ESTATE PLANNING
"In this world nothing is certain but death and taxes." Benjamin Franklin.
"I have nothing. I owe much. I leave the rest to the poor." Francois Rabelais
"Death is a very dull, dreary affair, and my advice to you is to have nothing whatsoever to do with it."
W. Somerset Maugham
CLIENT: "What happens if I die?"
LAWYER: "What do you mean 'if' "?
You may live forever, but since the circumstantial evidence suggests otherwise, shouldn't you have a will? Attorney Wheelock provides many essential services to his estate planning clients, from preparing wills, trusts, powers of attorney, healthcare powers of attorney and living wills, nominations of guardian, to living trusts, special needs trusts and guardianships. (See the estate planning article below.) Please contact our firm today at (603) 431-3430 to arrange your free consultation.
Simple Wills
If you do nothing else by way of estate planning, you should write a will. If you don't write a will before your death, state law (RSA 561 - the New Hampshire Intestacy Statute) will determine who gets your property (it may well not be whom you would have chosen), and a judge may decide who will raise your children. In your will, you can make those decisions yourself.
A basic will leaves your property to the people and organizations you choose, names a guardian to care for your minor children, names someone to manage property you leave to minor children, and names your executor, the person with authority to make sure that the terms of your will are carried out.
Do You Need a Will or a Trust?
What you need is: First, some good advice and an understanding of what estate planning involves and how the law applies to your situation. Wills and trusts are both documents that transfer property when you die. The difference is a will is the traditional document that’s been used to name the property or identify it in some way and name the beneficiaries who receive the property.
Wills
A simple will is a document that sets forth your wishes concerning the disposition of property at the time of your death. Anyone who is of sane mind and over the age of eighteen, or a married person under the age of eighteen, may execute a will in New Hampshire. The who executes the will is known as the “testator”. The will must be in writing, signed by the testator, or, if the person is unable to sign, by someone else at his or her direction and in his or her presence, and must be signed by two or more witnesses who, at the request of the testator and in the his or her presence, attest to the testator's signature. The witnesses to the will should not be a beneficiary or the spouse of a beneficiary of the will or the gift to the witness or the spouse will be invalid. A will does not in and of itself operate to pass owbership of your property. The will must be proven and allowed by the probate court before any of its provisions will take effect - i.e., the will must be probated. You may make gifts of specific assets or specific amounts of money to beneficiaries in your will, or you may make gifts of a portion or all of your estate to one or more people. You should designate what will happen to a gift if a named beneficiary predeceases you. It is better for you to choose what will happen to your assets than to let the New Hampshire law of intestacy determine who will share your estate.
Will a Basic Will Avoid Probate?
No. But if you're relatively young and healthy, and you don't have tons of money, your real concern is to make legal arrangements for the statistically unlikely event that you will die suddenly and unexpectedly. You've almost certainly got plenty of time to plan for probate avoidance later.
When a Simple Will Is Enough.
By and large, if you are under age 50 and don't expect to leave assets valuable enough to be subject to estate taxes, you can probably get by with only a simple will. As you grow older and acquire more property, you may want to engage in more sophisticated planning - such as a living trust discussed below. But in the common situation where a husband and wife want to leave their property to each other or, if they die together, to their children in equal shares and also want to name a personal guardian for their children, a simple will is probably all they need.
Wills are simple, inexpensive ways to address many people's estate planning needs, but they can't do it all. Here are some things you shouldn't expect to accomplish in your will.
Married Couples: Who Owns What?
Be sure you know what property is yours to leave or give away. Married couples usually own much, if not all, of their valuable property together. If you want to leave everything to your spouse, as many people do, you don't need to worry about what belongs to you and what belongs to your spouse. But if you want to divide your property among several beneficiaries, you need to know just what's yours to leave. It's usually easy to tell which spouse owns what. If only your name is on the deed, registration document, or other title paper, it's yours. You are free to leave your property to whomever you choose, subject to your spouse's right to claim a certain share after your death.
You can't use your will to leave property you hold in joint tenancy with someone else or with "rights of survivorship" with your spouse. At your death, your share will automatically belong to the surviving co-owner. A will provision leaving your share would have no effect unless all co-owners died simultaneously.
You can't use your will to leave property you've transferred to a living trust.
You can't use your will to leave proceeds of a life insurance policy for which you've named a beneficiary.You shouldn't use your will to leave money in a pension plan, individual retirement account (IRA), 401(k) plan, or other retirement plan. Instead, name the beneficiary on forms provided by the account administrator. And, you can't use your will to leave money in a joiny bank account.
Should I put my health care wishes in my will?
No, wills are typically not read - or even found - until days or weeks after a death. Instead, make a separate document - a Living Will and/or Healthcare Power Of Attorney - spelling out your health care wishes, and provide your agent with a copy. (See Living Wills & Heakthcare DPOA.)
Your closest relatives may have a right to claim part of your estate.
Only very close relatives - surviving spouses and sometimes children or grandchildren - have the right to claim an inheritance from a deceased relative. In most circumstances, a surviving spouse cannot be completely cut out of a will. Getting divorced automatically revokes bequests made to a former spouse in your will but to be on the safe side, and insure your estate planning reflectrs your current situation and wishes,if you get divorced, make a new will that revokes the old one. Generally, children have no right to inherit anything from their parents. However, state law does protect against accidental disinheritance. These laws usually kick in if a child is born after the parent made a will, and the parent never revises the will to include that child. The law presumes that the parent didn't intend to freeze out the newest child, but just didn't get around to revising the will. In that situation, the overlooked child may have a right to a significant part of the parent's assets. If you decide to disinherit a child, or the child of a deceased child, your will should clearly state your intention. And if you have a new child after you've made your will, remember to make a new will.
When Do I Need to Change My Will?
Make sure your will reflects your current wishes and situation. The only constant in life is change. Your will should always be tailored to your current family and financial situation, not the one you faced five years ago or maybe twenty years ago.
If you get married, you and your new spouse should create new wills. Your spouse is legally entitled to claim a percentage of your property after you die, unless you have a written agreement to the contrary. This includes married same-sex couples in Massachusetts. If you don't want to leave at least half of your property to your spouse, see a lawyer. The same applies to parties who enet into a civil union in New Hampshire. You are entitled to all the rights and subject to all of the obligations and responsibilities provided for in state law that apply to parties who are joined together pursuant to RSA 457.
In most cases, a final judgment of divorce (or an annulment) revokes any bequest made by your will to your former spouse, but doesn't revoke the remaining bequests to other beneficiaries, so you should make a new will after a divorce to reflect your current situation and wishes.
If you have a new baby, you'll want to make a new will to name a personal guardian for the little one. This is the person you want to raise your child in the unlikely event that both you and the other parent become available. Similarly, if
you have new stepchildren and want to leave them a share of your property, you should adjust your will.
If you acquire or dispose of substantial assets, such as a home and you want to leave it to someone specific, you'll need to change your will to make your wishes clear.
Changing a Will
There are two ways to modify a will. One is to add a "codicil" to it - a sort of legal "P.S." to your will, revoking part of it or adding a provision, such as a new gift of an item of property. Simple codicils made sense in the era of typewriters, when creating a brand-new will was a hassle, but today it's usually just as easy to make a new will.
Special Needs Trusts
You can use a trust to leave money to a disabled loved one, without jeopardizing government benefits. If you are providing care for a child or other person with a disability, you need to think about what will happen when you’re no longer around. Of course you can leave that person property -- but doing so without some careful planning can jeopardize your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits. Owning a house, a car, furnishings, and normal personal effects does not affect eligibility for SSI or Medicaid, but if you leave your loved one $10,000 in cash outright, he or she won’t be able to get SSI or Medicaid.
How a Special Needs Trust Can Help
A way around losing eligibility for SSI or Medicaid is to create what’s called a "special needs trust" in your will or living trust. Instead of leaving property directly to your loved one, you leave it to the special needs trust.
You will have to choose someone to serve as trustee, who will have complete discretion over the trust property and will be in charge of spending money on your beneficiary's behalf, so you need a trustee you trust completely, no pun intended.
How Trust Funds Can Be Spent
The trustee can’t give money directly to your beneficiary - that could interfere with eligibility for SSI and Medicaid - but can spend trust assets to buy a wide variety of goods and services such as personal care attendants, out-of-pocket medical and dental expenses, education, recreation and physical rehabilitation.
Living Trusts
How Living Trusts Avoid Probate
Property left through a will generally goes through probate. Probate involves an executor carrying out the terms of your will by invetoring and appraising the property, paying debts and taxes, and distributing the remainder of the property according to the will, while reporting to the probate court and all beneficiaries. When you make a living trust - a legal device in which you hold property as a "trustee" - your surviving family members can transfer your property quickly and easily, without probate court approval.
Ask people why they work hard and save their money, and ninety (90%) percent will answer it's because they want to leave something behind for their children. Understandably, they don't want a big chunk of that money to be used up for probate lawyers' fees.
That's where living trusts come in. When you make a living trust - a legal device in which you hold property as a "trustee" - your surviving family members can transfer your property quickly and easily, without probate. More of your property goes to the people you want to inherit it. Unless you expect to owe federal estate taxes at your death or your spouse's, a basic living trust to avoid probate is probably all you need. A married couple can use one basic living trust to handle both co-owned property and the separate property of either spouse.
Creating a Trust
To create a basic living trust, you make a document called a declaration of trust, which is similar to a will. You name yourself as trustee - the person in charge of the trust property. If you and your spouse create a trust together, you will be co-trustees. Then you transfer ownership of some or all of your property to yourself in your capacity as trustee. If you're the trustee, you don't give up any control over the property you put in trust. In the declaration of trust document, you name the people or organizations you want to inherit trust property after your death. You can change those choices if you wish; you can also revoke the trust at any time, unless you create an irrevocable trust.T here may be one or more
grantors, trustees, or beneficiaries of a trust. The Trustee holds the legal title to the property of the trust, but must manage the trust property for the benefit of the beneficiaries, in accordance with the terms set out by the grantor in the trust document.
After You Die
When you die, the person you named in the trust document to take over,- called the successor trustee, transfers ownership of trust property to the people you want to receive it. In most cases, the successor trustee can handle the whole thing in a few weeks with some simple paperwork. No probate court proceedings are required.
Testamentary Trusts vs. Living Trusts
Trusts that are included in a will arecalled “testamentary trusts”. Testamentary trusts do not take effect until the death of the "testator/grantor" and are subject to the supervision of the probate court. The trustee of a testamentary trust must be appointed by the court, must be bonded, and must file an inventory and annual accounts of the trust until the time that the "testator/grantor" has designated for the trust assets to be distributed to the beneficiaries. Trusts created during the grantor’s lifetime are called “living trusts”. Living trusts are not subject to the supervision of the probate court, unless a conflict arises during the administration of the trust, in which case the probate court has
jurisdiction to resolve the problem.
Revocable vs. Irrevocable Living Trusts.
Living trusts may be revocable or irrevocable. Irrevocable trusts, as the name implies, are not revocable once they have been established. People sometimes transfer assets to irrevocable trusts to make themselves eligible for Medicaid coverage of long term care. You should never create and fund an irrevocable trust unless you receive competent legal advice and completely understand the consequences of doing so.
Revocable Living Trusts for Asset Management and Probate Avoidance
The far more common type of estate planning trust is a revocable living trust. You typically create a revocable living trust by signing a trust agreement between yourself as "grantor" and yourself as "trustee" - the law allows you multiple legal roles here - setting forth the terms under which the trust assets will be managed during your lifetime and therafter. In order to avoid probate of your estate after your death, during your lifetime you transfer your assets to the trust - thereby “funding the trust.” You transfer real estate to the trust by means of a deed. You transfer your tangible personal property (furniture, jewelry, etc.) that does not have a certificate of title by means of a bill of sale. You transfer your bank accounts by sitting re-titling your accounts in your name as trustee of your trust. You contact your broker and arrange to have investment accounts transferred to the name of the trust. You re-title your vehicles in the name of the trust. (When you transfer insured property to the trust, make sure that you contact your insurance company and arrange to name the trust as an insured party.) You may also name your trust as the beneficiary of life insurance policies or retirement accounts.
Even though your assets are held in the name of the trust, with a revocable trust you are still in complete control of the assets. As Trustee, you manage the assets, and can buy and sell assets in the name of the trust. Even if you chose someone else to serve as Trustee, as "grantor" you remain in control through your right to change the terms of the trust, or revoke the trust completely. The trust agreement also specifies what happens to your property after your death. The greatest weakness to trust agreements, however, is that they apply only to property that is either in the trust prior to your death, or property that passes to your trust after your death by means of your will or a beneficiary designation. Many people think that they have transferred all of their assets to the trust, but someone later discovers an asset that the grantor did not know he or she had owned. Therefore, even if you believe that you have transferred all of your assets to your trust during your lifetime, you should always have a will that leaves your property to your trust. That type of a will is commonly called a“pour over” will because it pours your estate over into your trust.
Revocable Living Trusts for Tax Planning
People often use trusts to minimize estate taxes. For an overview of estate tax law that will help you to understand how trusts may be used to minimize yor estate taxes go to http://www.nhbar.org/pdfs/Wills&Trusts04.pdf.
Learn more about administering estates.