What is probate?
Probate is the court and process that looks
after people who cannot make their own personal, health care and
financial decisions. These people fall into three general categories:
minor children (under age 18 in most states); incapacitated
people who have died without legal arrangements to avoid
probate. Probate proceedings in some states can be expensive and
time-consuming. Additionally, the court proceeding and associated
documents are all a matter of public record. Many people choose to avoid
probate in order to save money, spare their heirs a legal hassle, and
keep their personal affairs private.
What is joint tenancy with rights of survivorship?
This is the most common form of asset
ownership between spouses. Joint tenancy has the advantage of avoiding
probate at the death of the first spouse. However, the surviving spouse
should not add the names of other relatives to their assets. Doing so
may subject their assets to loss through the debts, bankruptcies,
divorces and/or lawsuits of any additional joint tenants. Joint tenancy
planning also may result in unnecessary death taxes on the estate of a
married couple. You will often see the acronym "JTWROS," Joint Tenants
With Right of Survivorship" on the title of the account or asset.
What is a will?
The document a person signs to provide for
the orderly disposition of assets after death. Wills do not avoid
probate. Wills have no legal authority until the willmaker dies and the
original will is delivered to the probate court. Still, everyone with
minor children needs a will. It is the only way to appoint the new
"parent" of an orphaned child. Special testamentary trust provisions in
a will can provide for the management and distribution of assets for
your heirs. Additionally, assets can be arranged and coordinated with
provisions of the testamentary trusts to avoid death taxes.
What is a living will?
Sometimes called an advance medical
directive, a living will allows you to state your wishes in advance
regarding what types of medical life support measures you prefer to
have, or have withheld/withdrawn if you are in a terminal condition
(without reasonable hope of recovery) and cannot express your wishes
yourself. Oftentimes a living will is executed along with a durable
power of attorney for health care, which gives someone legal authority
to make your health care decisions when you are unable to do so
What does intestacy mean?
If you die without even a will (intestate),
the state legislature has already determined who will inherit your
assets and when they will inherit them. You may not agree with their
plan, but roughly 70 percent of Americans currently use it.
What are beneficiary designations?
You may avoid probate on the transfer of
some assets at your death through the use of beneficiary designations.
Laws regarding what assets may be transferred without probate
(non-probate transfer laws) vary from state to state. Some common
examples include life insurance death benefits and bank accounts.
What is durable powers of attorney and when do I need one?
These allow you to appoint someone you know
and trust to make your personal health care and financial decisions even
when you cannot. If you are incapacitated without these legal documents,
then you and your family will be involved in a probate proceeding known
as a guardianship and conservatorship. This is the court proceeding
where a judge determines who should make these decisions for you under
the ongoing supervision of the court.
What is a revocable living trust?
This is an agreement with three parties: the
Trustmakers, the Trust Managers, and the Trust Beneficiaries. For
example, a husband and wife may name themselves all three parties to
create their trust, manage all the assets transferred to the trust, and
have full use and enjoyment of all the trust assets as beneficiaries.
Further "back-up" managers can step in under the terms of the trust to
manage the assets should the couple become incapacitated or die. Special
provisions in the trust also control the management and distribution of
assets to heirs in the event of the trustmaker's death. With proper
planning, the couple also can avoid or eliminate death taxes on their
estate. The Revocable Living Trust may allow them to accomplish all this
outside of any court proceeding.