N. Brian Caverly

Probate is the method by which your estate is legally transferred after you die. When estate planning and writing your last will and testament, keep these tips in mind to help the probate process run smoothly. You can be both specific and general in your last will and testament — it's up to you. You can parcel out individual items to people by name and also let your beneficiaries decide how to divide up your worldly goods.

A trust agreement is a document that spells out the rules that you want to be followed for property held in trust for your beneficiaries. Common objectives for trusts are to reduce the estate tax liability, protect property in your estate, and avoid probate. Think of a trust as a special place in which ordinary property from your estate goes in and, as the result of some type of transformation that occurs, takes on a sort of new identity and often is bestowed with superpowers: immunity from estate taxes, resistance to probate, and so on.

Trusts are an important part of your estate plan when you want to leave money to your minor children. Trusts ensure that money, managed by a trustee, is set aside and made available to them when they reach a certain age. Trusts are often complex, time consuming to set up and oversee, and cost you money. So you should have a good reason to go to all this trouble!

Joint tenancy means that you share ownership of property. Property held in joint tenancy isn’t part of the probate process; creditors don’t have access to property held as joint tenants. If the court can prove that you transferred title of property to joint tenants to hide from creditors, your creditors may still make a claim against part of your joint tenancy property.

The federal tax system includes a gift tax, generation skipping transfer tax (GSTT), and estate (death) tax that work together to make as much of your estate as possible disappear. The laws and rules for these three federal taxes created some confusing relationships among them. Your estate-planning team — particularly your accountant and your attorney — can help you make sense of the odd relationships among these taxes: The gift tax: The federal gift tax is imposed on taxable gifts that you give to others.

Before you can plan how to distribute your assets after your death, you need to understand what your estate is. In the most casual sense, your estate is your stuff or all your possessions. In addition to understanding what your estate is, you also need to know what your estate is worth. First you make a list of positive balance items such as: Cash, checking and savings accounts Certificates of deposit (CDs) Stocks, bonds, and mutual funds Retirement savings in your Individual Retirement Account (IRA), 401(k), and other special accounts Household furniture (including antiques) Clothes Vehicles Life insurance Annuities Business interests Jewelry, baseball card collection, autographed first edition of Catcher in the Rye You calculate your estate’s value as follows: Add up the value of all of the positive balance items in your estate.

One common way to get around estate taxes on your life insurance is to create an irrevocable life insurance trust. You transfer the ownership of your life insurance policy to the trust, effectively taking advantage of a loophole to get around estate taxes. Beware of the life insurance tax trap! Various forms of life insurance are likely to be an important part of your estate planning, from protecting your estate to creating cash that goes to one or more of your beneficiaries.

A trust that makes annual payments to a beneficiary while you’re still alive is an intervivos trust. If you set up a trust to become effective and start making payments after your death, you’ve set up a testamentary trust. Unlike a testamentary trust, an intervivos trust generally doesn’t have to go through probate, but the probate court still has jurisdiction over an intervivos trust if any controversy or problems arise, just as it does for a testamentary trust.

Although the simple will is right for just about everyone, you do have other options for your will. Other types of wills, along with the drawbacks of each, include: A joint will, is a single legal document that applies to two people (you and your spouse, for example). Some married couples mistakenly think that they’re required to have a joint will, or that a joint will is better for them than two simple wills.