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Dear Jonathan: My financial advisor is pestering me to create a trust for the purpose of holding my assets for probate avoidance. However, I am really not interested in creating a trust and I am not all that concerned with having my estate being probated. The only thing that matters to me is that my children get whatever is left of my estate in equal shares, and if my assets have to be probated first before that happens, so be it. Am I wrong in thinking this way? Jonathan Says: Not necessarily; there is no right or wrong answer here. What’s m...
Dear Jonathan: My mother, who is a widow, passed away several months ago. Thankfully she prepared a trust and transferred her assets to that trust so that there would be no probate to deal with at her death. While in the process of cleaning out her house, I came across a folder with several stock certificates of publicly created companies, which are titled in both of my parents’ names as husband and wife. I was quite surprised to come across these since I wasn’t aware they owned stock in any of these companies. I have already checked, and all...
Dear Jonathan: My husband and I have been married for 10 years and it is a second marriage for both of us. We both have adult children from our first marriages. We have recently been talking about putting together an estate plan, but we are having difficulty deciding how to provide for each of our respective children at either of our deaths. We each want to provide our own children with a certain portion of our assets when we die, but are not quite sure how to accomplish that. Do we just leave it to the other spouse and trust that he or she...
Dear Jonathan: My husband and I recently completed our estate planning. We were able to save a lot of money by downloading forms off the Internet. The forms were pretty straightforward and after doing our own research we feel very comfortable with what we did. One thing we chose not to do, however, was to prepare wills which we didn’t feel were necessary because we created a trust. It is our understanding that if we have a trust, our assets are protected from probate and a will isn’t necessary. Are we on the right track? Jonathan Says: Fir...
Dear Jonathan: My wife and I know the importance of each of us having a durable power of attorney for health care, so each of us has one. However, we own all of our assets jointly, so we know we don’t have a probate problem and we really don’t see the need to have a will, a trust, or even a durable power of attorney for financial matters. Do you agree? Jonathan Says: No. Let’s take a look at why a will and trust are important. First of all, you are partially correct when you say that you don’t have a “probate problem” because you and your wife...
Dear Jonathan: My wife and I prepared wills several years ago. We thought by doing so that we were avoiding probate which was the main purpose why we prepared wills. However, a close friend of ours recently died and her estate is now being probated even though she prepared a will. This came as quite a shock to us as we thought we had everything covered. Could you please shed some light on this? Jonathan says: Yes. Unfortunately, many people share the same misconception that by preparing a last will and testament probate can be avoided. Whether...
Dear Jonathan: What is the difference between an executor and a personal representative? Jonathan says: There is no difference, they mean the same thing. Some states use the term executor and other states use the term personal representative. An executor or personal representative is the person who is in charge of administering a deceased individual’s estate if a probate administration is required. Dear Jonathan: What does it mean when someone dies intestate? Jonathan says: If a person has died intestate that means he or she died without m...
Dear Jonathan: My wife and I have a pretty modest estate. Basically, we have our home and a couple of bank accounts. We only have one child, a daughter, who will be the beneficiary of all of our assets. We know we don’t need a complicated estate plan, but at the same time, we want to make sure that what assets we do have pass to our daughter without having to go through probate. From doing our own research, we realize that we could set up a trust and retitle our home and bank accounts to that trust. If we do that, it is our understanding t...
Dear Jonathan: I recently updated my estate planning, which included a new will, as well as a revocable living trust. I decided to go with the trust because I want to make sure that my estate is not probated at my death. I recently read that if all of your assets avoid probate, you don’t need to have a will because the will only controls assets you have to probate. Is this true? If so, why did my attorney insist on me preparing a will along with my trust? Jonathan says: The article you read is correct in that a will only controls the d...
Dear Jonathan: I just completed the probate of my late brother’s will. I was the executor he appointed to act on behalf of the estate. This was not a pleasant experience and in fact was quite the opposite and made me realize that I don’t want to put my family through anything like this at my death. My wife and I don’t have a large estate, but we are comfortable and I want to make sure that everything I own goes to my wife first and then to my kids upon her death without having to go through probate first. What do you recommend we do to avoid pr...
Dear Jonathan: I know that the annual gift tax exclusion for 2014 was $14,000. Is this amount being increased for 2015, or is it staying the same? Jonathan says: The annual gift tax exclusion for 2015 will remain at $14,000. Dear Jonathan: How much will a person be able to shelter from federal estate tax in 2015? Jonathan says: The federal estate tax exemption will increase in 2015 from 2014’s amount of $5.34 million to $5.43 million dollars for a single person. A husband and wife will be able to shelter $10.86 million dollars from federal e...
Dear Jonathan: Several years ago my wife and I completed our estate planning. At that time our estate was worth around $2 million and the exemption from federal estate taxes was only $1 million. Consequently, our attorney recommended that we prepare separate trusts which would allow each of us to take advantage of the exemption amount so there would be no federal estate taxes due at the death of the second one of us to die. I don’t really remember or necessarily understand the strategy other than the fact that we had to create two separate t...
Dear Jonathan: If I loan my son $80,000 to pay off his mortgage, would either of us have an issue with the IRS? My son would repay the loan at a set amount each month. I would prefer not to charge an interest fee. Thank you for any advice you can supply. Jonathan Says: Believe it or not, your question, which is very straightforward, has a rather complicated answer, but I will try to keep it simple. There is no problem with you loaning money to your son so he can pay off his mortgage, but to avoid running afoul of the IRS, you should: 1. Have...
Dear Jonathan: I am a widower and 50 percent owner of a small business which employs two of my children. I am at retirement age now however I am not ready to stop working quite yet. I am thinking that I should probably update my estate planning because the last time I did this was over 30 years ago when my wife was still alive. Another reason that I want to update is that my children who work at the company have expressed an interest in receiving my ownership in the business after I am gone, so I want to make sure I address that in my plan. Doe...
Dear Jonathan: I am a widower. My only child, my daughter, is the sole beneficiary of my estate under my will. When I prepared my will, I did not prepare a trust because quite frankly I didn’t feel I had a large enough estate to warrant the cost. Now I am having second thoughts because what I do have, i.e., my house and several bank accounts, I would rather have avoid probate. Short of putting my daughter’s name on the title to my house and my bank accounts and CDs, is there any other way that my estate can avoid probate without my cre...
Dear Jonathan: My wife passed away last year just a few months after we had updated our estate planning documents. The attorney who prepared the documents on our behalf has recommended to me that I engage in yet another update of my estate planning documents for the purpose of removing my wife from the documents as the primary beneficiary and as the primary fiduciary. I guess I kind of understand why he is recommending this, however, in all of our documents we named our son and our daughter as back-up beneficiaries and fiduciaries....
Dear Jonathan: I am a widower. I am retired and financially set. In fact, I have been advised that it would be a good idea for me to reduce the size of my estate because it is larger than that amount which is exempt from estate taxes, which I believe is $5 million. Consequently, I am considering passing along a good chunk of my estate to my children and grandchildren now. What are the current rules for gifting? Jonathan Says: In 2014, a person can gift up to $14,000 per person per year without incurring any federal gift tax and without having t...
Dear Jonathan: What does it mean to have died intestate? Jonathan says: This simply means that a person died without making a last will and testament. If a person makes a last will and testament, then they will be deemed as having died testate. Dear Jonathan: What happens if the person appointed as agent under a power of attorney refuses to act and the person who made out the power of attorney now has dementia? Jonathan says: If there is no alternate agent named, the power of attorney will be ineffective and cannot be used. Consequently,...
Dear Jonathan: I am an elderly gentleman who is not married and has no children. Because I have become increasingly aware of my own mortality, I have decided to engage in estate planning for the first time in my life. Interestingly, I am more concerned with those documents whose purpose is to protect me during my lifetime, i.e., financial and health care durable power of attorneys, than I am with those documents that direct where my estate goes when I die, i.e., a will and trust. More specifically, I understand the importance and the need of ha...
Dear Jonathan: I have a question about my grandson who is going off to college in the fall. A close friend of mine told me about something that happened to his granddaughter who started college a few months ago, and it really has me concerned. Apparently, she ended up being hospitalized for a period of time, and initially was in a coma – she is doing fine now. When her parents, who live a thousand miles away from her college campus, tried to get information about her illness, they were denied because their daughter was over age 18 and b...
Dear Jonathan: My wife and I have a living trust and recently after consulting with our attorney, we transferred our home, as well as our family cottage to our trust for probate avoidance. Last week as I was writing out a check for our homeowners insurance premium, it occurred to me that my wife and I are the insureds on the policy, but our trust isn’t. Is that the way it should be, or now that the trust owns the home and cottage, should the trust now be the insured on the policy? I just want to make sure that we are properly covered. J...
Dear Jonathan: My husband died six months ago. We didn’t have much but everything we had we held in joint names. Consequently, upon the advice of a family member some time ago, we never bothered to prepare wills because we were told that the survivor of the two of us would own everything so there was no need to have a will. Now that my husband has passed away, do you recommend that I now have a will? Also, I have received several telephone calls and letters from two different credit card companies threatening to turn me over to collection if I...
Dear Jonathan: I am naming my sister as one of my beneficiaries in my last will and testament. I am signing the will at my home since it is hard for me to get out. I know I need to have two witnesses. My question is whether my sister can act as one of those witnesses. Jonathan Says: It depends upon the law of the state in which you live. Some states allow interested parties, i.e., someone who is named as a beneficiary in the will, to also act as a witness without invalidating the gift to that individual; some states do not. You need to check wi...
Dear Jonathan: What is the annual gift tax exclusion amount for 2013? Jonathan Says: The annual gift tax exclusion amount, which is the amount a person can give to another without incurring a gift tax, is $14,000 for 2013. Dear Jonathan: What is the federal estate tax unified credit exclusion amount for 2013? Jonathan Says: The federal estate tax unified credit exclusion amount, which is the amount of a person’s estate which is exempt from federal estate taxes, is $5,250,000 for 2013. Dear Jonathan: I am in the fortunate position of having a r...
Dear Jonathan: Several years ago I purchased a 20-year term life insurance policy on my life with a death benefit of $3 million. The premiums were reasonable and since my wife and I had saved very little for retirement, I wanted to make sure that she was taken care of if I died first. Unfortunately, my wife passed away last year. Rather than let the policy lapse, I thought I would keep it in place for my children. I recently read an article, however, that said life insurance is taxable when the insured on the policy dies. What does this mean?...
