not enough cash to pay the costs of administration, some of the assets of the estate will be sold to pay them. Then, taxes are paid. Finally, whatever is left is delivered to the beneficiaries in the will or to your heirs according to the laws of intestate succession.</FONT></div> <bR> <div> Many people believe that if they have a will there is no probate. <B>Nothing could be further from the truth.</B> Whether you have a will or not, your estate must go through a probate proceeding, unless it falls within some exceptions. The exceptions are addressed below.</div> <bR> <div> The only difference between dying with a will and dying without a will is that, if you die with a will, you tell the judge how you would like to have your property distributed after your death. If you die without a will, the state legislature tells the probate court how to distribute your estate. In either case, a formal probate will take place.</div> <bR> <div> In a probate, the person who is authorized by the probate court to administer the estate of a deceased person is called a personal representative, whether appointed by the will or by the court. If the personal representative is appointed by the decedent's will the person is called an “executor”; if appointed by the court when the decedent died intestate, the person is called an "administrator.”</div> <bR> <div> It is the court-ordered duty of the personal representative to 1) gather and take possession of the assets of the decedent, 2) pay the decedent's debts, and 3) distribute the balance of the decedent's property to the persons entitled to it. What is often needed is some way to "sign" the decedent's name after death. During life, a person signs a deed or bill of sale to transfer property. When a person dies, it is still necessary to have some document to show a transfer of title, in other words, to obtain the “signature” of the decedent. The probate process provides one method of doing this. (The Revocable Living Trust is another method. The Revocable Living Trust is discussed below.)</div> <bR> <div> <B> <A NAME="what_does_it_cost_"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>WHAT DOES IT COST?</B>  The cost of probate is just the first of several disadvantages this method of handling an estate entails. The executor and the lawyer are each entitled to the same fee. This is for "ordinary" services. If any "extraordinary” services are done, the court will allow an additional fee for those additional services. The chart below shows what each is entitled to receive for “ordinary” services. You should also know that, for the purpose of computing the fees, the gross estate value is used. This is the actual market value of everything subject to probate court control which the decedent owned at the time of death without deducting mortgages, liens or other debts. These fees are the <FONT SIZE="4" COLOR="#FF3300" FACE="Arial" >new</FONT> fees effective 1/1/02.</div> <bR> <div> <TABLE BORDER="4" CELLPADDING="1" CELLSPACING="1" WIDTH="642" BORDERCOLORLIGHT="#9999FF" BORDERCOLORDARK="#0099FF" FRAME="BOX" RULES="ALL" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> Amount In Estate</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> Lawyer's Fees</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> Executor's Fees</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $100,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $4,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $4,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $200,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $7,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $7,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $300,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $9,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $9,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $400,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $11,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $11,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $500,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $13,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $13,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 23 WIDTH="206"><div> $1,000,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $23,000</div> </tD> <tD VALIGN=TOP WIDTH="206"><div> $23,000</div> </tD> </tR> </TABLE></div> <bR> <div> (When the estate's value is more than $1,000,000, the amount in excess of $1,000,000 is subject to a rate of 1%, which is then added to $23,000 to determine the full fee due the attorney.  (Fees for estates over $9,000,000 are further reduced in percentage.) <B>NOTE: </B>Additional fees also may be requested to be paid for "extraordinary" legal services, such as assistance with the sale of real property or in the event of litigation.</div> <bR> <div> <IMG SRC="031694b0.png" border=0 width="105" height="75" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> <A NAME="how_long_does_it_take__"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="4" COLOR="#000000" FACE="Arial" ><B>HOW LONG DOES IT TAKE?</B>  The second major consideration in probate is the time it takes to complete the process. During the time lost in probate, income is often lost and assets are not fully usable to the people you intend to have them after your death. There have been many “reforms" to shorten the probate process, but it still remains a long process for its main purpose. The main purpose of probate is, after all, the transferring of title from you to those you want to receive your assets.</FONT></div> <bR> <div> Estates that have a total value of less than $500,000 will take not less than 9 months. That is the minimum. The average time, however, will be more like 1 to 1½ years. During this time management and use of the assets will be very difficult. </div> <bR> <div> Estates that are over $500,000 have the same theoretical minimum: 9 months. The average time for these estates is longer. They will typically take 1½ to 3 years before they are completed. The more there is to go through the process, the longer it takes.</div> <div> <FONT SIZE="2" COLOR="#000000" FACE="Arial" ><IMG SRC="03259780.png" border=0 width="89" height="120" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> <A NAME="intestate_succession"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT><B>INTESTATE SUCCESSION: </B>Intestate Succession is an estate plan by default.  That is, you do not create the plan, the state creates it for you. It is the state legislature which decides how they think you would have wanted your property to pass had you taken the time to think about it. This may or may not be true. Intestate Succession is not <I><B>planning</B></I> and it certainly <U>is not safe</U>.</div> <bR> <div> What is it? In plan English, intestate succession means that you do not have a will. Therefore, your assets will pass to your heirs according to the state law rather than as you direct. This is an estate plan<I> by default</I> because you have failed to plan and you have permitted someone else (the state legislature) to decide for you how your assets should pass at the time of your death.</div> <div>                                         </div> <div> <B>Remember: If you do not create your own estate plan, the state will create one for you.</B></div> <bR> <div> Property which passes from a decedent to the heirs requires probate to transfer the title to the assets from the decedent to the heirs. That means all of the expense and delays which are inherent to probate. In addition, the heirs as determined by the state may not be the same people to whom the decedent would desire to give the assets.</div> <bR> <div> <B> <A NAME="no_conservatorship_protection"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>No Conservatorship Protection:</B> A “conservator of the person” is an individual or corporation appointed by the court to assume the responsibility for the care, custody, control and education of a person who is unable to properly provide for his or her personal needs for health, food, clothes, or shelter. A “Conservator of the estate” is an individual or corporation appointed to manage and control the estate of an adult who is substantially unable to manage his or her own financial resources or resist fraud or undue influence. The person for whom a conservatorship is established is called the “Conservatee.”</div> <bR> <div> These proceedings occur in the Probate Court. An attorney must normally be hired (and paid). In addition, there are accountings and other administrative procedures which are time consuming and expensive.</div> <bR> <div> If you have no estate plan, and if you fall into a situation in which you are not able to care for yourself or administer your affairs, a conservatorship will be needed. Neither Intestate Succession nor a Will provide any protection against your having a conservatorship.</div> <bR> <div> <B><IMG SRC="035704b0.jpg" border=0 width="112" height="75" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B><B> <A NAME="the_will"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>THE WILL:</B> There is a great deal of confusion about Wills. Not only what they are, but how they work. Many people believe a Will avoids probate. It does not. A Will does not avoid Probate. It merely directs the executor and the probate judge how to dispose of your assets after your death.</div> <bR> <div> A will is not much more than a letter addressed to the judge of the Probate Court. It is the legal expression or declaration of a person's mind or wishes as to the disposition of his or her property after death. It is the duty of the judge to read the will and follow the instructions left by the person who died.</div> <bR> <div> <B> <A NAME="a_will_does_not_avoid_probate"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>A Will does NOT avoid probate</B>. The Will, rather than the state legislature, tells the probate judge how your estate should be administered in the probate process. </div> <bR> <bR> <div> There are two different basic types of Wills: (1) holographic and (2) formal. The <I>holographic</I> will is written, dated and signed by the person making the Will entirely in his or her own hand writing. The authenticity is vouched for by the person's handwriting. The <I>formal</I> will is written and its authenticity is vouched for by the witnesses. Some states require two witnesses and other states require three witnesses.</div> <bR> <div> Unless the estate of the decedent has a gross value of less than $100,000, is entirely of community property which is to be confirmed in the name of the surviving spouse, or is in joint tenancy (or has some other type of designation of beneficiary), the estate must go through the probate process. Many people use joint tenancy as a means of avoiding probate. However, the problems created by only using joint tenancy can be enormous. In fact, the problems are so serious that an entire section below is devoted to this subject. The only difference between dying without a Will and dying with a Will is who tells the probate judge what to do with your assets: With a Will, you tell the judge. Without a Will, the state legislature tells the judge. In both cases, the process of probate is required.</div> </td> </tr></table></body>