Many people don’t even think about a will—why?

Some feel superstitious about making out a will; others don’t want to think about their own death. Some people feel they don’t have anything to leave behind, and still others just don’t create a will because they don’t know they should.

How many people do you know who do not have a will? How about your parents, your siblings, or your friends? Wills are easy, simple, and quick. People think they “only” have their house, car, or jewelry, but these are all things that can cause family fights and avoidable taxes.

A will is the instrument to do your bidding. This document tells everyone what you want to do—it designates who should execute it, and to where and to whom everything goes. It’s your last will and testament!
There are three components to having an estate plan: your will, a living will or a healthcare proxy (a medical power of attorney), and/or the various powers of attorney. Just remember, depending upon how your estate is set up through your attorney, there are different alternatives available to you, such as a trust or living trust. Always consider state and federal laws.

Everyone needs a will

This document specifies what, where, or how you want your assets distributed, dispersed, dissolved, or presented after your death. If you have minor children, you may want to name a guardian. Your animals—who do you want your beloved pet to go to?

If you die without a will, this means you died “intestate”—without a will—which means it is up to the courts or whoever is the closest relative to you to deal with the probate. If you have a spouse, children, or siblings, they will go through the process of probate for dispersal of your assets. Additionally, without a will this process can be very costly. The probate could drain part or all of the money that you had left or could be a financial burden to your family.

Stop the fighting, the arguments; talk with your family—your heirs

By talking ahead of time with them, you make clear your intentions, your wishes, and any reservations there might be. Something you might think very little about may become a big blown-out fight between family members; so think what you want to leave behind and for whom so that everything is taken care of by your will or trust.
Start a list of all your assets. Do you have a personal financial statement? This is a sheet of all your assets—all that you own or possess. This also shows all your debts and what you owe—specifically how much and to whom. Your assets should include your home and other investments, such as properties, stocks, cars, precious metals, etc.

Money - Tax Free? Not your wise choice

Yes, you can leave money behind to your spouse; however, this may not be the best or wisest choice. By leaving money to your spouse, it could increase your spouse’s taxable estate by not utilizing estate-tax exemptions. Avoid this: talk to your attorney to determine the best strategies to distribute your assets.

What is the Federal Estate Tax and Exemption?

“The estate tax in the United States is a tax imposed on the transfer of the taxable estate of a deceased person, whether such property is transferred via a will or according to the state laws of intestacy. Here is the table currently. Over the past five years the exemption amount has been increasing and will be 3.5 million this year of 2009. The following year of 2010, there are NO Federal Estate Taxes if death occurs in that year. Then in 2011 it reverts back—see table below. This means that you will only be allowed to leave behind $1 million tax free dollars to your heirs.” —From Wikipedia, the free encyclopedia

FEDERAL ESTATE TAX EXEMPTION TABLE 2004 – 2011
YEAR EXCLUSION AMOUNT
2002 – 2003 $ 1Million
2004 – 2005 $ 1.5 Million
2006 – 2008 $ 2 Million
2009 $ 3.5 Million
2010 NO FEDERAL ESTATE TAX if you die in year 2010
2011 Currently the FET is scheduled to go back to $1 Million
—©2004 Estate Talk

“This table means simply that if you die in any year listed in the table the value of your taxable estate can be as great as the exemption amount shown for that year and you will owe no Federal Estate Tax. In fact, if your estate is equal to or smaller than the exemption amount it may not even be necessary for your estate to file a Federal Estate Tax return; however, this decision should follow a discussion between your personal administrator, your heirs, and their attorney. Among other considerations is the fact that no statue-of-limitations ever runs on an estate unless an estate tax return is filed. You should be aware of changes by Congress and the Administration with respect to this area of tax law.” —©2004 Estate Talk

Give gifts tax free and reduce the estate

There are a few ways to do this. There is a yearly limit to the amount one can “give”— $12,000 to an individual or $24,000 from husband and wife to an individual. You can also pay for medical and/or educational bills for your friend, family, or someone else only if you pay directly to the doctor, hospital, school or any institution where the bill or debt was made.

The gift of giving – charities

When donating to charitable gift funds or foundations, remember your original investment grows, and, as a charitable fund, it increases tax free, so donate those profits to your choice of charities during your lifetime and after your passing.

Here are some additional things to keep in mind

Among various duties don’t forget to file tax returns for the person who died. Final federal, state, and local income taxes must be paid, including the federal and state estate taxes as necessary. Although personal income taxes for a deceased person are due on the standard April 15th deadline, estate tax returns are supposed to be due nine months after the death, but this date can be extended. After the settlement of the estate, the estate administrator petitions the probate court to remove them from their binding, which means to remove them as the administrator or executor of the estate.

About your executor-administrator

Who do you want to handle your financial affairs? Who do you trust to carry out your wishes? What if you are in an accident, or incapacitated in some way… who will you want to charge with this responsibility? Who do you want making your medical decisions for you upon your inability to make them? Who do you want to inherit your assets? Should your estate go to your spouse, children, other family members, a corporation, or your favorite charity? As you can see, it can be a big mess if you don’t take charge now and make your arrangements.
Talk to your accountant, your attorney, and your financial planner. Most importantly, talk to your family. Remember, the person you want to administer or execute your will also must agree and accept your request to carry out this responsibility. You may want to have a backup by appointing an alternate to replace your executor in case your first choice is unable or unwilling to carry out these duties at the time of your death. You could even have more than one person as executors; however, you will need to have in writing your wishes of how any disputes are to be settled.

Also, if the executor you have appointed dies and you do not have a backup or alternate in your will, then the court will appoint one for you. However, if you already have a will and your executor that you have chosen dies before you, you can name a new person as executor by adding a codicil to your will. This document is used to amend the current will.

This executor may be paid

Many times family members will take on this responsibility to administer the estate and, more times than not, they won’t ask for a fee. Nevertheless, they have the right to be paid. If you had not made any arrangements or provisions for their payment in your will, then the executor may approach the Probate Court to be paid a reasonable fee. This person(s), as your executor, is taking on a heavy burden to take care of all your business so give them the respect of authorizing them to be paid. It is important to make sure you set a maximum price or limit to what amount of payment they can receive for this service.

As much as we all try to be organized and detailed, there is always something missing. Having a written will alleviates any problems or confusion. Choose carefully, and just make certain you have it all on paper. This way the administrators can carry out your wishes effortlessly, methodically, and in a timely manner for your family.

Depending upon the size, difficulty, and complexity of an estate, assistance from professionals may be needed. This may include a certified public accountant (CPA), financial planner, attorney, doctors, insurance companies, or personal friends.