Frequently Asked Questions
Klenk Law specializes in trusts, wills, estate planning, probate, and will challenges and will contests, with offices in Philadelphia, Bucks County, Allentown, New York and New Jersey.
A will is perhaps the most important legal document the average person will ever sign. It is an instrument that, upon your death, controls who gets your property, who will be the guardian of your children, and who will manage your estate.
dying without a will you are “intestate”. This means that the state, not you, decides how your property is to be distributed. Every state has its own rules and you should consult with an attorney about your specific state’s rules, but typically states have adopted rules similar to this:
First, all your jointly held property passes to the other joint owner. Then, all of your community (if you live in a community property state) passes to your spouse (if you have one). Second, your separate property will pass according to these rules:
* If your spouse survives you, your spouse receives:
– All of your property if you leave no children, parents, siblings, nieces or nephews.
* All property not given to your surviving spouse is distributed to the following persons, in this order:
– Your children in equal shares, or if you have none to their issue, or if you have none;
The rules of the states vary, but typically there are only two primary requirements for a valid will:
1. Soundness of Mind: The person signing the will cannot be mentally ill or disabled and must be acting of his or her own free will, without undue influence from others.
2. Witnesses: At least two people (three in some states) must watch you sign the will. They cannot be related to you and cannot be entitled to receive anything under the will.
In most states you will want your will to include a Self Proving page. This page is notarized and then allows you’re the executor to file the will without the witnesses being present.
Probate is the process of filing the will with the state and gaining recognition as the Executor. If there is no will, it is the process in which someone is appointed as Administrator for the estate. In some states this is a quick, easy process but in some states it is not. It also provides the platform to challenge a will should you believe the will is invalid.
Probate can be avoided by the use of trusts or joint ownership of assets. Sometime this is a good idea and sometimes it is not. Your unique set of circumstances will dictate the best course of action.
In a typical will, there are two types of gifts: specific gifts and general gifts. Specific gifts, which leave a particular object to someone, are optional – but they are the first gifts that are bestowed from a will. For example, a specific gift might read: “I leave to my daughter Maria my engagement ring.” You can also choose to forgive a specific debt that someone owes you.
A general gift leaves a percentage of all that remains after the specific gifts are made. The residual heir or heirs (residue being what is left after the specific gifts) usually receive the bulk of the estate after the smaller gifts and valuables are distributed. Usually, the residual heirs are the will maker’s spouse or closest relatives. Each will must have at least one residual heir.
If you die your minor children will be traumatized enough without being put through custody hearings. If you have minor children, naming a guardian for them is one of the most important considerations in your will. Typically, if one parent dies, the surviving parent will remain responsible for the children. However, complications arise if both parents die simultaneously, or if one parent has re-married. Unless you name guardians for your minor children in your will, the court decides who takes custody of the children in those situations.
If you have a spouse who is legally the mother or father of a child, then in most cases you should appoint the spouse as guardian. If you choose to appoint someone else, the court will balance your desires with what is in the best interest of the children. For example, if you remarried and you want your current spouse (and not the natural parent of the child) to be the guardian, you may want to state your reasoning on why your current spouse would be better for the children.
Guardians are responsible for a child’s health, education and other daily needs. They may also be given the responsibility of managing a child’s property. You may find it wise to place the guardian in charge of your minor child’s assets or, you may find it wise to nominate a third party as trustee over the minor child’s assets. The trustee then acts as a buffer between the money and the guardian.
Upon death a person’s property is first used to pay for probate and funeral expenses, then to pay debts. Generally, all debts must first be paid before assets are distributed. Your outstanding credit card balances, for instance, will be paid before gifts are distributed to your heirs.
A major exception to this general rule is for “secured debts,” such as home loans or auto loans. In the case of secured debts, property can be distributed with its debt. In other words, let’s say you have a car worth $10,000 and have a loan on the car of $5,000. You can leave the car to someone, but it will be that person’s obligation to pay off the loan.
What happens if you owe more than you own? In general, people cannot inherit another person’s debts. If there is not enough cash to pay your debts, then all property will be sold to pay the debts, and no one will inherit anything. For example, say that you owe $12,000 in credit card debt but only have cash and property worth $10,000. In that case, the property will be sold by the court, and only $10,000 will be paid to the credit card issuer.
What if someone owes you money? This money would usually be collected and added to your overall estate. However, you can always choose to forgive debt in a will. This would be similar to a specific gift, but instead of leaving something to someone you would be forgiving a specific debt.
Some states have enacted Homestead Laws. A homestead is the permanent home of a person who: (1) is married and/or has minor children; and, (2) owns the property in his or her name alone. Homestead laws generally state that the family home will become the property of the surviving spouse and minor children, free of the claims of creditors.
Most Homestead laws state that if you have real estate that is a homestead, your will has no control over it. Upon your death, your homestead will automatically pass as follows:
1. If you have both a spouse and minor children, your spouse gets the right to live in the home for the rest of his or her life, and your children get the home upon your spouse’s death.
2. If you have a spouse and no minor children, your spouse gets the home, no matter what your will says.
3. If you have minor children but no spouse, your children get the home in equal shares, no matter what your will says.
An exception to the above rules occurs when you have a spouse and adult children. In this case, you may leave your home to your spouse alone.
Whether a home is legally a homestead can be a difficult legal question. Because homestead property is property owned by one person alone, any property held jointly, as community property or in trust does not fall under these rules. If you do not want your home to be considered a homestead, you should set up title to the home jointly, or set up a living trust. It might be a good idea to consult an attorney if you cannot determine whether your home is homestead property.
Trusts are wonderful tools. If properly drafted a trust can allow your heir to access the gift you leave them but protect the gift from their spouses, creditors and from future death taxes.
If you heir will not immediately spend the gift you are giving them, there is a good chance that the gift is best placed in trust with the beneficiary named as his or her own trustee. There is no need for a bank or attorney if the trust is properly drafted.
Simply put, a trust is an arrangement where one person, the Grantor, gives some property (cash, real estate, etc.) to a another person (Trustee) to be held for third person (beneficiary). A trust can be very simple or very complex.
You can make change or revoke your will at any time. There are, however, some very important rules to follow.
One way to make changes to a will is to make a codicil, which is an amendment to a will. Another way is to make an entirely new will, which revokes and takes precedence over any older wills. A codicil is a separate document and must be signed and witnessed just like a regular will. Because of these formalities, it is usually easier just to make a new will.
Be sure not to make any changes or markings on your will after it has been witnessed and signed. This is absolutely vital. If you cross out a person’s name or add writing to a will that has already been signed, you risk making the whole will invalid.
To revoke a will without making a new one, all you have to do is intentionally tear it up, deface it, burn it or destroy it. If this is done accidentally, then the will is not revoked.
Many states have passed laws that automatically modify your will if you (1) get married; (2) get divorced; or, (3) have or adopt children.
Some of these laws state that if you get married after making your will and do not rewrite it, your new spouse automatically gets a share of your estate. The share is the same as if you never wrote a will in the first place. Exceptions to this rule are if you have a prenuptial agreement, if you made a provision in your will for your spouse, or if you wrote in your will that you specifically intended not to mention your prospective spouse.
Some of these laws state that if you get divorced after you write your will, your ex-spouse is automatically deleted from his or her share of the will. However, you should probably not rely on this and rewrite your will. Otherwise your ex-spouse may contest the will, costing your estate a lot of money to defend.
Some of these laws state that if you have a child after making your will and do not rewrite it, the child gets a share of your estate as if the will were never written in the first place.
Estates are subject to two kinds of taxes: Federal Estate Tax and State Death Tax.
Though the rules are currently in flux, the Federal Estate Tax has a minimum of 18% and a maximum of 55%. There is, however, an exemption from this tax if the value of your estate is below a certain threshold. The exemption amount varies depending on what year you die. In 2003, for example, an estate worth less than $1,000,000 would not be subject to estate tax. This exempt amount is increasing annually as follows:
* 2002 – $1,000,000
The future of the estate tax is uncertain. Under current law, there will be no estate tax in 2010 – in other words, the exempt amount will be unlimited. This phase-out, however, could be short-lived; the estate tax is scheduled to be reinstated in 2011 unless further legislative action is taken.
In some states (such as California), if you do not owe Federal Estate Tax then you do not owe state death taxes either. If you do owe Federal Estate Tax, then a portion of that amount would be paid to the state to satisfy the death tax. Your total tax liability would therefore remain the same.
Example: If your estate is worth $1,100,000 in the year 2003 (thus, $100,000 over your exemption), then your total tax liability would be $23,800, divided in the following manner: $23,240 in federal taxes and $560 in state death tax (for a total of $23,800). The exact amount of these taxes is based on schedules provided by the government and varies state by state. You can go to the following website to figure out your tax liability: www.IRS.gov.
Because the United State’s Constitution requires the legal documents of one state to be recognized by the others, if a will was validly made while you were living in another state, it is probably valid in your new state. However, if your will was not “self-proved,” it may not be accepted by certain courts until the witnesses sign an oath swearing that they saw you sign your will. Because of the expenses involved in finding your witnesses, it is probably best to rewrite your will after moving to another state.
A handwritten will is called a “holographic will.” It is valid in about 25 states so long as all material provisions and clauses are entirely handwritten. However, because errors are common in holographic wills and because they often cause delay in administering estates, we do not recommend them. The court can be unusually strict in determining whether a holographic will is authentic. More importantly, we do not recommend that people revise their wills by hand.
Most states do not provide a place for you to file your will during your lifetime. Even if your state does provide this service, you are not obligated to file your will with a court or other governmental authority immediately after you sign it. Upon probate, however, the will must be filed with the court and will become public.
In most states, unless you have a post or prenuptial agreement, your spouse has a right to a portion of your estate, even if you disinherit your spouse in your will. But in most states you can disinherit your children.
Some states have enacted laws giving special protections to minor children. For instance, your state may have a law stating that you cannot give your home to someone else if your minor child will have to move from the home.
After you sign your will, you should keep it in a safe place that is easily accessible. Our clients will often store their original documents in our fireproof files where they cannot be easily destroyed or stolen. Be sure that the person you appointed as your personal representative knows where you placed your will. If you store your documents in our fireproof files, the executor need only prove that you have died and the documents are then released to them.
Your bank is an excellent place to locate not only a notary, but also witnesses for your documents.
As long as a Will has satisfied all the requirements set forth by the state in which your live or the state in which you sign the Will, the Will is valid. No state has made having a lawyer draft the document be a requirement of a valid Will. The problem, of course, is that unless you regularly work as an Estate Planning Attorney you likely do not know what is required to make a valid Will or Trust. A lawyer that focuses exclusively on Wills and Trusts can help make sure your wishes are followed after your death.
No. Jointly Held assets pass to the other joint owner at your death and “In Trust For” assets will pass to whomever you have designated as the beneficiary. It is a common, erroneous, mistake to believe that if you draft a Will that its terms cover an IRA, Life Insurance Policy or a Bank Account that names a beneficiary. Your Lawyer should work with you to review all your accounts, deeds and IRAs to make sure your assets pass to the correct person at your death.
Yes, if done properly. This is a rather complex area of the law and the terms in your Will must be exact. But, if done properly a Special Needs Trust can be created to care for a Special Needs Person while keeping the Person on their existing government programs.
Yes, but be careful, as your family will likely not contact your Estate Planning Lawyer or look at your Will until after your funeral. Make sure that your plans are in your Will and are known to key people who will be contacted at your death.
Will reviews are situational, but as a general rule you should review Will terms annually. At our firm we send you a summary of your Will’s terms at least twice a year and do not charge for an in-person Will review if there are no changes.
The terms of your Will and the Estate Planning techniques used can certainly reduce or even avoid Estate and Inheritance Taxes. This is a very complex area of the law and you should work closely with your Estate Planning Lawyer.
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