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Frequently Asked Questions About Wills

Alexander Farrar

 

The vast majority of Americans do not have a will or a trust. If they died today they would leave the distribution of their assets to the state.  

1.     Can I draft my own will without having to pay an attorney? Yes, you can in most states. A self-drawn will is called a holographic will. The rules governing holographic wills vary from state to state, and you must thoroughly understand the laws of your state to ensure your will is probatable in court. For this reason all wills should be proofread by an attorney.

2.     Should I keep my will in a safety deposit box? If you do keep it in a safety deposit box you need to be sure that someone else has access to the box. Since a safety deposit box cannot be opened except by court order, the process can be lengthy and expensive. Therefore you should name your spouse and your attorney or accountant as authorized signatories.

3.     Do I need a new will if I change residences from one state to another? Possibly. You need to have an attorney in the new state review your will to be sure that it conforms to that state's laws.

4.     Do I need a will if my spouse and I hold all of our property in joint tenancy? Yes, you still need a will. Joint tenancy means that the surviving tenant owns the property if the other tenant dies, but if there are assets owned outside the joint properties they will not be covered. You will need to check with an attorney to determine how jointly owned properties are handled in your state, in case of the death of one of the owners.

5.     Who can I name as my estate executor? You can name anyone you desire to act as executor of your will and estate. That person's duties are to probate the will and distribute the assets according to the dictates of the will. Unless otherwise stipulated, many states require an out-of-state executor to post a bond. Some require that the bond be equal to the value of the estate. If you use a professional executor, there will be a fee involved. This can vary from an hourly fee to a percentage of the estate value. Any such fees should be clearly spelled out in a contract and attached to the will or trust.

6.     What is a trust? A trust is a legal contract to manage someone's assets, before and after death. There are two basic types of trusts: living trusts and testamentary trusts. A living trust is drafted and implemented while the assignee is still living. Within a living trust is another division: the living trust can be either revocable or irrevocable. If it is revocable, the assignee reserves the right to modify the trust as long as the assignee is alive. If the trust is irrevocable, the trust cannot be changed once in force, nor can the property assigned to the trust be recovered by the donor. A testamentary trust is valid when the person dies.

7.     What is the advantage of a trust, if any? A trust is not a public document, like a will, and does not require probate, thus ensuring privacy. In many cases, assets held in trust could be free from estate taxes.

8.     How much tax will my estate have to pay? That depends on the value of the estate at your death. Through a marital deduction allowance, each spouse can leave the other an unlimited amount of assets. However, assets left to someone other than a spouse are subject to estate taxes.

9.     When are the taxes due? Usually within six months of death, the state will require an appraisal of the estate. The taxes are due and payable at that time, although in practice both the state and federal tax collectors will normally work out a plan to convert the assets necessary to pay the taxes so that the estate doesn't suffer a severe dilution through a forced sale. Liquidity, or cash, in an estate is very important, since taxes must be paid in cash. Otherwise, assets must be sold to satisfy the tax obligation.