Estate Planning

Estate Planning: Goals


·         Ensure the assets of the estate to the users/heirs

·         Reduce the tax "bite"

·         Tax is due within 9 months of Date of Death if the estate is over the current exemption.

·         Transfers between spouses are exempt (even at death)

·         Gifts to anyone up to $11,000 are tax free

·         Eliminate Probate costs

·         Ensure family harmony.

·         Control over who gets what

·         Eliminate the need for a conservator

Estate Planning Documents

The Will

·         It outlines the disposition of assets

·         It names the beneficiaries of the estate

·         It names the personal representative

Items to consider

·         Is the will considered valid, if the senior has moved?

·         Is the will valid if it is acquired through the Internet?

·         Who has been named executor/executrix?

In the absence of a will

·         The court appoints a personal representative

·         The law decides who inherits

The disadvantages of a will

·         May not avoid probate

·         May lead to the appointment of a conservator

·         May lead to court control of minor children

·         Becomes public record

·         Lack of tax benefits


A Living Trust 

·          A living trust manages assets during life and distributes at death.

·          A revocable trust can be changed or revoked any time prior to death.

·          Upon death the trustee or successor trustee takes over administration

·          The trust may continue for the benefit of named beneficiaries.

·          No Probate Court jurisdiction.

·          The trustee administers the estate without the court.

·          The process can be quicker than probate.

·          Husband and Wife may use an AlB trust to create a Federal tax exemption twice avoiding tax on their estate.

·          The trust is not a recorded document, which ensures privacy..

·         The person named in the trust takes over if you are incapacitated and can manage your affairs without interference from the court.


Life Insurance 

·         Insurance Policy

·         Support of dependents (including schooling)

·         Compensate for wage earners income

·         Cover costs of estate tax


Ownership of the insurance policy

·         If owned by the decedent of spouse proceeds are part of the estate

·         Avoid this by having the beneficiary be the owner "Gift" the beneficiary the amount of the premiums

·         Set up an irrevocable insurance trust

·         Set up a survivorship policy


Durable Power of Attorney for Health Care, Living Will

·         You appoint the person to make decisions

·         Designate that there will be no artificial means to prolong life when the condition

·         is irreversible



·         Designate all measures be used to prolong life

·         Designate organ donation, burial provisions, etc.

·         Consider "Five Wishes" (See Appendix)

·         Directive to Physicians

·          Appointing the physician to make decisions instead of designating another

·         person

·         Directs physician to withhold life sustaining treatment when in a coma


Succession to Property

Joint tenancy

·         Passes by law to the surviving joint tenant(s)

·         Not affected by the will

·         Only the decedent's "basis" steps up to market value


Community Property

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin

·         Husband and wife only

·         Entire property steps up to market value


Community Property with the Right of Survivorship

·         California only

·         Husband and wife only

·         Passes by law to surviving spouse

·         Not affected by will

·         Entire property steps up in basis to market value


Beneficiary Designation

·         POD (payable on death) or TOO (transfer on death) for some assets

·         Abbreviated probate for small estates available in some states

Probate To assure or prove that the intent of the decedent is followed

·         Examination and validation of the will

·         Items that pass outside the will are not probated


·         Representative of the estate, not the beneficiaries

·         Specified in the will or hired by the personal representative

·         Petitions the court to admit the will to probate

·         Issues Letters Testamentary to the personal representative

Probate Court

·         Controls the decedent's estate

·         Appoints the personal representative

·         When named in the will, an executor

·         When not in a will but named by the court - an administrator

·         Supervises the payment of debts

·         Orders the distribution of assets

·         Issues "Letters Testamentary" to the personal representative granting authority to act

Personal Representative

·         Named in the will or by the court

·         Represents the estate, not beneficiaries

·         "Letters Testamentary" give authority to act

·         Financial bond must be posted unless waived in the will or by the beneficiaries. Receives all income, pays all expenses, invests surplus cash, and manages the estate

Requires the court approval to sell assets

Notice to Administer Estate

·         Published in local newspaper

·         Creditors have a "claim period"

Sale of Assets

·         Court may order sale to pay debts and taxes

·         Court may grant an interim "allowance" to the family

·         Personal representative inventories the assets

·         Probate referee appraises the estate for a fee

·         Appraisal establishes tax basis

·         Remaining assets distributed to heirs

Fees and Costs

·         Court fees are set by state law and vary widely

·         Fees for the attorney and personal representative are

·         Regulated by statute in some states

·         Hourly or "reasonable" fee in some states

·         Fees must be paid before distribution to heirs

·         Fees can be a flat fee or a percentage of the gross estate

Sale of Real Property

·         Publication of notice is required unless waived in the will

·         The listing is signed by the personal representative with approval of the court

·         The court approves the amount of brokerage compensation

·         The court will decide on the necessity or advantage of the sale

·         Confirmation of Sale hearing is required

·         Overbids may be allowed

Disadvantages of Probate

·         Expense - can be as high as 10%

·         Time - 12 months or longer

·         Lack of privacy - public process

·         Loss of control by the family

Advantages of Probate

·         Court ordered process

·         Provides notices and allows for objections by heirs and creditors

·         Independent Administration of Estates

·         Allows for property to be sold as a traditional listing

·         No court confirmation of sale required

·         Must be included in the Will Document

·         Provides for personal representative to act directly to facilitate the closing

·         Check with attorney for local specifics


Avoiding Probate

·         Title as Joint Tenancy with right of survivorship

·         Title as Community Property, or Community Property with right of survivorship

·         (where allowed)

·         Title in a Living Trust

·         Creating a Life Estate

·         Named beneficiaries for Insurance, Bonds, etc.

·         Retirement benefits

·         Payable on death, transfer on death, custodial accounts, "in trust for" accounts




Title passes by law, not by will (avoids probate) Tax implications of the step-up in basis

"Gifted" title may be subject to estate taxes


Joint Tenancy is created


·         At the same time

·         On the same deed

·         With equal interest and possession

·         Joint tenancy can be broken without consent

·         Co-owner can transfer share without your knowledge

·         Easy to add - Difficult to remove a co-owner

·         Co-owners debts and obligations expose each owner

·         If a minor is a co-owner, a guardian may be needed for some actions

·         Limited tax planning options

·         Upon incapacity of co-owner the court may appoint a conservator (your new co-owner!)

·         Right of survivorship may eliminate your family from inheriting your share

·         Only the last survivor can will the property

·         A Trust does not supercede joint tenancy

·         Step-up in basis on deceased joint tenant's portion only


Community Property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico,Texas, Washington, Wisconsin


·         The "community property" form of ownership automatically goes to survivor spouse unless the will says otherwise.

·         Upon death 100% of the tax basis steps up to market value as of the date of death.


Community Property with Right of Survivorship


California allows this form of ownership between spouses. Combines best features of joint tenancy with community property. Transfer by law upon death avoids probate and provides a step-up in basis on both halves of the property.




Upon death the property automatically goes to the survivor - no matter what the will says.


Tools For Managing Incapacity Conservatorship/Guardianship


·         The conservator is appointed by the court.

·         Has the legal capacity to manage the personal needs and financial resources of one who lacks legal capacity

·         Special powers shall be granted by the court e.g. power to sell real property




·         Records and proceedings are public

·         Expense of court costs, expert witness testimony, examinations, auditor fees, bonds

·         Conservator may be a stranger

·         Recovery requires court proof


Durable Powers of Attorney


·         You appoint the person to conduct your affairs immediately, or in the event of a future problem

·         Incompetence (springing power)

·         Powers may be limited or broad

·         Not necessary if there is a living trust because the trustee assumes the roll




·         Upon the incapacity of the trustor, the successor trustee takes over the role

·         May eliminate need for a conservator/guardian


Disclaimer:  Hurst Home Realty is not qualified to give legal or tax advice and does not quarantee the accuracy of this information.  All clients and viewer are strongly urged to contact a Real Estate Attorney, CPA or other financial specialist to obtain legal or tax advice prior to completing any contracts.  Make financial review a contingency of the transaction.  Read and understand all documents!