What Everyone Needs to Know About Estate Planning

Curious about estate planning but don't know where to start?

Then check out the slideshow below to learn the basics about estate planning. (Click the bottom right corner for full-screen).

Call J. Cutler Law Today

To determine what estate planning documents are best for you, or to answer any of your Estate Planning questions, call J. Cutler Law for a free consultation at (801) 618-4469 or contact us online.

How Do I Know If My Estate Is A Small Estate?

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Not all estates need to go through the probate process, and not all estates need to be written as trusts.

For many individuals who do not own a significant amount of property, the small estate procedure will assist heirs in resolving outstanding estate issues.

The Purpose of Small Estates

Small Estate procedures were created to assist heirs in obtaining the deceased’s property and assets without the lengthy process of probate. Small estates can also be done relatively quickly while keeping both time and costs low, both of which appeal to those involved.

Small estates can be completed through affidavits executed by either the spouse or heirs of the deceased. They give the affidavit to the holders of the deceased property to get the property.

In certain states, you must present the affidavit to the Court first before going after the property. In Utah, if the value of the entire probate estate does not exceed $100,000, the estate is considered a “small estate,” and it can be closed within thirty days after the death.

Determining the Value of the Estate

Small estate procedures can happen with or without the will. All that matters is the total value of the property involved in the estate.

To determine the value of the estate, it is recommended you make a list of all of the deceased’s assets. Come with an accurate value as best you can with respect to the various assets, and if you are unclear on certain line items, attempt to get an appraised value.

Certain assets are not included in this list, including property in joint tenancy, retirement plans, payable-on-death (POD) accounts, real estate transferred through a transfer-on-death deed, or a transfer-on-death brokerage account. Life insurance proceeds are similarly excluded from the list of assets.

The Small Estate Affidavit

The spouse or heirs need to file out a simple affidavit and wait for a 30-day period before distributing the assets.

The small affidavit can be used to collect property, except real property, if the deceased living in Utah at the time of death or his property was located in Utah; the person signing the affidavit is a surviving spouse, child or heir of the deceased, or if this individual is named as a beneficiary in the will; the person who signs the affidavit is entitled to receive the deceased’s property, 30 days have passed since the death of the decedent; no one else is appointed or is seeking to be appointed as personal representative in any state; and the deceased’s estate value is not more than $100,000.

Summary Probate Small estates can be subject to a summary administrative procedure. If, after look at all property and appraising the value of the estate, minus lines and encumbrances, it does not exceed the homestead allowance, exempt property, family allowance, costs and expenses of administration, reasonable funeral expenses and any medical and hospital costs of the deceased’s last illness, the personal representative can distribute the assets without giving notice to creditors.

The personal representative then files a sworn closing statement with the court stating the nature and value of the estate assets, the value of the estate, any debts that were outstanding as part of the estate, and a statement that the personal representative has fully administered the estate, paying off needed debts and disbursing the assets. A closing statement needs to be given to all beneficiaries and creditors showing that their claim has been satisfied in full.

Call J. Cutler Law Today

To determine if assets are classified as a small estate, or to answer any of your Estate Planning questions, call J. Cutler Law for a free consultation at (801) 618-4469 or contact us online.

Probate Vs. Non-Probate Assets in Estate Planning

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You may hear a lot about probate assets and non-probate assets and not understand what the terms mean and why the difference matters.

Whether an asset is probate or non-probate affects how quickly you get the asset as well as the oversight needed to distribute the asset to the rightful beneficiaries.

What Is the Difference?

Assets that do not have to go through probate can be transferred to beneficiaries much more quickly. Probate can take months, if not longer, depending on the complexity of the estate.

Often beneficiaries will need assets and funds quicker than that time will allow, and these non-probate assets help make this possible.

Common Assets That Go Through Probate

The probate process is required for any property that was solely titled in the name of the deceased person.

For instance, if the deceased owned real estate or a car titled only in his or her name, that property would be handled via the probate system. In addition, if property was owned as “tenants in common” with a deceased person and another individual, that portion of the property owned by the deceased would be handled via probate.

All this property goes into the “probate estate,” and this will be handled by the personal representative or executor, as well as the Judge in the probate court.

Many choose to hire an attorney to assist with this process, as well as an accountant for purposes of estate taxes, should those apply.

Assets That Don’t Need to Go Through Probate

Not everything goes through probate. Many assets can be handled without filing a single document in court, if done properly prior to the deceased’s death.

For instance, if the deceased is married and owned most of his or her property jointly with his or her spouse, that property would quickly pass onto the spouse upon the passing of the deceased.

Living trusts are the most common method people use to avoid having their assets go into probate. Trusts are created giving the Settlor (i.e., you) the power to modify or change as many times as you wish during your lifetime, and then, upon your death, the trust is under the control of the Trustee, someone you name specifically within the document to handle your assets and debts, as well as any outstanding affairs that need to be handled before the trust can be closed.

These assets are not taxed under estate taxes and can be distributed quickly outside of the court system. The caveat to trusts, however, is once the document is created, you will need to change legal ownership of your property to “The Trust of ‘X’.” Otherwise, you are walking around with a document that holds absolutely no power over anything you own, and all your assets will go to probate in the end.

Life insurance proceeds are out-of-probate assets that go directly to the beneficiaries listed on the accounts. Some people choose to list the estate as the beneficiary of a life insurance policy, though this somewhat defeats the purpose of having a non-probate asset like this.

Retirement accounts, IRAs, 401(k) accounts, and pension plans all have beneficiary designations, and these assets also go outside of probate.

Any property that is held in joint tenancy with right of survivorship or property that is owned in Securities registered in transfer-on-death form, funds that are available in a pay-on-death bank account, U.S. saving bonds that are also registered in a pay-on-death form, or real estate that is valid on a transfer-on-death deed are also handled outside of probate.

If you have registered your car or boat in a transfer-on-death form, this asset would be dealt with outside of probate. However, this option is limited only to a handful of states.

Call J. Cutler Law Today

At J. Cutler Law, we offer free probate consultations for you and your family. We can help you decide what trust best fits your family’s needs. Call us today for a free consultation at (801) 618-4469 or contact us online.

5 Reasons Why You Should Do Your Estate Plan This Year

If you're like most people, you understand that estate planning is a good idea. You know that an estate plan ensures that your property goes to the right people and ensures your children are properly taken care of. Although you probably understand the importance of estate planning, you know it's all too easy to put off actually sitting down and making your plan.

If you can relate, then what better time then the New Year to resolve to actually finish your estate plan? While you may already have several New Year's resolutions swirling around in your head (or better yet already written down), a resolution to prepare your estate plan is a realistic goal that can be achieved by anyone.

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So to further encourage you to make finishing your estate plan a goal for the New Year, let us offer five reasons why your estate plan should be done this year:

1. Your Property Will Go To The People You Want

Without an estate plan you do NOT get to decide where your property goes when you die. Instead, state law determines who gets what. This may be the number one reason to do your estate plan. Even if you are not wealthy, you can still prepare a simple will or living trust to ensure your property is transferred to the people you want.

2. Your Children Will Be Taken Care Of According To Your Wishes

If you have young children and die without an estate plan then state law also determines who is the personal guardian of your minor children and who is the financial manager of their inheritance. This is why you'll want to ensure that your children are taken care of according to your wishes. In your will, you can name guardians to raise your children and managers to look after their inheritance. 

3. Your Medical And Financial Decisions Will Be Made By People You Trust

If you ever become incapacitated you will want to ensure the people you trust make important decisions for you instead of a court order or court appointed receiver. Part of estate planning is preparing for what would happen if you ever become unable to make medical and financial decisions for yourself. This can be done through a health care directive and a durable power of attorney. These documents can save your family much heartache.

4. You Will Save Time And Money By Avoiding Probate

Probate is the court process for wrapping up an estate. It's often time-consuming and expensive and rarely provides any benefit to the beneficiaries. With a little estate planning you can keep most or all of your estate out of probate, saving your loved ones time and money.

5. You May Reduce Your Estate Taxes

For the year 2017, if you pass away and your estate is worth more than $5,490,000 then your estate will be subject to federal estate taxes. If you already own this amount, or plan to eventually, then you will want to use your estate plan to reduce the tax that your estate could owe after your death. 

 

Hopefully these five reasons encourage you to make estate planning part of your goals for the New Year. Estate planning may seem overwhelming and time-consuming but it does not have to be. Keep in mind that many people need only a simple estate plan. You may even be able to prepare all your documents yourself. Or you might discover that having a lawyer do all the work for you is easier. Either way, planning your estate is a worthwhile goal that you can achieve this year. To start, get a free consultation to discuss what is best for you.

 

 

If I create a living trust, do I still need a will?

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The short answer is yes. Even if all of your property is owned by your revocable living trust, there are several reasons why you still need a will. A will "backs up" your living trust in case there is some property that somehow did not make it into the trust.

For example, a backup will helps:

  • dispose of suddenly acquired property (e.g. sudden gift, insurance proceeds, lottery winnings, a lawsuit settlement, etc.)
  • dispose of property that is generally not desirable to transfer to a living trust, such as your personal checking account or car;
  • name a personal guardian who will look after your young children; or
  • name a property manager who will look after your children's property.

If you have are planning on preparing a living will, make sure that you have a backup will for all of the above scenarios and more. Doing so will ensure that all of your property is disposed according to your wishes.

 

Do I need a living trust?

For those wishing to avoid probate, a living trust is often the most common avoidance tool. This is especially true for people that have major assets like a home, investment property, stocks, bonds, and other big ticket items.

Given the advantages of avoiding probate, it may seem like a living trust is something that everyone needs no matter their situation. However, while some lawyers make such a claim, a living trust may actually not be necessary for everyone. 

There are two reasons for that; first, there are other probate-avoidance tools that may be more appropriate, especially for certain types of property; and second, some people don't really need to avoid probate.

For example, you may not need a living trust if:

You can more easily transfer your assets by another probate-avoidance device

Other easy ways to avoid probate include pay-on-death bank accounts, joint tenancy, life insurance, gifts, and in Utah, transfer-on-death deeds for real estate. There are also other devices that you can learn about or ask an estate planning attorney about. Each of these devices can be just as effective at avoiding probate as a living trust.

You are young and healthy

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It is not very common when a healthy, younger person dies without warning. Because of this, a Will may be all that you need. While a Will does go through probate, probate only occurs after you die. Thus, as long as your living, probate-avoidance is of no benefit.

Likewise, when you are young it is likely that your primary estate planning goals are simply to ensure your property goes to the people you want and that you name someone to take care of your children (if you have any). If this is true, a will often achieves these goals more easily than a living trust.

Some attorneys may recommend a living trust to young people in case they become incapacitated and can no longer manage their estate. However, most young people don't own substantial assets or estates that need to be managed. More importantly, an easier way for young people to manage their assets should they become incapacitated is to sign a power of attorney.

Overall, if you are young and healthy, a living trust may be more appropriate later in life when the prospect of death is more imminent and you have accumulated more property.

You don't own much property

If you don't own a lot of property than there isn't any real benefit to avoiding probate since probate likely won't cost that much anyway. In fact, in Utah, if your total estate is less than $100,000 than you all of your assets can be transferred by way of a beneficiary affidavit rather than probate.

However, if you don't have much property but you do have a life insurance policy, and your young children are named as beneficiaries, than it may helpful to have a trust set up so that any life insurance proceeds are managed by the trustee instead of a court appointed conservator. This is especially recommended if you do not want your children receiving the insurance proceeds as soon as they turn 18.

You have complex debt problems

If you have a lot of creditors, then going through probate may actually be helpful. The reason for this is that probate provides an absolute cutoff time for creditors to file claims.

For instance, in Utah, creditors have one year to make a claim against your estate as soon as you file in probate court. That time period shortens to three months if you provide public notice of your probate proceeding. In contrast, a trust may be subject to creditors' claims much longer than a year.

So, a living trust?

To sum it all up, a living trust is a great tool to avoid probate and will likely be just what you need at some point in your life, if not already. However, a living trust is not always the answer to your estate planning issues and there other steps you can take to protect your assets and provide for those you care about. A good estate planning attorney can help you decide what is best for you.

 

What is the best way to provide for my children upon my death?

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If you're like most couples, you want to leave all or most of your assets to your children upon the death of both spouses. Your property can be transferred to your children through your will or through probate (if you don't have a will). However, where children are of an age where they would not be able to handle money or may be subject to influence by others, we suggest that their interests be placed into a trust for their benefit until each child reaches a certain age.

A trust is simply a vehicle in which the assets are held, managed and distributed by an independent person or entity known as the “trustee”. The property held in the trust is available for the child to assist in needs associated with health, education and general support. The property is generally not available to the child “on demand”, although he or she can make a request for funds which would be considered by the trustee and an analysis made to assure that the funds are used for prudent purposes and not recklessly wasted.       

There are two commonly used types of trust for children: a simple child's trust and a family protection trust.

Child's Trust

An example of a simple child's trust would be assets held in a single trust until the child reaches a certain age, and then those assets are partially distributed out based on certain ages. Two common sets of age distributions for this type of simple trust would be: half at age 25 and the balance at age 30; or one-third at age 25, one-third of the balance at age 30 and the remaining balance at age 35.

Family Protection Trust

An example of a family protection trust would be assets held in a single trust until the child reaches a certain age, but then instead of making distributions to the child, the child may elect to be appointed trustee or co-trustee, and may manage the trust property according to the trust instructions.

This protects the assets in each child's separate trust from claims made by his or her spouse (including claims from a divorce), from bankruptcy, and from any other creditors. This trust would ensure that any assets remaining at the child's death would pass free of probate, state inheritance taxes, and federal estate taxes.

The protection from creditors and taxes is the major benefit of this type of trust. However, it is more expensive and time consuming to manage a lifetime family protection trust, e.g, tax returns would need to be filed each year for each child's separate trust. 

If the benefits of a family protection trust are outweighed by the management costs, or if you'd simply prefer to give your property outright to your children, then a simple child's trust is a good choice for you. 

Either way, it helps to sit down with an experienced estate planning attorney to determine what is the best way to provide for you children; whether by a child's trust, a family protection trust, or one of the many other types of estate planning instruments.

Do I need to update my will or trust?

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The answer to this question depends on two things: (1) what changes have occurred in your life since you created or last updated your will and trust? and (2) when did you create or last update your estate plan?

In general, any major changes to your marriage, net worth, or beneficiaries, will require an update to your will or trust. Likewise, if your estate plan was done more than five years ago then it likely needs to be updated.

Significant events or changes in your life often require you to update your will and trust. For example, it is worthwhile to review or modify your estate plan in the event of any of the following:

  • You marry or have a child
  • You move to another state
  • You change your name
  • Your spouse dies
  • A beneficiary dies
  • You acquire or purchase significant assets
  • You have sold or no longer own property included in your will or trust

There have also been major changes in the law regarding estate planning. So if your will and trust haven't been updated in over five years then your estate plan may no longer work the way you intended. For example, a timeline of some of the significant changes in law include:

  • April 14, 2003 - This is the required compliance date under HIPPA. This means that if your power of attorney, health care directive, will, or trust was executed before this date you may not be able to work with your insurers and medical providers.
  • December 17, 2010 - This is the date the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act was enacted. This Act increased the threshold for owing federal estate taxes. If your estate plan was created before this date, your estate planning documents may contain federal tax-planning provisions that are no longer needed.
  • January 2, 2013 - The American Taxpayer Relief Act of 2012 became law on this date. This Act lets a surviving spouse use his or her deceased spouse's unused federal estate tax exclusion. This is known as the "portability election". If your trust or will was drafted or last updated before this date, and you're married, you could be missing valuable tax planning opportunities. 

If any of the above applies to you, it is important that you meet with a trusted estate planning attorney to review all of your estate planning documents.