10 Common Estate Planning Questions to Ask Your Lawyer
In youth, many individuals avoid thinking about the inevitable moment they pass away. They lack a will, much less a full estate plan. Typically, someone close to them passes away, and as they experience probate administration firsthand, they realize how badly everyone needs a plan for their estate. Knowing that they need an attorney to formalize a will or create a trust, they contact an estate planning lawyer, first asking 10 common estate planning questions, then moving on to formalize their will or trust or create something more complex.
1. How Are Physical Assets Valued?
Many people want to know how the legal system values physical assets at their death. Will their fixer-upper classic VW bus go to a repairable salvage vans for sale yard for $100 or will probate realize its value if a beneficiary finishes the restoration? Valuation varies depending on the asset type and your estate planning method.
With a will or trust, you document the value, creating an inventory of assets, first. Provide the value of each asset according to the following methods:
- Real estate uses the market value of the property.
- General personal items use a reasonable estimate based on open market sales.
- Antiques, collectibles, and jewelry require an appraisal.
If you die without a will or trust, the probate court uses valuations at the time of your death, so your real estate will undergo valuation during the court process.
2. What Happens if I Don’t Have an Estate Plan?
One of the common estate planning questions people ask centers around what happens if they don’t create a plan for their estate. Without an estate plan, such as a trust or a will, your estate goes into probate when you die. Probate takes about as long as a total ground thaw in a northern state at the tail end of winter, meaning months. Sometimes, probate can drag on for years.
In probate, the state in which you reside administrates your estate. It opens a probate case that allows any person to attempt to make a claim against your estate. That means the fourth cousin who you never met could register as an heir to your estate and inherit the car you wanted your daughter to have or cause the estate to sell the car and divide the proceeds between the individuals making claims to the estate.
Dying without an estate plan leaves your estate open to creditors. From your credit card providers to the mortgage company, creditors can register for your probate court case and siphon off some of the money that should go to your spouse, children, or the non-profit for which you have volunteered for decades. Although your debt should die when you do, it doesn’t all, and instead of leaving it up to your heirs to handle, dying without an estate plan in place provides the creditors first dibs at your estate.
3. What Is a Trust, and How Does It Impact My Estate Plan?
Here’s another of the most common estate planning questions – What’s a trust? When you create a trust, you protect the assets placed within it. The term trust refers to a legal shelter for assets and two kinds exist – revocable and irrevocable. If you form a revocable trust, you can add or remove assets to it as time passes, but with an irrevocable trust, once you place assets in it, they remain there until you die.
A trust protects the assets in it from seizure, sale, and other legal dangers. With both types of trust, you maintain the right of use while you live, so when you place your primary home in a trust, you still get to live in it and use it normally. You can still rent out your vacation home if you place it in a trust or make changes to it, such as hiring a masonry restoration service to fix a retaining wall. You cannot sell the home if you placed it in an irrevocable trust unless you completely dissolve the trust, which unprotects everything within it.
With a trust, the items within it avoid probate court. Items in the trust pass directly from the trust to your designated beneficiary upon your death. This lets your beneficiaries avoid the uncertainty of what happens after your death.
For example, without an estate plan, your estate goes into probate, freezing your assets for a time; your spouse won’t be able to access funds kept only in your name or your home’s deed. Unless an account bears both of your names, your spouse gets cut off from those funds and so will your children until the probate court case ends. During those months, your family could be left without funds to pay bills, the mortgage, tuition, etc. With a trust, all of the bank and investment accounts go into the trust, as does your real estate, so it passes immediately to your spouse and kids as you prescribed in your trust documents.
4. How Are Properties Distributed to Heirs?
Among the other common estate planning questions, how properties pass to heirs comes up. This differs depending on the method you use for your estate planning. The common options include:
- no estate plan, which goes through probate,
- a will,
- a trust.
Let’s consider how each option affects the property distribution.
When your estate goes through probate, every asset you own or partially own, such as your half of a partnership in a shed building company, goes into probate. During this murky time, no one really “owns” anything in the probate, although your family still typically resides in your home, they cannot sell it. Any individual who lays claim to your estate by registering with the probate court gets an equal opportunity at its proceeds, which the court typically divides equally. Probate names an administrator, who handles distribution according to the court’s directions.
When you write a will, it provides specific directions to the probate court on how to divide your estate and names your estate’s administrator. Your attorney files the will, formally referred to as “the last will and testament,” with the court system when you write it. When you pass away, the court reads your will into the proceedings of the probate court and uses it as a distribution guide. The only items the court decides the distribution of will be those not included specifically in the will.
When you form a trust, the probate court never deals with the items placed in the trust. Your estate does still go through probate, but the only items in probate remain the ones you did not place in the trust. The manager/administrator of the trust, who you name upon trust creation, distributes ownership exactly according to your directions in the estate documents, so if you wrote that your spouse fully owns your primary home, your spouse receives the title and deed, unencumbered, when you die. If you say that your spouse and each of your three children receive equal ownership in your business, then each person receives 25 percent of the business.
5. How Do My Investments Factor Into My Estate Plan?
Investment funds, such as stocks, bonds, cryptocurrencies, etc., and how they’re handled top the list of common estate planning questions. Since investments qualify as an asset, if you write a will or form a trust, you decide who gets each stock or all stocks or gets to take over the investment account. That means you choose who gets your stock in the drink company, Jarritos, and the Jarritos distribution of the stock. You can divvy up the Jarritos stock between your spouse and children or leave that specific stock to just one beneficiary in a will or trust.
Perhaps you have one close relative with an affinity for cryptocurrency and all things blockchain. You can choose to leave all of your blockchain-related assets to that person, and they will inherit your cryptocurrency held in hot and cold wallets, on all exchanges you use, and in financial apps like PayPal. That individual will also inherit all of your non-fungible tokens (NFTs) if you use the wording “blockchain-related assets,” but will only receive the distribution of your cryptocurrency if you use that word.
Let’s say that your investments all “live” inside an investment account, such as a mutual fund or a brokerage account. In your estate plan, you can transfer ownership of all of the assets in the account to any individual or organization of your choice. You cannot transfer ownership of the account itself, since all financial accounts must be in the name of their owner. That means your beneficiary needs to open their own account in their own name, and the assets will pass into this account.
Perhaps you purchase your stocks, bonds, and other assets independently. In either a will or a trust, you can designate who receives which shares. You can also divide an asset by percentages, so each child receives an equal share. Back to the example family in which the spouse and three children survive the decedent – you can leave each nuclear family member with 25 percent of the Jarritos stock or 25 percent of the stocks contained in the investment account.
6. How Can I Donate to Organizations After My Death?
Many people support at least one charity throughout their lifetime, whether it’s their church or a favorite non-profit. For that reason, how to donate to them in death has become one of the most common estate planning questions asked. You can write an organization into your will, just as you can a person. If the organization Dynatorque impressed you in life or benefitted you somehow, a donation upon your death can provide a way to say thank you and continue its good work.
Your attorney can word the legal documents to your liking, so your estate makes either a one-time donation upon your death or monthly or annual donations. Without estate planning documents, none of your assets go to charity because the estate goes through probate. With a will, the donation passes to the charity during your probate court proceedings; with a trust, the charity receives the first donation when you die.
7. How Can I Support My Grandchildren’s Futures?
Many grandparents contribute to their grandchild’s upbringing and support them either formally as a guardian or informally by providing funds for day-to-day living expenses. If you don’t want your grandchild to need to register with a temp agency and go to work as soon as you die, you can use a trust to ensure that they receive the same amount of money you have contributed each week or month at your death. One of the most common estate planning questions related to this comes from grandparents who want their grandchild to receive the money, not their child. In these cases, a trust offers the best solution.
Using a trust, your attorney and you create a provision for your grandchild administered by a third party, which can be the trust. The trust’s administrator, whom you choose when you create the trust, can function as the third party if you so deem it in the documents. Until the grandchild reaches the legal age of maturity, in the U.S., 18 years old, the trust administrator manages the funds for the child. You can require that they meet with the child monthly for a wellness check.
The administrator pays the bills for the grandchild, such as those for boarding school, an assisted living center for a special needs child, etc. This individual can also take care of seasonal needs, such as purchasing shoes or a winter coat. These types of provisions come in handy when the parent poorly manages money or has a problem with addiction. The parent never has access to the funds, yet the grandchild continues to be cared for by their grandparent.
8. How Can I Use My Estate to Fund Research?
Although one of the less common estate planning questions, some individuals ask their estate planning lawyer if they can fund research with their estate. Yes, you can, whether your interest lies in Hall effect current devices or neuroplasticity as it relates to burst aneurysm recovery. Through a trust, you can create a regular donation to an existing research fund, or you can create your own foundation via the trust upon your death.
9. Can Estate Plans Include Scholarship Funds?
Encourage the entrepreneurship of your spouse, children, grandkids, or perfect strangers by including money for their education in your estate planning documents. Questions about earmarking money for education rank among the most common estate planning questions. Use a trust to protect the funds for this purpose and create the documentation for the establishment of a scholarship.
10. How Can I Support My Community With My Estate?
Lastly, individuals often ask attorneys common estate planning questions about supporting their community with a donation upon their death, but they don’t know how. An estate attorney can help with ideas and the legal documents to form them. You could fund union apprenticeships at your plumbing or electrical business or do as one Sooner fan did and leave your alma mater funds for planting flowers each year to beautify the campus. This process involves establishing a fund and providing an interest-earning mechanism for it, such as placing the funds in a high-yield savings account, so the original donation steadily replenishes itself.
Getting Started with Estate Planning
Create your estate plan today, so your beneficiaries don’t need to wait on probate court to decide how your estate gets divided. You make the decisions by creating a will or trust. Contact an attorney who specializes in estate planning today.