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Why does everybody need estate planning? The reasons rest with words like responsibility, accountability, stewardship and reality. Its been said that the only things in life which are certain are death and taxes. If you fail to do your estate planning, you may cause unnecessary emotional distress and financial hardship for your family and other loved ones.
A recent American Bar Association survey ascertained that almost 50% of all Americans do not have a will.
If you don’t have a will or equivalent estate planning documents, then the law of the state of your domicile (principal residence with intent of returning), as interpreted by the Probate Judge, and perhaps Superior Court Judge, will decide who gets your property.
Let’s assume that you have not done any estate planning, that is no Last Will and Testament and/or Revocable Living Trust. No big deal, except the Probate Judge (and not you) will name an Administrator (in lieu of an Executor), who may have to obtain bond and file detailed inventories and returns with the Probate Court. The Probate Judge (or the Juvenile Court, that has concurrent jurisdiction) will also name a Guardian over the person of the minor children; otherwise, they may become Wards of the State (can you imagine the potential trauma to the minor children?) and be sheparded by the Department of Family and Children Services. Guardianship accounts, as governed by the Probate Court, are very restrictive with respect to the types of authorized investments. Annual returns would have to be filed. The children would get their shares outright at age 18. Most probably, the attorney fees associated with the administration of the estate would be at least 3 times the normal probate process fees.
The Georgia laws of intestacy would dictate that the surviving spouse will always get at least one-third; the balance is shared equally between the children; and if none, your assets would pass to grandchildren, parents and(then in 1998) siblings, grandparents, aunts/uncles, first cousins, etc. Also, numerous estate tax reduction techniques may have been lost.
So should you have a Last Will and Testament and/or a Revocable Living Trust…the age old question? A revocable living trust avoids the publicity of probate and avoids the need for a guardianship of your property if a successor trustee is named. It has no estate tax reduction/avoidance advantage over a Will.
As I understand it, in some states (like California, New York, Massachusetts, Connecticut, Delaware, Missouri, Hawaii, etc.) where estates have long administration periods or the probate process is expensive or the attorney fees are a percentage of the estate, a revocable trust is a must.
In Georgia, according to the Georgia Counsel of Probate Court Judges, the average probate court fees were $130.00. Legally, the Executor should wait six months before distributing assets if he/she desires personal exemption from creditors. If there is no Will, assets may be tied up for months and even years.
The problem with revocable living trusts is that to avoid probate, all assets must be transferred to the trust while one is living; otherwise, there will be a partial intestacy, if there is not a pour-over will (which would have to be probated anyway) to facilitate the post death funding of the trust.
The widow or widower, all alone in life, without loved ones, should consider a revocable living trust.
Well, you might be telling yourself that this is not a problem since you already have a Will. Therefore, you feel good because you know you have done the right thing for you and your family. Do you have anything to worry about? Absolutely! I find it very hard to believe, but according to one Georgia estate planning attorney and professor, statistics indicate that around 1/3 of all intended Wills throughout the United States are found to be invalid for one reason or another. That professor contends that those numbers are even higher in Georgia. Now you have just died without a Will even though you thought you had one. There are many reasons why a Will is found to be invalid. Improper execution is a leading reason, often as a result of incomplete execution of “Will Kits”. Another significant reason is that most attorneys who write Wills are not estate planning specialists. Since these attorneys do not specialize in estate planning, they do not understand all the details and finer points that must be taken care of. Would you let a doctor who specializes in the treatment of broken bones treat your heart condition? Of course not! Therefore, you should never let anyone other than an attorney who specializes in estate planning prepare your Will or other estate planning documents. With a properly drawn Will you can reduce or eliminate these financial and emotional hardships. Other reasons resulting in a finding of invalidity include divorce, remarriage and/or the birth of children not contemplated by the documents.
So you want to leave everything to your spouse, regardless if by Will or Revocable Living Trust. Assuming valid documents, under existing estate tax laws, if you:
- Predecease your spouse, and
- Leave everything to your spouse outright,
- There will be no estate tax upon your death.
However, if your spouse then passes away with an estate in excess of $5,000,000:
- You would have made a mistake, and
- Your spouse’s estate will pay estate tax on each dollar in excess of $5,000,000 at an escalating rate, starting at 40% which you could avoid by creating a trust (in your Will) at your death with your spouse as a lifetime income beneficiary with access to the principal for health, maintenance and support.
Estate planning is basically getting your affairs in order before you pass away. What about while you are alive? Most people assume that they have the automatic right to make decisions on behalf of their spouse, parents, and children if they should become unable to make their own decisions due to temporary or permanent impairment as a result of serious illness (cancer, heart attack, surgery, etc.), accidents or simply “old age”. Yet, without comprehensive and properly executed Durable Powers of Attorney for Financial Affairs and Health Care (and/or Living Will) [and now an Advanced Directive] you will not be allowed to make decisions concerning your spouse, parents or adult children.
Estate planning is a very detailed and complicated area of the law which only an estate planning specialist can adequately address. Everybody needs to do their estate planning regardless of “how few” assets they think they have. Estate planning done properly may reduce or eliminate taxes, eliminate unnecessary emotional and financial distress on your loved ones, ensure that your wishes are carried out and give you piece of mind. There is so much to estate planning that I have been able to only “scratch the surface” in this article. Not discussed are estate planning documents and tools such as irrevocable life insurance trusts, charitable remainder trusts, generation skipping trusts, irrevocable trusts for qualified plans and IRA’s, qualified terminable interest property trusts (if you’re concerned about your spouse’s remarriage and your assets not eventually going to your children), children’s trusts, grantor retained income trusts, personal residence trusts, prenuptial agreements, buy/sell agreements, family limited partnerships, and limited liability companies which documents oftentimes people need because of their unique situations. As you have questions and have needs for your estate planning to be done and that of your loved ones, please call me at the phone number listed above.
While I’m on a roll, please be advised that estate tax is due in cash, nine months after the date of death. For estates in excess of $11,200,000 (reverting back to $5,000,000 in 2026), the estate tax return (which, as a CPA, I prepare) is also due on that date.
Note: The $5,000,000 figure is indexed for inflation.