FAQ
Find answers to common questions about estate planning, probate, and trust administration to help guide your decisions with confidence.
Your Questions, Answered: Estate Planning FAQs
Planning for the future can bring up many questions. Our FAQ section provides clear answers to some of the most commonly asked questions about estate planning, trusts, probate, and more. Explore these answers to get a better understanding of the processes and options available, helping you make informed decisions for yourself and your family.
FAQs
Estate Planning FAQs
Estate planning is the creation of a comprehensive and complete plan to manage your assets while you are alive and to distribute your assets after your death.
When we talk about an estate, we mean all assets of any value that you own, including your residence, other real property including mineral rights, business interests, automobiles, artwork, collectibles, investments, insurance proceeds, bank accounts, annuity contracts, retirement benefits, household and personal property, and even your personal effects and family mementos and memorabilia.
Most Americans do choose to do nothing. Experts report that 70% have no written estate plan. And, of those who have planned, most have created a simple Will or rely on joint tenancy ownership of their assets to distribute their estate. Unfortunately, for the majority who have no plan in place, state law will dictate how their estate is to be distributed at death. As you might imagine, the government’s plan of distribution cannot address your specific desires for the best interests of your family.
Doing nothing can result in probate and unnecessary estate settlement costs, and perhaps increased taxes. Major problems may result from relying on a Will or owning assets in joint tenancy.
Yes. While an estate under the exemption amount is free from the Federal Estate Tax, you may experience a “living probate” if you become incapacitated, and your estate may need a death probate when you die.
Remember, probate and the Federal Estate Tax are two separate matters. Estate taxes are paid to the federal government for the right to transfer property at your death. Probate fees and costs are for supervising the administration of your estate and for controlling distribution of assets to your beneficiaries. So, your estate may owe no Federal Estate Tax, yet still require probate.
Trusts and Wills FAQs
Many people plan their estates by creating a document called a Last Will and Testament. A Will is a legal document that sets forth how you want your assets distributed at your death.
Your Will does not take effect until you die, so a Will is no help with lifetime planning. A will does not even control the distribution of all of your assets. Joint tenancy property, pay-on-death (POD), transfer-on-death (TOD), life insurance, and retirement plans all pass outside your Will.
Upon your death, your Will becomes a public document when it is filed with the probate court and is available to anyone who wants to read it.
With a Will, your estate must go through probate, so a Will system may not be the best planning document for most families.
Yes. You sell assets in the same way you currently do. The deed or other transfer document will, however, recite that you are acting as trustee of your trust. The result is the same as if the asset were in your name alone. No amending or updating of your trust will be necessary.
Yes. While you are alive and competent, you can alter your Living Trust or even revoke the Trust at any time without penalty. (Obviously, a married couple who divorce would revoke their joint Living Trust.)
One who dies without a trust or a will is said to die “intestate.” State law (of the state where the decedent is a legal resident at death) determines the heirs (the persons who inherit the decedent’s assets). These are the laws of “Intestate Succession.” You may not want the government “fall-back rules” deciding who gets your estate. Your Living Trust avoids this problem.
A Revocable Living Trust is a complete Will substitute. The Trust can control all of your assets both during your lifetime and after your death.
Here is how it works:
When you set up your Living Trust, you name yourself as the trustee and beneficiary. You then transfer your major assets (your residence, bank accounts, stocks and bonds, other real estate, etc.) from your name to the name of the trust. As trustee, you and you alone, have total and complete control of all your assets. As trustee, you can buy, sell, trade, do whatever you want — just as you do now.
Yes. If you are competent to handle your financial affairs now, there is no legal reason why you cannot be the trustee of your own Living Trust. In fact, most people who create Living Trusts act as their own trustees. A married couple can act as co-trustees.
Successor Trustees
You may, however, appoint others to act as your trustee. You definitely should designate successor trustees against the day of your incapacity or death. Your grown children or a trust company are possibilities.
Probate FAQs
No. A durable power of attorney may prove to be inadequate if you become incapacitated. The Living Trust is a more complete system for incapacity asset management. See page 6.
Actually, you also need a durable power of attorney, in addition to the Living Trust, to manage business affairs you may have outside the trust.
When you mention the word “probate,” most people think it is something that happens after you die. Unfortunately, a process similar to probate can also happen while you are alive. It is often referred to as a living probate, but it is technically called a conservatorship in Montana. In some states, it is called an “estate guardianship.” (In Montana, the “guardian” is the court-appointed person to handle health issues.)
If you become incapacitated, the probate court may appoint someone to take control of your assets and personal affairs. The court-appointed agent must file strict annual accountings with the court. The entire procedure is expensive and time-consuming, and may be humiliating because of the legal requirement that the judge must first declare you incapacitated.
No. Each joint tenant is required to sign documents on all major transactions involving joint property. If one of the owners is incapacitated, everything may have to wait until the probate court appoints a conservator.
It may or it may not. A power of attorney is a document signed by one person authorizing another to act as agent in financial transactions. A “durable” power of attorney is one that is effective when you are incapacitated. While often useful, a power of attorney has its limitations and traps.
Death probate administration certainly has an expense. Legal and accounting fees, personal representative fees, and appraisal costs comprise most of the administration cost. Small estates are particularly vulnerable because even reasonable fees can consume a large percentage of an estate’s assets. Every dollar going to probate costs is a dollar that could benefit your family.
In addition to the expense and delay of probate, your family may also be liable for death taxes. There are two types of death taxes: the Federal Estate Tax and the State Estate and/or Inheritance Tax.
Most states have abolished the state estate and inheritance taxes (Montana did so as of January 1, 2001), but the Federal Estate Tax is still with us and it can be a big tax if the estate is large enough. It is a tax on your right to transfer property at your death to your children or to other persons other than your spouse or charity.