Canada Money CA

Every year, billions of dollars are transferred from one generation to another in Canada. Unfortunately, many of us don’t take the proper precautions to make sure our wishes are carried out in the event we should pass away. I’ve heard everything from “I don’t want to think about a will right now” to “If I make out a will, I feel like something bad is going to happen to me.” By ignoring the need to draft a comprehensive will, something bad will definitely happen to your family.

Let me be the first to admit: At some point after I publish this article, I am going to die. It will probably be at 105 years old (and due to being shot by a jealous husband rather than natural causes) but it is going to happen. Life is a pre-existing condition with a 100% mortality rate, which means you are going to die too. Hopefully not for a very long time – but it is going to happen.

You do have a choice, though. You can choose:

1. Have an orderly transfer of assets, with the lowest amount of taxes paid, while protecting your family from disputes, debts and heartbreak.
2. Family disputes, debts and heartbreak; allowing the government to intrude into your private affairs, making them as public as possible without the help of neon signs and a loudspeaker.

For the next few Death and Taxes posts, I’ll lay out the most common mistakes we make with estate planning and how to avoid them.

Mistake #1: Not Having a Will

This is the biggest, most common mistake. It’s also the easiest to fix, which is why it simply shouldn’t happen. A will lets everyone know your intentions for your assets and how they will be distributed in the event of your death. It also lets you choose who is responsible for managing the estate (The Executor) and who will be the guardian of any children still under the age of 18. By having a will, your estate should be managed responsibly and you may be able to save money on taxes and probate fees. There are many ways to go about having a will written, but I always, always recommend visiting a competent estate lawyer.

Have a conversation about your wishes for when you pass away and have your lawyer draft a will that fulfills those wishes. I’ve heard grumbling about the price of drafting a will (usually in the $500 range, but the price can go up if your financial and property affairs are more complicated), but think about this for a moment. Consider the time, taxes and grief involved in sorting out an estate that has not been organized by a will. If time is money, it will always be more expensive to not have a will than to have one. If you don’t prepare a will and die intestate, the provincial court will appoint someone to administer the estate. That person usually ends up being a spouse, adult child, grandchild, parents or siblings.

If no one is willing and able to take on the administrator’s role, then the province will appoint someone to take that role instead. This person, the Public Trustee, will:

1. Make funeral arrangements
2. File the tax returns
3. Pay creditors, and
4. Charge fees all along the way.

By allowing a Public Trustee to take over the administration of the estate, you are letting the government dish out your hard-earned money and property. The same government we hardly trust to spend our tax dollars responsibly is now responsible for the entirety of your assets. And charging you a fee to split up your assets in a way that you might not even want.

I don’t think I need to explain any further why going without a will should NOT be an option.

Many Blessings,

Andray Domise
Independent Financial Advisor
Change your life one dollar at a time, with REAL help for building wealth and reducing debt:
http://www.andraydomise.com

Estate Planning FAQ:

Question: Adding a name to a clear deed…..no relation single person with no children any advice estate planning?

Answer: Contact whoever records deeds in your county. There is probably a filing fee and a simple form that can be used in this case. If more is required they can tell you what is needed. If the purpose is to let this person have the property when the other passes be sure to also put on the deed the following: Joint tenants with right of survivorship and not as tenants in common.

Question: Where do I get no cost will and estate planning and forms?

Answer: Books stores sell do it yourself will kits. The library will have books on basic estate planning.

Question: Is an elder law atty and an estate planning atty the same?

Answer: No. Elder law attorneys specialize helping the elderly deal with their assets and, in particular, help them plan their estates in ways to best make them eligible for entitlements or enter nursing homes etc.

Estate planning attorneys specialize in assisting folks, of any age, plan to transfer their assets at and before death in ways to both give the assets to loved ones and to minimize tax burdens.

Question: Estate Planning or lack of it?
My Uncle is 90. My brother, sister and myself are heirs to the estate. My father is the executor and has power of attorney. Other than the usual $12000 yearly gifting no planning has taken place. I understand the estate tax laws change in 2010. What should we do?

Answer: Speak with a financial planner with expertise in estate planning immediately. A will is ok, but if you are talking about $2.5 mill you need to consider options like a family trust. There are 2 reasons for this:

#1) a Will is public knowledge…anyone can open the paper and see when a will reading is.

#2) A Will is contestable in the courts.

If there is no other documentation a will is a good thing, but in a case of a somewhat large amount of an estate like this, you need an estate planners advice to create a plan for any potential tax bill’s that might be passed on when the estate changes hands, etc.

If your uncle is 90, get on the horn right now and get some kind of plan in place.

Question: Looking for ideas for estate planning when you have no children.?
I have no children and in the event that my husband dies before me, I don’t know who to will my belongings to. There are no nieces or nephews, either. I don’t own much but I do have a few nice things.

Answer: Do you have any other living relatives? You can give them your items but if you don’t want to, you can always bequeath it to a close friend or a charity that you like…perhaps UNICEF or WWF (World Wildlife Fund)?

Question: Anybody have experience or recommendations on self prepared estate planning (will kits, etc)?
Which are best and do they stand up?

Answer: It depends on your estate…if you have a large one, hire an attorney to prepare one. If you have a small estate, then here are some recommendations:

1) Nolo Press;
2) If you’re in California, the California State Bar has a free will on their website.

Question: Info on estate planning / pre-planning funeral?
Trying to create a checklist of all I’d need to pre-plan for funeral etc – estate planning info. Recently lost a relative so subject is on my mind – and would like to be sure that our lives are properly organized so that if (when!) it’s TheEnd it would be less stressful for family members. Hopefully they will be very old family members by then! In addition to info about wishes for funeral, organ donation, etc., and location of bank account, mortgage etc – what else does one need to have in order?

Answer: You should have a will drawn up with codicils regarding who gets what at the time of your death. Also, and very important, you should decide about a Living Will. Do you want to have extreme measures taken to save your life if necessary? Or just let nature take its course. In case of an auto accident, for instance, this could mean a great deal to your family. They’d know what your wishes were.

Question: How should we set up our estate planning with two sets of grown children from previous marriages?
We don’t want to exclude our children but they really don’t see eye to eye with each other. Should we just include the grand children? Some parents won’t use the money for them. Yet some of our children think we should leave it to them divided up 8 ways. Can you help? It will be in the range of several thousands.

Answer: Consult an attorney and a Financial Planner, esp. one that focuses on the psychological side of estate planning. While I do agree to an extent that this is your estate and your collective children should not dictate your choices; you will obviously care what their opinions are. Discussions of mortality and money can be tense in the best of circumstances, but it sounds like the contention between your children and your spouse’s children add another layer to this.

Working with an estate planner will help you and your spouse explore exactly what you want to happen and what problems might arise. The he/she will help design an estate plan that takes those items into consideration.

Occasionally, I’ll have someone admit grudgingly that it makes sense to draft a will, but then they perform a near 180 by saying “I’ll just buy a will kit from Grand & Toy.” Or worse, “I’ll just write one up myself and leave it in the jewelry box.”

Look, if you’re going to do this, do it properly. Drawing up a will by your own hand (“Holographic Will”), can cost you even more than if you had done nothing at all. Not only are you leaving open the possibility that your instructions won’t be interpreted correctly (e.g., defining exactly what your assets are, how they will be valued, how they will be divided, etc.), but you’re also running the risk that your will won’t comply with the province’s statutory requirements.

Now you’ve complicated matters and your family is spending more money for lawyers to properly analyze and come to an agreement as to how the estate should be managed. Worse, the will might be thrown out altogether, causing wasted time and putting the whole process back at square zero (i.e., not having a will at all). If you’re reading this as you get ready to open up the will kit you bought at an office supply store, take the following steps:

1. Put the box back in the plastic bag along with your receipt.
2. Go back to the store and return it.
3. Use the refunded money toward paying someone to do the job properly.

Also, don’t assume that the will you made out before you were married or re-married will automatically include your current spouse. The first priority (well, perhaps second priority) after the ceremony is over should be getting an up-to-date will.

Many Blessings,

Andray Domise
Independent Financial Advisor
Change your life one dollar at a time, with REAL help for building wealth and reducing debt:
http://www.andraydomise.com

Estate Planning FAQ:

Question: What are the best estate planning tools for a newly married couple?

Answer: The best thing you can do is to write your wills and name a health care proxy – the health care proxy is the person who will make medical decisions if you can’t. Once you get married, usually this is the spouse but if your family disagrees with the spouse, then there could be disastrous consequences (e.g. the Terri Shiavo case). Also, make sure to update your payroll info with new marital status and make sure to update the beneficiary designations on pensions, life insurance, etc.

Question: Estate Planning: Now that home prices are often lower than the outstanding liablility, how do you pass on to your spouse?
Do they have a choice not to accept home because more is owed on it than the value of home. Is there a certain clause to include in a will or living trust?

Answer: Buy a life insurance policy that tracks the outstanding balance on the loan. The premiums are very reasonable. If you die the debt is repaid.

Question: Estate planning – what legal document can be used?
Person#1 would like to give legal guarantee to Person#2 that specified property will be left to Person#2 after death of Person#1. What legal document can be used for that purpose?

Answer: An irrevocable trust.

Question: What forms are needed for estate planning for a us citizen abroad?
My father has land in asia under his name and recently passed away. In order to transfer ownership to my mother, does anyone know what forms I would need to do this? Other than bringing proof that he is my father, land deed and new person’s ID.

Answer: Of course you’ll need the proof, any relevant paperwork, an ID might help but a passport would be better. If you or your mother happen to have citizenship in that country that would probably secure your right to the property. The countries in Asia have very different laws. You need to find out about your specific country. Talk to a lawyer in that country.

Question: What does an estate planning attorney do?

Answer: They generally set up legal arrangements for someone so that when they die, their asset will avoid having to go through probate court and will avoid having to pay estate taxes. They also set up arrangements related to paying for long term care (nursing home, etc.). They do a lot but all of it has to do with preparation for growing old and dying.

Question: Estate Planning: What happens to a property loan in the event one spouse passes before another?
Living trust established, in process of being funded with title being transferred to trust. What happens when there is not sufficient life insurance to cover existing liability on home?

Answer: The remainder of the loan would still be due at the existing payment rate unless other arrangements are made with the lender (or refi with another lender). Note that paying down part of principal does not typically allow you to skip payments or make the payments smaller (unless interest only or flexible payments), it just ends the loan sooner (less payments until fully paid off), and results in less total interest paid over the life of the loan.

Question: How do I tell my sister in law that my Mom’s estate planning is none of her business?
The sister in law is concerned about assets going into probate after my Mom dies. She assumes my Mom is doing nothing. I think there are other concerns that she is not telling me. I understand her concern, but feel this is an issue between me, my siblings and my Mom. I don’t know for sure what my Mom is planning, but from some things that she has said, I think she is doing something. At this point I am not pressing the issue and I am giving my Mom the chance to make the first move. If she doesn’t, I or one of my siblings will bring it up when we feel the time is right. It is not my business to tell someone else my Mom’s business.

Answer: Just talk to her reasonably. Tell her you understand her concern about probate and you feel the same way, but you feel you want your mom to decide on her own. Also let her know that if you don’t feel your mother is doing anything then you or one of your siblings will broach the subject with your mother. Let her know that you understand her concern, but that you and your siblings are aware of the situation and you will handle it.

Question: Estate Planning ? If I already have a will with all the other papers,such as Power of Attorney etc. and have all accounts w/POD or TOD to my children except for my house do I need to create a Revocable Trust or not? Couldn’t I just have a TOD on my house also to avoid Probate? Creating a Revocable Trust gets pretty pricey.

Answer: A simple, general answer is that avoiding probate would be nice for all of us but it may or may not be worth it. You might want to consider the cost of the probate process (this is capped in most states) v. the cost of writing a revocable trust and keeping it updated. Your situation might make a revocable trust advisable because of other concerns you have that a will may not cover – that’s another good reason to see a few attorneys to figure this out. The first attorney you talk with is not necessarily the right one for you.

There’s a lot of misinformation floating around about how certain assets are taxed when the owner dies. I’ve heard that RRSPs are not taxed if beneficiaries are named on the RRSP application. This is only partially true and if you think you’ll be able to leave RRSPs to your adult child with no tax consequences, they are in for an unpleasant surprise.

I’ve also heard that the principal residence passes free and clear to the named beneficiary. This is also only partially true. The principal residence isn’t taxed at death but it is still part of the estate and thus subject to probate fees. There will very likely be some price to pay on the principal home.

Let’s start with RRSPs. RRSPs aren’t just passed to the beneficiary tax-free unless they qualify as one of the following:

Your spouse
Your financially dependent child or grandchild under 18 years of age
Your financially dependent child or grandchild, of any age, who is physically/mentally disabled

We’ll call the people in this category “qualifying beneficiaries.”

When you pass away your RRSP assets are deemed disposed, meaning that you have sold all of your RRSP assets at their Fair Market Value (FMV). The entire amount of your RRSP savings is then added to your income for the final tax return. Your estate is then responsible for paying the taxes on that RRSP. If you have been a diligent saver and have a large amount of RRSPs to pass on, they will likely be taxed at a high marginal tax rate (MTR). One of two things will happen:

The other savings/investment assets in the estate will have to be used to pay the tax bill first, before being passed on to your non-qualifying beneficiaries; or
The tax bill will be subtracted from the RRSP assets

Either way, Canada Revenue Agency will get its share.

Next, your principal residence. This situation gets messed up when people try to avoid paying a bill. Your principal residence is not taxed when you pass away. If you leave your principal residence to your children, they will not get a tax bill. However, the residence is part of the estate, so there will be probate fees. In Ontario, those fees are 0.5% on the first $50,000 of estate assets and then 1.5% on any amount over $50,000.

Example: if your entire estate is valued at $500,000, you can expect to pay $7000 in probate fees.

In order to avoid paying the probate fees, it has become popular to name children and other beneficiaries as joint tenants. This is where people often get burned. When you name a non-spouse as a joint owner on your property, they are now a 50% owner of that property, meaning that you have just given away half the ownership rights of that property. If you sell the property and your adult child doesn’t live in the home with you, they are on the hook for the taxable capital gains resulting from the sale. Normally, a principal residence exemption would apply on capital gains resulting from the sale of the home. However, that exemption becomes totally non-existent for your joint owner’s half of the interest in the home for every year the joint owner does not live in the home with you.

Additionally, if they have outstanding debts, their creditors can now come after their interest in the property. Your property. Worst of all, if your adult child gets taken to the cleaners in a divorce case, their 50% interest in the home is fair game for the ex’s lawyers.

And all of that doesn’t even consider the cost of the legal paperwork to put their name on your home. Ask yourself if all of this risk is worth avoiding the probate fees.

Here’s an example of how an “equal” share of assets in a will can quickly become unequal:

Jim, a resident of Ontario, passes away. He owns a mortgage-free home worth $500,000, a mutual fund portfolio worth $500,000 and an RRSP portfolio worth $500,000. The adjusted cost base (ACB – the net cost of building that portfolio, including contributions) of his portfolio is $250,000. He sets up joint ownership on the house with his son Jack, leaves his RRSP portfolio to his daughter Jill, and his non-registered mutual fund portfolio to his other son Jesse. Here is a basic rundown of what will happen (not including deductions, credits, etc.):

Probate fees on $1,000,000 estate: $14,500

Tax payable on $500,000 RRSP portfolio (46.41% MTR): $232,050

Tax on $250,000 capital gain in the mutual fund portfolio (46.41% MTR): $58,012.50

The taxes and fees payable ($304,562.50) will be subtracted from the non-registered mutual fund portfolio.

So Jack will receive the $500,000 home, Jill receives the $500,000 RRSP portfolio, and Jesse receives only $195,437.50. Granted, it’s nearly two hundred thousand more than he started out with, but this kind of unequal distribution is what leads to nasty estate disputes (and even lawsuits) between family members. Is that really what Jim wanted for his children?

Is that what you would want for yours?

Many Blessings,

Andray Domise

Independent Financial Advisor

Change your life one dollar at a time, with REAL help for building wealth and reducing debt: http://www.andraydomise.com

Estate Planning FAQ:

Question: What do you think about this type of estate planning?
My grandfather says that houses can only stay in the family for so long because once a family gets too big, it’s hard to share it… (like a summer house). So, can you keep a house in a family for more than 2 generations? Of course it depends on how big the family is; ours is really big! The descendants become like strangers I guess because they are far removed from the original owners (grandparents). So, it there a way to improve/fix this dilemma so the house can stay in the family indefinitely?

Answer: Most likely your grandfather is alluding to the fact that it is difficult to have a house in which everyone owns a piece as the family grows from one generation to the next. Sooner or later there will be family members who aren’t interested in the house and wish their share in cash. Someone has to inherit the property. If it goes to one child then the others usually get money instead or something of equal value. If all children get a share then the problem starts as they pass their share on to their children until it becomes impossible.

Question: Financial Planning versus Estate Planning, which is the higher priority?
If you had an extra $1000 and all things being equal, which is more important at this moment, meeting with a financial planner or getting your estate planning documents in order (trust-we have one child, will, durable power of attorney and HCPA/AMD) for my wife and I? The idea being that on average a good fee-only financial planner or attorney to do either thing will cost $250-$300/hour (in the Washington DC area).

As far as financial background, we have life insurance, we contribute monthly to a 401K and Roth IRA and I have a defined benefit pension (yes they still exist). We are paying down debt, but I still feel that we could use a good financial review (not to sure about our allocations in the Roth and IRA’s). We DO NOT HAVE A WILL or other estate planning documents… and this is beginning to concern me… should it?

Answer: All the financial planning in the world isn’t going to be worth squat if you don’t have the legal power to protect it.
You need a will, living will, power of attorney etc. If you are seriously hurt in a automobile accident and are not able to communicate, your spouse has very few choices without the power of attorney and the living will. You may end up as a “turnip” in a nursing home spending all that money you have worked to save, just to care for you.
Or, if you and your spouse somehow are both killed, what will happen to the child? Think about your family and your spouses family and image that there could be conflicts over who should be in charge, and who will control the finances. Who will be the legal guardians? Who will help your child decide what happens to all the money you have amassed? Who will control that child’s future? Without a will, living will, and power of attorney, there will be problems.
Take care of this planning. Once this is done, then continue your progress on financial planning.

Question: Will and estate planning with a baby?
Did you have a will or other estate planning documents done after your baby was born? Did you see a lawyer, and if so, what documents did you have done? I am most concerned about choosing someone to take care of my son if we both die; can you offer any advice?

Answer: You should definitely meet with an attorney and get your affairs in order. Talk to your husband about who you would want to name as guardian in the event that something were to happen to you, and find time to sit down and speak with the person or couple and make sure that they are willing to be your child’s guardian.

Decide what you want to do with your assets, including any property, life insurance, investments, and retirement funds. You can set up a trust that will help your guardians with the expenses of raising your child, provide for college expenses when the time comes, and the rest can remain in the trust until your child reaches a designated age (usually 25 or 20, depending on your wishes). If you have several children, you may want to provide a sum of money up front for the guardians, because the expansion of their family might require a move to a larger home to accommodate everyone. And then you can set up the trust to provide a monthly payment to the guardians while your child is still living in their home.

Keep in mind that you can name a separate person (or more than one person) as the trustee, which is often advised, so that there is no conflict of interest. So you may also want to give some thought as to who you would want to control the funds in the trust. If there is nobody in your family you would want to name, you can designate your attorney.

You can set up an initial meeting with an estate planner to determine what your options are, and he can also advise you as to whether you have sufficient insurance and investments to provide for your children.

Question: How to deal with a Borderline Personality with regards to Estate planning?
One of my siblings is unfortunately a Borderline Personality,what is the best way for my parents to plan their Estate (Will) with this situation in mind. My parents reside in Quebec, the sibling in question resides in the USA.

Answer: There is no simple answer to this question. A lot depends on how much assistance this sibling needs now in his/her financial affairs, and if the parents believe this person can handle finances on their own. Perhaps your parents could require that the BP sibling get good financial counseling upon receiving the bequest at the least, and if they are not confident of this sibling’s ability to handle the money, set up a trust.

Question: Can you suggest a good book or website for estate planning?
I hear that if a grown (adult) child lives at home with the parents for 2 or more yrs that the parents can quitclaim the house to the child. This would be to avoid (legally avoid) estate taxes on the house if it were willed to the kid.

Answer: I would speak with an estate planning attorney. Most good attorneys will do a free consultation, and give a recommendation depending on your specific needs. Each state has slightly different laws and each scenario is different so it is not a good idea to take advice from people on tv/the internet.

Question: Where on line can I find some useful information on estate planning and tax avoidance?

Answer: Schwab has some good free info on its site. However, you get what you pay for. I would suggest a consultation with a good estate planning lawyer. The best advice is usually proprietary.

Question: How is tax burden minimized when using Trusts in estate planning?

Answer: A trust doesn’t reduce the tax issue. The IRS sees revocable/grantor trusts as continuing to belong to the person who set them up. The savings occur with fewer costs at probate and the ensurance that the titles of the assets go to the intended parties. This is good when a husband and wife have, say, 2.5 million assets and the estate would normally go to the other spouse. With proper trusts in place, if the 2nd spouse dies soon after the first, the same asset isn’t subject to tax in both estates.

Question: What is meant by the term “estate planning?”
Does it mean that, with proper planning, with the help of an expert, a person not rich, and not poor but somewhere in the middle, can insure his savings and other assets for his children after his death? In other words, can he “protect” his assets so that his children will be sure to inherent his money?

Answer: You are correct. It is the a plan that protects your assets from probate and inheritance taxes if done correctly. It also ensures your heirs receive what you wish. Eliminates fighting among your children.
The professionals also encourage you to tell your children your decisions once the plan is complete. At any time you can change, alter or eliminate any part of the plan.

This is probably the most frustrating mistake for the executor to have to deal with. You’ve gone through the time, trouble and expense of drafting a bulletproof will. And then it’s left in a household safe to which no one knows the combination or in a safety deposit box to which your executor isn’t granted access. I’ve been told about cases where wills were left in a secret cubby in the closet, behind a wall and under floorboards. Please do not put your executor through this. They will be under enough stress as it is just managing the estate. No one wants to go rifling through someone else’s bookshelves and sock drawers looking for the proper documents, much less obtaining court injunctions for access to bank deposit boxes or cutting through a locked safe.

Give your executor:

1. A copy of the will for safe keeping, or
2. Signed access to the bank deposit box where the will is kept, or
3. Knowledge of where you keep the will in the home – and easy access to it.

Keeping a copy of the will at your lawyer’s office is reasonable. However, if you have the unfortunate luck to pass away while your lawyer is on vacation and the office is closed for the holiday, an unnecessary holdup will happen.

What did we learn?

It only makes sense to have a properly reviewed will, which is drafted with your unique situation in mind. Always sit down with an advisor or estate planner and work out the details before drafting the will. Better yet, if you already have a will, make an appointment to review your current one. Make sure that it makes sense and that your estate will be distributed fairly (note: not necessarily equally, but fairly). And, as I said before, make an appointment to sit down with a competent and qualified estate lawyer. Your children will love you for it.

Many Blessings,

Andray Domise
Independent Financial Advisor
Change your life one dollar at a time, with REAL help for building wealth and reducing debt:
http://www.andraydomise.com

Estate Planning FAQ:

Question: What’s the best way to create a will / estate plan?
I’d like to write a will and develop an estate plan for my wife and daughter. Are the CDROM/online services (eg Quicken Willmaker) good enough, or should I see a lawyer?

Answer: Depends on how much you have to give and if there will be people fighting for it. If not, Quicken will be fine. If you have sufficient assets, setting up a trust is a good idea. It can be costly depending on what you want. I am by no means wealthy, but with the trust, you can be comfortable in knowing that your specific instructions will be followed.

Question: I am looking for information on estate planning and forming a corporation of my parents assets.?

Answer: You need to call a financial planner you can trust. You should also consider getting a book like Nolo’s series of books on such topics. You can then either choose to use the book or at least learn what to ask and discuss with the financial adviser if you hire one. Remember, they are also doing it to make money so your knowing where they’re coming from will help you a lot.

Question: What is AB trust in Estate Planning?

Answer: They are trusts to which estate assets are rolled on the death of the first spouse and are designed to minimize estate tax liability.

Question: How should an estate plan disbursement be structured?
I have one child and am trying to decide how to disburse a sizable estate in the event of my death.

Answer: You probably need to talk to a probate attorney, as you’ll want to set up a trust for your child, along with a guardian. You don’t want some random idiot getting custody of your child, AND having complete access to the sizable estate. They’ll run through your money, and your little darling won’t end up with a thing.

Question: Attorney Overbilling – Probate Attorney – Estate Planning attorney ?
Well it seems we got burned by a nice attorney – he said he would help us settle our Mothers estate and now he has BILLED us “over” $12.000 dollars charging us 295.00 Per Hour on a 25.000 estate and his job is not yet done – we will have fire him today. What could you recommend us to do in hiring another PROBATE ATTORNEY – Estate Planning
attorney – and how we can protect ourselves against law firms overbilling and attorney over billing?

Answer: What I would recommend in your case is to have a simple memorandum of agreement w/ the lawyer you intend to hire indicating a percentage (w/c you and your family will have to decide upon) of the estate’s value as his professional fee. I would think 20% of this percentage could be his initial payment and balance payable upon completion of the entire work. It’s a simple legal form w/c the lawyer of your choice could prepare or even you could do it. You could get a book on legal forms and presto! Just make sure you read closely the contents of the memorandum of agreement if cited lawyer were to prepare it.

Question: Estate Planning / Life Lease?
I am from a family of 2 children (my brother and myself). As a part of their estate planning, my parents deeded their house & the farm to my brother & I – with a life lease (we have to let them live there and use the land, etc. as long as either one of them survives, without charging them for it.) We cannot sell it, etc. as long as either of them survives. However, can one of us (either my brother or myself) sell his future interest in the property to a third party? Could he do this before my parents pass away? After my parents are no longer here, could one person sell their 50% undivided interest to a third party?

Answer: You can absolutely sell your interest. It will be hard to find a qualified buyer who understands these stipulations. Perhaps you should notify your parents of this. I’m sure their intention was for the two of you to keep the land, not sell it to a third party.

Question: Estate Planning – Living Revokable Trust versus Will?
My wife and I are in the process of estate planning. We talked with 2 different lawyers and have 2 different pieces of legal advise:

~1: Establish a Living Revocable Trust. This allows you to avoid probate on assets that do not have beneficiary designations.

~2: Use a Will. Your major accounts and home will pass to your spouse if you ensure the beneficiary designation forms/titles are on file with the correct information. True, any personal property (not held jointly) without a beneficiary may go through probate, but that will be a small portion of your assets.

My question is this: If a couple has a living revolvable trust, one or both of the spouses pass away, is it advisable to have legal council to execute the trust? The way things are being presented, the Trust is a large upfront cost with no back end costs. The Will is a small upfront cost but a large back end cost. I am curious if the Trust is a large upfront cost and has significant costs on the back end too.

Answer: A trust does have large upfront costs, but it does not have “back end” costs for the remaining trustee. The successor trustee should be able to adequately handle things without the help of an attorney. However, depending on your amount of assets and how much you want the CFG–control from the grave–a will may be enough for you.

The lawyer was correct when she/he talked about correctly titling assets. You can put a POD designation on all bank accounts, saying you want to pay a particular beneficiary(s) on death. This does NOT go through probate. You can put a TOD designation on stock accounts, real estate, etc. which will transfer to designated beneficiaries upon your death–also without going through probate. Any annuities, IRA’s, life insurance you hold will also not go through probate, as these vehicles have named beneficiaries.

A trust is great when you have a complicated estate with over a couple of million in assets.

Question: Estate Planning Question?
My friends mom’s name is Mary. Mary creates and funds a revocable trust. She names her son to receive the income for life and her grandson to receive the property upon her son’s death. What are Mary’s powers with respect to the trust and how will the trust be treated in her estate?

Answer: A revocable trust is one that can be modified and changed at will. Mary has complete control and can cnx the trust at any time. Her son will enjoy the income for life and will pay tax on it. Her grandson unfortunately is in the (GST) area. Generation skipping tax and depending on the value of the trust could pay significant taxes upon his dad’s death.