Many people procrastinate with respect to their estate planning needs. Nobody should do that. You need an estate planning attorney to review your estate before something unexpected happens.
As an estate planning attorney, I can tell you that many people have been caught unaware by an unexpected death or event they hadn’t planned for that made their estate settlement more painful and expensive than it should have been. Proper estate planning with an estate planning attorney can ward off the pain of an unexpected tragedy.
Our experienced estate planning attorneys will help you figure out what estate planning documents best fit your wants, needs, and circumstances.
Community Property vs. Separate Property
If you are unmarried, all of your property is classified as your “separate” property. The concept of “community” property is inapplicable to unmarried persons.
If you are married, there potentially exists three classes of property owned by the married couple: his separate property, her separate property, and their community property. (“Community” property merely means that both spouses have an ownership interest in the property.) With some exceptions, all property (including income) acquired by either spouse during the marriage is presumed to be community property. (The manner in which title to the property is taken is immaterial. So, e.g., if the married couple purchase a home during their marriage, yet the home is deeded in the mane of only one of the spouses, the home still will be presumed to be community property.) Examples of exceptions to the presumption of community property include gifts and inheritances received solely by one of the spouses; those are classified as the separate property of the receiving spouse. All property not classified as community property is classified as the separate property of the spouse who acquired it. That normally includes all property acquired by the spouse prior to commencement of the marriage.
The married couple can enter into an agreement to have their property accumulations classified differently than described in the preceding paragraph. Such an agreement is called a Community Property Agreement (although, technically, it more property should be called a Community & Separate Property Agreement). In their Community Property Agreement, the married couple can specify which items of their past, present, and future property accumulations they will classify as their community property and which of those property items they will classify as their respective separate properties. The Family Court (in the case of a divorce) and the Probate Court (in the case of the death of one of the spouses) must hone the specifications set forth in the couple’s Community Property Agreement. Much of this is also present in Family Law.
What Happens to Your Property When You Pass Away Without a Valid Will?
This discussion in this section assumes your property is now owned by a valid Trust. Trusts are discussed in another section below.
When you die without having a valid Will in effect, you are said to have died intestate. (“Intestate” means “without a Will.”) In its “intestate succession” statute, our Legislature has provided a distribution scheme which mandates to whom a deceased intestate’s net property shall pass. (“Net” property is that property that remains after the deceased’s debts are paid.) Under our intestate succession statute, if you die without having a valid Will in effect, your net property shall pass as follows:
If You are Married When You Die: When a married person dies, each item of property (e.g., real estate, personal property, cash, investments, and etc.) in which the deceased had an ownership interest must be identified as either the couple’s “net community property” or the deceased’s “net separate property.” (Of course, your surviving spouse already owns her share of the net community property and all of her net separate property.) The intestate succession statute mandates that the Probate Court shall award solely to your surviving spouse the following portions of your net property interests:
- 100% of your share of the net community property and
- between 50% and 100% of your net separate property (depending upon whether you died with certain other close relatives surviving you).
In the event that some portion less than 100% of your net separate property is awarded to your surviving spouse, the Probate Court shall award the remaining portions of your net separate property as described in the following section.
If You Are Unmarried When You Die: This section applies to (1) 100% of your net property if you are unmarried when you die or (2) the remaining portion of your net separate property which is not awarded to your surviving spouse, as described in the preceding paragraph. The Probate Court shall award such property as follows:
- 100% to your “issue” (your children, grandchildren, great grandchildren, etc.) – in portions specified by the intestate succession statute; or
- if you died without any surviving issue, 100% of your parent(s) who survive you; or
- if you died without any surviving parents, 100% to your parent’s issue (their children, grandchildren, great grandchildren,etc.) who survive you – in portions specified by the intestate succession statute; or
- etc. The statutory intestate succession scheme goes on and on – so that, in all likelihood, your property will be awarded to some living relative(s), so that your property won’t have to “escheat” (be forfeited) to the State.
If you want your net separate property and your share of the net community property to pass to surviving people in any other way whatsoever, you must specify your desires in a valid Will.
An Estate Planning Attorney Can Assist in Your Last Will and Testament or any Codicils
As just mentioned, you can entirely avoid the effect of the intestate succession statute by executing a valid Will. When you die with a valid Will in effect, you are said to have died testate. (“Testate” means “with a Will.”) Thus, with your valid Will, you can bequeath to whomever you want both (1) 100% of your share of the net community property (which is applicable only if you are married when you die) and (2) 100% of your net separate property (which is applicable regardless of whether you are married when you die). There are many factors which must be taken into consideration to ensure that your Will will be regarded by the Probate Court as “valid,” so it is best for you to have us, as your estate planning attorney, prepare your Will for you.
An Estate Planning Attorney Can Provide Counsel on Trusts, are Trusts for You?
There are many, many different kinds of trusts which can be formed, including, without limitation, bare trusts, discretionary or accumulation trusts, heritage or charitable trusts, interest or possession trusts, mixed trusts, non-resident trusts, parental trusts for minors, settler-interested trusts, vulnerable beneficiaries trusts, special needs trusts, marital or “A” trusts, irrevocable life insurance trusts, charitable lead trusts, charitable remainder trusts, generation-skipping trusts, qualified terminable interest property trusts, grantor retained annuity trusts, and etc. New kinds of trusts pop up every now and then. Many kinds of trusts are created as a result of changes in the federal lax laws. Because federal tax laws are changing all the time, you should consult with your CPA or other tax advisor to determine which kind of trust best suits your tax needs before having us, as you estate planning attorney, prepare the trust documents for you.
The person who creates the Trust is called a Trustor. A Trust, like a Will, is created with a written document. The written Trust document creates a fiduciary arrangement that identifies a person or institution – the “Trustee” – who holds “bare legal title” to the Trust assets for the “beneficial ownership interest” of the Beneficiaries of the Trust. In order to have any financial meaning, the Trust needs to be funded with assets. That can be accomplished by titling the assets (e.g., real estate, bank accounts, investment accounts, vehicles, etc.) in the name of the Trust.
There are some benefits of titling your property in the name of a Trust, rather than having your property pass pursuant to a Will or the intestate succession statute. For example:
- In order to probate your property – either pursuant to your Will or the intestate succession statute – your survivors must initiate a probate case with the Superior Court. That process, like most court processes, is open to the public (and the public can get copies of the court filings in the case). On the other hand, any of your property that is titled in the name of your Trust is not part of your “probate estate” – meaning that a public probate case in the Superior Court will not be necessary to determine who owns that property after your death. So, you can increase your survivor’s privacy interests, and reduce their court costs, by having your property titled in the name of your Trust.
- If your property is going to pass to others pursuant to either your Will or the intestate succession statute, it will all pass at once, to whomever the Probate Court determines are the correct heirs. That might result in your 18-year-old child getting several hundred thousand dollars all at once, at an age at which he likely is not mature enough to properly manage his inheritance. On the other hand, with your Trust, you can direct the Trustee to portion out money to your child over time – e.g., only for his educational and medical needs until your child reaches age 30, at which time he then gets the remainder of the money that is held in trust for him. You can make any kinds of specifications you like for the Trustee to follow. So, with your Trust, unlike a Will, you can control the distribution of your wealth over time.
- The purpose of a Will (or the intestate succession statute) is only to specify who gets what parts of your property after you die. In other words, you don’t address care taking of others in your Will. On the other hand, in your Trust document, part of the duties you can specify for the Trustee to perform may include the care taking of those you care about, like your minor children or elderly parents. So, you have greater subject matter which you can address with your Trust. Also, a Trust is a separate legal entity from the individual Beneficiaries.So, where the Trust is properly set up, the property that is titled in the name of a Trust can be protected from the Beneficiaries’ personal creditors.
There are 2 main categories of Trusts which here deserve further mention. Those are Intervivos Trusts (often referred to as “Living Trusts”) and Testamentary Trusts. Both are created “now,” but they become operative at different times. The remaining discussion about these trusts assumes your name is Mary C. Jones, and you are a single mother with two minor children.
Intervivos Trusts (Living Trusts): “Intervivos” means “while living” or “while alive.” Thus, once created, a Living Trust becomes operative immediately (while you are still alive). Your Living trust will have a name. For example, you might name it “The Mary C. Jones Family Trust.” Because your Living Trust becomes operative right away, you will need to fund it right away. So, e.g., if you are going to fund your Living trust with any real estate, you will need to title the real estate in the name of the trust: “The Mary C. Jones Family Trust.” Similarly, if you want any bank accounts to be owned by your Living Trust, you will need to put those bank accounts in the name of “The Mary C. Jones Family Trust.”
Your Living Trust document prepared by your estate planning attorney will specify who the Trustee will be – and who the Beneficiaries will be. Typically, in the example given, you would have yourself named as the Trustee, with a couple of adult family members named as successor Trustees in the event you are no longer willing or able to serve as the Trustee. Also typically, you would have yourself and your two minor children named as the Beneficiaries. There are several trust provisions that are recommended for all Living Trusts. Beyond that, you are free to specify what additional trust provisions you want included in your Living Trust in order to direct the Trustee to manage the trust property for the benefit of the Beneficiaries.
A Living Trust can be either revocable or irrevocable, and again, your estate planning attorney can help in making that decision. By statute, “unless the terms of a trust expressly provide that the trust is revocable, the trustor may not revoke or amend the trust.” In other words, by default, your Living Trust is legally deemed irrevocable, unless the trust document expressly provides that it is revocable. And, as the statute provides, where your Living Trust is deemed to be irrevocable, as the Trustor, you not only cannot later revoke your Living Trust, you also cannot later even amend your Living Trust (although there does exist a statutory exemption to those prohibitions). Generally speaking, the more irrevocable your Living Trust is deemed to be – in terms of its express writing, the operation of the statute, and the acts of the Trustee and Beneficiaries in actually treating the Living Trust as irrevocable – the more likely the property of your Living Trust will be protected from any creditors of the personal Beneficiaries (including, in ever-decreasing ways, with respect to reimbursements to our State’s Medicaid program). Are you beginning to see how important having an experienced estate planning attorney can be for your future plans?
Testamentary Trusts: A Testamentary Trust, like a Will, does not become operative until you die. Hopefully, that will be many, many years after you create your Testamentary Trust. Because your Testamentary Trust does not become operative until you die, you will not be funding it during your lifetime. Also, because your Testamentary Trust does not become operative until you die, you are free to revoke or amend your Testamentary Trust at any time during your life – so, the concept of “irrevocable” does not apply to your Testamentary Trust.
Typically, your Testamentary Trust is combined with your Will, all in the same document. That way, your Will can be the mechanism by which you fund your Testamentary Trust. In other words, your Will can specify that certain of your property (again, e.g., real estate, bank accounts, investment accounts, vehicles, etc.) is bequeathed to your Testamentary Trust (becomes owned by your Testamentary Trust) upon the occurrence of your death. Then, in probating your Will, the Probate Court will award that property specifically to your Testamentary Trust, which, here too, you might have named “The Mary C. Jones Family Trust.” Such provisions in a Will are referred to as “pour over Will” provisions, because the specified property figuratively is being “poured over” from your Will to your Testamentary Trust upon the occurrence of your death.
In most other aspects, your Testamentary Trust can and will operate the same as would your Living Trust.
An Estate Planning Attorney can Provide Powers Of Attorney
The purpose of a Power Of Attorney document is to designate somebody (your “attorney in fact”) to make decisions on your behalf in the event you are not able to do so. There are two types of Power Of Attorney documents: one for financial decision making and one for health care decision making. You will specify in your Power Of Attorney documents whether you want your attorney in fact’s decision making authority for you to become “effective immediately” or to become effective upon the later event of your mental incapacity.
For example, if you are planning a trip to Europe, then Africa, then South America – and you plan to be gone for 6 months – you may want to execute a Power Of Attorney For Financial Decision Making before you leave, naming your sister or your best friend as your attorney in fact, so that person can manage your financial affairs on the home front while you are away. For another example, perhaps you are not in your 70’s and you are concerned that, if you live long enough, you might one day become mentally incapacitated by dementia, Alzheimer’s, accident, or illness. So, in planning ahead for such a circumstance, you could (1) execute both a Power Of Attorney For Financial Decision Making and a Power Of Attorney For Health Care Decision Making, (2) name a trusted person as your attorney in fact in the documents, and (3) further specify in the documents that your attorney in fact’s decision making authority on your behalf shall become effective only when (and only if) you later become mentally incapacitated. These are critical issues that an estate planning attorney can help you address.
Estate Planning Attorney and Health Care Directive (Living Will)
A Health Care Directive applies only in the event that you become diagnosed (by your attending physician), in writing, to be in a terminal condition or diagnosed (by two physicians), in writing, to be in a permanent unconscious condition – and where the application of life-sustaining medical or surgical treatment would serve only to artificially prolong the process of your dying. For those circumstances, in your Health Care Directive, you specify whether (1) you want to be artificially kept alive with life-sustaining equipment or (2) you want to be allowed to die naturally.
If you choose in your Health Care Directive to be allowed to die naturally, without artificially prolonging the process of your dying, you also will specify in your Health Care Directive whether, while you’re being allowed to die naturally, you desire to receive hydration (water), nutrition (food), and/or pain medication.
Every adult should have a Health Care Directive. You should not want your family members to have to get into arguments, or lengthy and expensive court battles for that matter, in order to make such decisions for you. That would not be good for them, and it would not be good for you, either.
These things we are discussing are BIG life decisions, and having an estate planning attorney properly prepare and execute your wishes prior to life changing events occurring goes a long way towards peace of mind.
An Estate Planning Attorney can Prepare a Transfer On Death Deed
A new estate planning tool was enacted into law in 2014: the Transfer On Death Deed. Essentially, if you own real estate, you can execute a Transfer On Death Deed while you’re still living, naming as the grantee whomever you want to be the owner of the property upon your death. Once you’ve recorded your Transfer On Death Deed, you still own the property while you are alive, and the grantee named in your Transfer On Death Deed automatically will become the owner of the property upon your death – so that the property will not need to be the subject of a probate case upon your death.
“An ounce of prevention is worth a pound of cure.” If you have failed to properly plan for the succession of your property during your lifetime, it will be too late once you pass away. That can result in unwelcome (even disastrous) effects with respect to tax consequences and where your property ends up. The topics addressed above are only a few of the many, many estate and succession planning legal issues with which an estate planning attorney can assist you. Given our abundance of expertise with the great variety of the estate planning options available to you, our attorneys will responsibly guide you through the entire process of setting up those estate planning documents which are best suited for you and your circumstances.
Justice shouldn’t just be for the wealthy, justice was intended for everyone.
Our Tri-cities Estate Planning attorneys service all areas of southeast Washington, including Kennewick, Pasco, Richland, and West Richland, as well as Benton and Franklin Counties. Similarly, our legal services are available to a all of Washington State.
To learn more about our legal services or our lawyers, we invite you to give us a call, or fill out the form on our Contact page.