• Living Will (aka “Directive to Physicians”, “Health Care Directive”, “Medical Directive”): A legal doc in which you state your wishes about life support and other kinds of medical treatments. The document takes effect if you can't communicate your own health care wishes.

  • Durable Power of Attorney for Health Care (aka “Medical Power of Attorney”, “POA for Health Care”, “Designation of Surrogate”, “Patient Advocate Designation”): A legal document in which you give another person permission to make medical decisions for you if you are unable to make those decisions yourself.

  • Advanced Health Care Directive: A legal document that includes both a health care declaration and a durable POA for health care.

  • Health Care Agent (aka “Attorney-in fact for health care”, “Patient Advocate”, “Health Care Proxy”, “Surrogate”, “Health Care Representative”): The person you name in your durable POA for health care to make medical decisions for you if you cannot make them yourself.

  • Durable POA for finances: A legal document in which you give another person authority to manage your financial affairs if you become incapacitated.

  • Probate: the legal process by which a court oversees the distribution of property left by a will. During Probate, your assets are identified, all debts and estate taxes are paid, fees for lawyers, appraisers, accountants, and for filing the case in court are paid, and the remaining property is finally distributed to your inheritors. The average probate proceeding drags on for at least a year before the estate is actually distributed. Probate is the legal process that includes:

    • Filing the deceased person’s will with a local court.

    • Identifying and inventorying the deceased person's property.

    • Having that property appraised.

    • Paying off debts, including estate tax- if any.

    • Having the will proved valid to the court.

    • Distributing what's left as the will directs.

    • If the deceased person didn't leave a will, or if the will isn't valid and the deceased did not leave the property in any other way, such as through a living trust of joint tenancy, the estate must still go through probate.

    • Whatever bills the deceased had- often not many- are readily paid out of the property left.

    • In unusual situations, probate can be useful. If your estate will have many debts or claims by creditors, probate provides a forum for resolving those claims with relative speed and certainty. And if creditors who are notified of the probate do not file claims within a set period (usually a few months), the claims are barred forever.

  • Community Property (CA): Spouses share ownership of most property, even if only one spouse’s name is on the title slip or deed. In these states, each spouse is free to leave his or her half of the property as desired, but has no control over the other spouse’s half.

    • Joint Tenancy in Community Property States (CA): Most property accumulated by either spouse during a marriage is the community property of both. Spouses can, and commonly do, hold their community property in joint tenancy with each other to avoid probate when the first spouse dies. In these states you can obtain all the benefits of community property ownership, plus the important advantage that if the deceased spouse’s share of community property doesn't have to go through probate. Instead, the surviving spouse owns it automatically.

  • Common Law (FL, VA, DC): The spouse whose name appears in the ownership document owns that property. However, unlike community property states, these states provide that each spouse has a legal right to claim at least a minimum portion of the other’s property at death, even in if the deceased spouse left it all to someone else. The spouse who earns money or acquires property owns it separately and solely, unless, of course, he or she transfers it into shared ownership.

  • Spendthrift Trust: Where a trustee controls the money (principal) and can draw on the trust principal only if the trustee agrees they need it for educational, medical, or other essential needs.

  • No Contest Clause: A clause that states that any beneficiary who challenges a will, gets nothing if the challenge is unsuccessful.

  • Tenancy by the Entirety (VA, HI, DC, FL, PA): Property owned in tenancy by the entirety does not go through probate when one spouse dies; it automatically goes to the surviving spouse. If someone sues one spouse and wins a court judgement, in most states the creditor cannot seize and sell the tenancy by the entirety property to pay off the debt.

Estate Planning

  1. Prepare your Estate Plan

    1. Make arrangements for handling your financial and medical affairs if you become incapacitated and unable to make these decisions yourself.

    2. Decide what you want done with your body after you die.

    3. To handle money matters if you become incapacitated, you can prepare a document called a “durable power of attorney for finances.”

  2. Create an Estate Plan

    1. Choose an Executor (you can name co-executors):

      1. Your executor is responsible for arranging probate and supervising the transfer of your will property to your beneficiaries.

      2. If your estate is over the estate tax threshold, your executor is responsible for filing a federal estate tax return- and a state estate tax return, if it is required

    2. Create a Will: In your will, you name your executor, the person with legal authority to administer the transfer of your will property and represent your estate.

      1. A will is a backup to a comprehensive estate plan.

      2. Property left by a will must go through Probate.

      3. At a minimum, a will is a backup device essential to the transfer of any property that somehow wasn't transferred by other methods, such as property you overlooked or that you unexpectedly acquire after setting up your probate-avoidance devices.

      4. If you have a will, that property will go to your residuary beneficiary, who, by definition, takes the rest of your property- that is, everything that isn't left to some specific named beneficiary.

      5. What property cannot be transferred by will?

        1. Property in a Living trust

        2. Property in joint Tenancy

        3. Money in informal bank account trusts or POD accounts.

        4. Life insurance proceeds payable to a named beneficiary.

        5. Funds remaining in retirement plans, including pensions, 401ks, IRAs, and profit sharing plans payable to named beneficiaries.

      6. What Makes a Will legal?

        1. You must be at least 18 years old.

        2. You must be of “sound mind.”

        3. The will must be type-written.

        4. The will must have at least one substantive provision.

        5. You must appoint at least one executor.

        6. You must date the will.

        7. You must the sign the will in front of two witnesses. Witnesses need only be 18, of sound mind, and people who won't inherit under the will.

        8. Witnesses watch you sign your will and then sign it themselves. They must be told that it's your will they are signing, but they don't have to read it or be told what it contains.


    3. Create a living trust:

      1. In it, you name yourself as trustee to manage the trust property and a successor trustee (usually a family member or close friend) to distribute the property when you die. You also name the trust beneficiaries, who receive the property when you die.

      2. The Job of the Successor Trustee

        1. The Primary Job of the successor trustee is to turn trust property over to the beneficiaries you have named. No court approval is required, and normally this task is not difficult if the property and beneficiaries are clearly identified.

        2. The successor trustee obtains several certified copies of the death certificate of the grantor and presents, with a copy of the living trust document and proof of their own identity, to financial institutions, brokers, and other organizations that have possession of trust assets.

        3. If any documents of title must be prepared to transfer trust property to the beneficiaries, the successor trustee prepares them. For example, to transfer real estate to the beneficiaries, the successor trustee prepares, signs, and records (in local land records office) the following documents:

          1. A deed showing the beneficiaries as the new owners.

          2. A short statement (declaration) stating that the original trustee (the grantor) has died and the successor trustee has taken over.

        4. In addition to dealing with the property subject to formal ownership (title) documents, the trustee supervises the distribution of all other trust assets- household furnishings, jewelry, heirlooms, collectibles- to the appropriate beneficiaries. The trust ends when all beneficiaries have actually received the trust property left to them in the trust document.

      3. Notifying Trust Beneficiaries

        1. A number of states (VA, CA, CO, DC, FL) have passed laws requiring the successor trustee of a living trust to notify all trust beneficiaries when the trust has become irrevocable- that is, when the grantor dies.

        2. The successor trustee must also provide a copy of the trust to the trust beneficiaries, at least to those who request a copy.

        3. Whatever state you live in, your successor trustee would be wise to notify all trust beneficiaries, in writing, that the trust has become irrevocable and to provide other basic information about the trust. Here are some facts commonly included in the notice

          1. The name and date of death of the trust creator.

          2. The date on which the creator signed the trust.

          3. The name, mailing address, and phone number of the successor trustee.

          4. A statement that the recipient (a trust beneficiary) can receive a copy of the trust by notifying the trustee.

          5. When you prepare a backup will, name your successor trustee to serve as executor too. If a different person fulfills each function, conflicts could arise.

      4. For purposes of transferring title into the trustee's name, there are two types of property: those with ownership (title) documents and those without.

        1. Property without Ownership (title) documents: Many types of property do not have title documents, including all kinds of household possessions and furnishing, clothing, jewelry, furs, tools, most farm equipment, antiques, electronic and computer equipment, works of art, bearer bonds, cash, precious metals, and collectibles. You transfer these items to the trust simply by listing them on a trust schedule.

        2. Property with Ownership (title) documents: It is vital that all items of trust property that have ownership documents (title papers) be registered in the trustee's name. Your living trust won't affect any property with an ownership document that is not registered in the trustee's name. This includes: real estate, bank accounts, stocks and stock options, most bonds including US govt securities, corporations, limited partnerships, and partnerships, money market accounts, mutual funds, safe deposit boxes, vehicles.

      5. You can amend or revoke your living trust at ANY time.

      6. Revoking your Living Trust

        1. You can revoke at any time for any reason. This must be done in a signed document.

    4. Various Probate Avoidance Tools:

      1. Living Trust: Allow you to retain full control over trust property while you live. After your death, your living trust property is transferred quickly to your beneficiaries.

      2. Joint Tenancy: a form of shared property ownership with the key element of that the surviving owner of joint tenancy property automatically inherits the share of a deceased owner.

        1. Great for long-term couples owning property together, but usually not a good substitute for a living trust later in life, because each joint tenant can normally sell their interest. There may be gift taxes involved in creating joint tenancy and putting property in joint tenancy.

      3. Community Property with Right of Survivorship (CA).

      4. Transfer on Death Car Registration (CA).

      5. Transfer on Death registration for securities (CO).

      6. Pay on Death (POD):

        1. Limited to bank accounts and some government securities.

        2. Allow you to name a beneficiary to quickly and easily receive, without probate, assets such as bank accounts or stocks when you die.

        3. Most states have adopted laws allowing the use of Transfer on death registration for securities- stocks, bonds, and brokerage accounts.

        4. After your death, the beneficiary can promptly obtain whatever money remains in the account simply by presenting the bank with proof of ID and a certified copy of the death certificate.

        5. Estate Taxes: The money in a POD is included in the taxable estate.

        6. If you register your stocks, bonds, securities accounts, or mutual funds in a transfer on death form, the beneficiary or beneficiaries you designate will receive these securities promptly after your death.

      7. Transfer on Death Deeds for Real Estate

      8. Naming a beneficiary to pension plan or retirement account

        1. Limits can be imposed by specific policy or plan.

      9. Life Insurance.

        1. Good way to provide quick cash for beneficiaries or to pay estate taxes.

        2. Life insurance proceeds go directly to the policy beneficiary, without going through probate.

        3. Different Types

          1. Term: Provides insurance only for a set period, and some form of permanent insurance, which the company can never cancel as long as the premiums are paid. Over time, permanent insurance builds a cash value, which produces returns.

            1. Example: A 5 year $130,000 term policy pays off if you die within five years and that's it. If you live beyond the end of the term, you get nothing.

            2. Term is the cheapest form over a limited number of years and is Particularly suitable for younger people with families, who want substantial coverage at low cost.

          2. Whole Life: Provides a set dollar amount of coverage that can never be cancelled, in exchange for fixed, uniform payments.

          3. Variable Life: Policies in which cash reserves are invested in securities, stocks, bonds. In a sense, these policies combine an insurance feature with a mutual fund.

          4. Annuities: A policy in which an insurance company contracts to pay the policy beneficiary a certain cash amount each year, or month, instead of one lump sum upon death.

      10. IRAs

        1. Individual Retirement programs, such as IRAs, profit-sharing plans, or 401k plans, allow you to leave any money remaining in the account to a named beneficiary. The money is transferred outside of probate.

    5. Revise your Estate plan when:

      1. You sell or give away property listed in your will or living trust.

      2. You get married.

      3. You get divorced.

      4. A child is born.

      5. A beneficiary dies.

      6. Your financial situation changes dramatically.

      7. You move to a new state.

      8. You acquire significant property.

      9. You want to change the successor trustee of your living will or the executor of your will.

  3. When Death Occurs:

    1. Obtain the Death Certificate

      1. Whenever a person dies, a physician must complete a death certificate shortly after the death and file it with the appropriate governmental agency, often a local registrar of health. Those responsible for winding up a deceased person’s affairs will need certified copies of the death certificate to transfer certain types of property to inheritors.

    2. Collecting the Proceeds of a Life insurance policy

      1. They can be collected after the insured person’s death by submitting an insurance company claim form and a certified copy of the insured person’s death certificate to the company. The beneficiary may also have to file a copy of the policy and proof of ID as the named beneficiary, as required. In some states with state estate or inheritance taxes, insurance proceeds above a certain amount cannot be released until the tax officials approve.

    3. Obtain a Title to joint Tenancy Property

      1. To get the deceased owner's name off the ownership document so that the surviving joint tenants are on record as legal owners, they must:

        1. Establish that the joint tenant has died by filing a copy of the death certificate with the appropriate government official or recorder of title.

        2. File a document establishing that the surviving owners are the sole owners to the property.

    4. Notify people in Trust/Will/Plan.

    5. Estate and Gift Taxes:

      1. You will likely learn that no federal estate tax will be assessed against your estate. Federal law exempts a certain amount of property from tax. For 2009, an estate worth less than $3.5million is exempt from federal tax.