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Estate Planning Books
Jordan S. Simon
Joseph Mashinski
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Published:
March 7, 2003

Estate Planning For Dummies

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Overview

Get your arms around wills, trusts, probate, inheritance taxes, and other important estate planning essentials

Estate Planning For Dummies teaches you the ins and outs of estate planning. It’s all about drafting wills, dealing with probate, assigning powers of attorney, establishing living trusts, and beyond. Think you don’t have enough assets to merit estate planning? Think again. This everyone-friendly guide walks you through building a solid estate plan, whatever your current financial situation. In easy-to-understand language, you’ll learn the ins and outs of estate planning, including what happens to your stuff—cash, real estate, businesses, retirement funds, everything—when you pass away. This new edition is updated for the many recent changes in estate taxes and inheritance law. Make sure your assets get into the pockets of your heirs or wherever you want them to go, and learn how to accomplish it the For Dummies way.

  • Understand state and federal estate and inheritance taxes
  • Build an air-tight will and make sure your heirs get as much as they can
  • Protect your estate’s privacy even after you’re gone
  • Plan for the transition of a family business
  • Prevent disagreements and uncertainty among your heirs
  • Figure out how to pass on your digital assets

This friendly guide is a must for people of any age in the process of drafting their wills and planning where their assets ultimately end up.

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About The Author

Jordan S. Simon is a partner at the Venture West Group and coauthored the first edition of Estate Planning For Dummies.

Joseph Mashinski is an attorney and consultant with more than 19 years’ experience in estate plan­ning, insurance, employee benefits, and ERISA compliance.

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CHEAT SHEET

An estate plan, including a last will and testament, protects your family and finances after you die. Your first step in estate planning is to write a comprehensive will that moves smoothly through the probate process.Make sure you're aware of current estate taxes that may influence your planning and how insurance factors into your estate plan.
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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.
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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!
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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.
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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.
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An estate plan, including a last will and testament, protects your family and finances after you die. Your first step in estate planning is to write a comprehensive will that moves smoothly through the probate process.Make sure you're aware of current estate taxes that may influence your planning and how insurance factors into your estate plan.
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Even the most orderly estate plans can fall victim to some unforeseen event. To put together a thorough estate plan, take a look at situations that may occur and find out the necessary information for dealing with them. If you're in the process of getting a divorce, you have a lot on your mind. But you also need to look at how your divorce will affect your estate planning.
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You definitely want your home to be protected after you die. Some states have homestead allowance statutes to make sure that your spouse and any minor children have a place to live after you die. Your homestead is typically defined as your house and may also include a certain amount of adjacent land. (The legal term you may run across is curtilage.
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Protective trusts — spendthrift, supplemental needs and special needs, education, and minor’s trusts — let you parcel out money when you feel the time is right or specify exactly how the trust money is to be spent. In addition to a spendthrift trust, you can specify spendthrift provisions on other types of trusts, such as a discretionary trust.
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Depending on the value of your estate, you may not have to deal with at least some of the federal taxes, but you or your surviving beneficiaries may have a substantial amount of tax-related paperwork to file. When estate planning, use these tips to understand what you're dealing with from a tax standpoint: Most people don't have to pay the federal estate tax — the so-called "death tax" —because their estates fall below the federal threshold.
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Insurance is vital for estate planning: It helps protect your current property, things you hope to attain in the future, and the gifts you hope to leave behind. Take a look at how insurance affects your estate and what types of insurance to consider for your estate planning: Life insurance is a critical part of your estate planning, so make sure that when you purchase a new policy or change an existing one, you look at the rest of your estate planning to get the most benefit from your life insurance.
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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.
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Most marriage-oriented trusts postpone payment of estate taxes until both spouses in a marriage have died. A marital deduction trust allows you to put property in trust with your spouse as the beneficiary. Upon your death, your spouse has the right to use the property in the trust. No matter how valuable the property in the trust is even if it exceeds that year’s federal estate tax exemption amount, your spouse won’t owe any federal estate taxes.
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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.
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Even the simplest wills are filled with confusing legal terminology. Discuss your will requirements with an attorney: Cover the value of your estate and your tax situation, the individuals and institutions you want to leave your estate to, and nursing home concerns — so that your attorney can help you prepare a will that accurately reflects your situation and preferences.
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Your unanticipated death could create an immediate financial crisis for your family. Family allowance statutes enable the probate court to provide money for the support of your spouse and minor children during the probate process. In fact, family allowance statutes are among the few distributions that can be made from your estate without risk before the claims of your creditors are paid.
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The Estate Recovery Act technically isn’t a tax, but it involves the government taking money out of your estate after you die. In fact, the Estate Recovery Act can have a far more devastating impact on your estate than any estate tax does. The idea behind the Estate Recovery Act is simple (but devious): If you need to accept help from Medicaid for health care services, you have no problem while you’re still alive.
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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.
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Some states are repealing or phasing out their inheritance or estate taxes, but other states that currently don’t have estate-related taxes are instituting an inheritance or estate tax. Whereas most state governments had budget surpluses throughout the 1990s, the early 2000s have been quite a different story with deficits coming back as a result of economic slowdown.
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Your will is a living document. Although a will’s intent is to provide for what happens to your estate after you have died, your will needs to change as your life changes. Don’t make the mistake of putting your will away and forgetting about it. You must make sure that the details of your will reflect changes in your life.
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Trusts can be a great help in your estate planning — they can protect your property, save on estate taxes, and help you avoid probate. Sounds great, right? Well, before seriously considering a trust, you need to understand the basics of trusts and make a well-informed decision about setting up trusts right for you.
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If you have a valid will, you are said to die testate, meaning you have spelled out your intentions completely and legally in your last will and testament. A will status of intestate means you don’t have a valid will. When only some of your assets are covered by a valid will, you are partially intestate. Be sure to periodically consult with your attorney to make sure that your will is complete, current, and has been properly signed and witnessed, and you will increase the likelihood of your will status being testate (remember, that’s good!
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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.
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Why would you want to use a will substitute (a legal agreement that transfers ownership upon your death) rather than your will for certain property? Property covered by a will substitute is transferred outside of probate, which may provide you with some significant advantages in the following: Time. With will substitutes, property is typically transferred immediately upon your death, even if other parts of your estate are just beginning what may be a lengthy probate process.
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Setting up a charitable trust to leave property to a qualified charitable organization can reduce your estate taxes similar to the way giving gifts to charitable organizations offers the charitable deduction to reduce gift taxes. If you’re trying to reduce your estate by using a charitable remainder trust and specify your spouse to receive payments, you may be increasing the value of your spouse’s estate so much that estate taxes kick in or, if they already apply, they may be higher than they otherwise would be.
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Grantor-retained trusts let you create a “noncharitable” trust. Instead of the property in the trust eventually going to a charitable organization, the property goes to (for example) your child or your favorite cousin. There are three types of Grantor-retained trusts: GRAT — a grantor retained annuity trust: This trust that pays you a fixed amount of money at regular intervals.
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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.
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Estate planning often involves setting up a revocable trust or irrevocable trust. Each one of those trusts begins with an intervivos trust — a trust you set up that goes into effect while you're still alive. You then decide if the intervivos trust is revocable, meaning that you can change your mind, or irrevocable, meaning sorry, what's done is done.
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Almost always, a simple will is the will of choice for you. A simple will is a single legal document that applies only to you (unlike a joint will for you and your spouse). A simple will describes Who you are, with enough information to clearly identify that document as your will. The names of your beneficiaries, both people — whether those people are family members or not — and institutions, such as charities, and enough information about the beneficiaries, such as their addresses and birth dates so whoever is reading your will can figure out to whom you are referring.
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