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Wills and estate planning in nd march 2011
- 1. Estate Planning in North Dakota Getting Started
- 2. Do you have an Estate Plan? Yes you do! And if you don’t have a personal Estate Plan - - - North Dakota has one for you!
- 3. What is Estate Planning? “I want to control my property while alive, take care of my loved ones and myself if I become disabled, and, upon my death, give what I have to whom I want, the way I want, and when I want. And if I can, I want to save every last tax dollar, professional fee, and court cost possible.”
- 4. Basic Steps in Estate Planning Step 1 - Initiate the discussion Step 2 - Take inventory, evaluate the present Step 3 - Develop objectives Step 4 - Choose professional advisers Step 5 - Consider alternatives Step 6 - Review and modify
- 6. Take Inventory & Evaluate the Present Take A Complete Inventory Non-titled Property Real Property Financial Assets
- 7. Develop Objectives It is your estate Where do you want it to go? What do you want to accomplish?
- 8. Choose Professional Advisers Attorneys Accountants Financial Advisors Trust Officers Life Insurance Underwriters
- 9. What Your Attorney Should Know Personal Information Property Information Assets Insurance Accounts Receivable Liabilities Retirement Plans Location of Important Papers
- 10. Personal Representative Every estate plan needs as PR Name one in the will or trust Court will appoint PR if one is not named PR usually hires an attorney to assist in settling the estate
- 11. A Will . . . Distributes property after death Tells Who, How and When the property is distributed Names guardians Names a Personal Representative
- 12. Creating a Valid Will The Testatormust be 18 years of age Must be of sound mind Must not be under undue influence Must be in writing Must be signed with two witnesses present Signatures Notarized
- 13. Restrictions on Will A surviving spouse is entitled to at least 50% of assets (ND law) Property owned in Joint Tenancy with right of survivorship passes out side a will Assets with a beneficiary designation pass outside a will
- 14. Drafting a Will on your own Will templates (fill in the blank) Online options Software tools Holographic wills
- 15. If you have a Will do you have an Estate Plan? A will is important but it is just one tool used in planning an estate.
- 16. Estate Planning Tools A Will Property Ownership Beneficiaries Trusts Gifting Charitable Giving Prenuptial Agreement Durable Power of Attorney Power of Attorney for Health Care Living Will HIPAA Release Letter of Last Instructions Life Insurance
- 17. Property Ownership How property is owned is Estate Planning! Determines if it passes through a will Determines if it goes through probate
- 18. Sole Ownership One owner Total control of property Upon death the property goes to the owner’s gross estate Passed on through a will Needs to go through probate
- 19. Co-Ownership When two or more people hold legal title to a property Tenancy in common Joint tenancy
- 20. Life Estates and Remainder Interests Holders of a Life Estate share ownership with those who will receive the property after their death. Life tenants Remaindermen
- 21. What is Probate? Legal (court) procedure for settling an estate after someone dies Assists in the distribution of property Approves or appoints Personal Representative Notifies Creditors Inventories and appraises property Insures payment of taxes owed
- 22. Additions to Estate Plan Letter of last instructions Advance Directives (living will) Durable power for attorney for health care List for passing on tangible personal property
- 23. Review and Modify Review Estate Plan every 3 to 5 years When there is a major change in your life Changes in Tax Laws
- 24. Thank You! This presentation is not intended to be a substitute for legal advice.
Notas del editor
- *raise your hand if you have an estate. Why didn’t everyone raise their hand? One of the biggest myths we hold is that only the ‘rich’ have estates, and its only the ‘rich’ that need to do estate planning. The rest of us just need to write a decent will and then we’ll be fine. The truth, however, is…. (follow script below)*What is an estate and who has one?Anyone who owns any type of property or assets has an estate, could include bank accounts, land, home, vehicle etc.The sum total of all types of property owned by a person at a particular time, usually upon his/her death is his/her estate.What do you want to happen with your asset when you die? People spend a lifetime working and building an estate (resources) to carry them through their retirement years. Remember,to many, "estate planning" sounds like something only for the rich. Yet few families today can do without it. Some people avoid estate planning because it deals with attitudes and feelings about death, property ownership, business arrangements, marriage and family relationships. Others neglect or postpone estate planning with such excuses as"I'm too young, "I don't have that much,“ "It's too expensive," "I'm in excellent health," "I don't have time." It is worth investing some time and money now to avoid the confusion, delay, expense and family quarreling that might occur if you die without an estate plan.
- See handout Dying Without a WillSince something must be done with property after a death, the state of North Dakota has provided a method for dividing it among heirs if the deceased has not made a plan. If other arrangements have not been made (such as through a will or living trust), do you know how and to whom property you own will be distributed if you die?If I should die before tomorrowWhat would happen to the property I have worked a lifetime for?Who would care for my minor children or aging parents?Would my spouse and children be provided for in a fair and equitable manner?Would the family business continue?Would the estate settlement be conducted by someone with my family's interests and needs in mind?Would estate and inheritance taxes, probate fees, and other administrative or legal costs be held to a minimum?
- Estate Planning is the process of arranging your affairs to meet your objectives regarding the use, conservation and disposal of your property. It involves the coordination of all your properties (stocks, bonds, cash, real estate, business interests, life insurance, retirement benefits and other assets) into a total program. You can't take these "riches" with you. Someone is going to inherit your property, so it seems only sensible to have the results of your efforts distributed according to your wishes and conserved, as much as possible, from estate and inheritance taxes and other costs of estate settlement.
- We will quickly go through the steps to creating an Estate PlanThis presentation is not intended to be a substitute for legal advice.Nor is it intended to serve as a complete and exhaustive explanation of estate planning. Rather, it is designed to provide basic, general information about the fundamentals of estate planning so you will be belter prepared to work with professionals advisors to design and implement an effective estate plan.
- Perhaps the greatest hurdle in the path of most families is lack of communication. All too often, family members are hesitant to discuss estate planning. Parents considering retirement may wish to delay any discussion because of the unpleasant overtones connected with growing old and dying. Adult children may not mention estate planning to avoid placing additional stress on their parents and grandparents and because they do not wish to appear greedy or as if they are trying to "take over." How do family members initiate a discussion about the need to develop an estate plan without causing misunderstandings? One way is to use this publication as a conversation piece. Share what you learn with other family members. Encourage them to read the material. The NDSU publication FS-522, "Family Communication and Family Meetings," http://www.ag.ndsu.edu/pubs/yf/famsci/fs522w.htm may be helpful. Other ways to stimulate conversation include reading books, magazine articles and publications from banks, trust companies and other reputable sources or attending estate planning seminars or meetings. These may serve as the basis of discussion and illustrate the benefits of planning (and the consequences of not planning). Other opportunities can come from visits with attorneys, bankers, accountants and insurance representatives. A discussion of estate matters may come up in an incidental fashion and serve to initiate action. It's tragic -- but true -- that the death of a neighbor, friend or relative may lead a family to realize that estate planning is not a subject to be overlooked. Once the discussion is initiated, it should be easier to discuss the family's situation, concerns and objectives. Difficult decisions may need to be made. But the alternative is letting someone else decide.
- The next step is to make a critical review of your present financial situation. This step is crucial because it is the foundation of your entire estate plan. The end result will be satisfactory only if the information is complete. The checklist on page 5 of the Getting Started publication, "What My Attorney Should Know," will give you an idea of the information needed. It asks for family information, locations of legal and business papers and names and addresses of people you consult for advice. The checklist also will help you determine what your estate contains (liabilities as well as assets), its value and how ownership of property is held (see the discussion on property ownership). It is a good idea to review with professionals every document that bears on your personal and business situation to avoid "surprises" later. Handouts – FE 445 – Family Records: What to Keep, Where and For How LongFE 446 - Inventory of Important Papers
- What do you want to accomplish? Objectives vary from family to family due to differences in liabilities and assets, abilities and ages of survivors, number of children and values that are important to the person making the estate plan. The objectives of each family member, as well as overall family objectives, should be considered. Remember that objectives may change with your age, marital status, income, amount and kind of property and other circumstances. Some common objectives are listed on page 3 of handout Check those that apply to your situation and list any you wish to add. If there is conflict among the objectives, they should be ranked in order of importance. Possible ObjectivesProvide security for surviving spouse. Relieve surviving spouse of estate management responsibilities.Assure continuity of farm, ranch or other business.Minimize estate and inheritance taxes.Name guardians, conservators, or trustees for minor children.Provide means for paying expenses of estate settlement, taxes and other debts.Provide equitable (not necessarily equal) treatment of family members.Transfer specific property to specific people.Provide for charitable bequests to a favorite charity or organization.Minimize probate and settlement costs.
- You may be thinking . . . I really don’t have much to give to my kids/spouse, do I really need a lawyer to help me with this? Can’t I do this on my own? Maybe I can just handwrite a will? Do I have to have it notorized? Where should I store it? These are questions we all have and even tho’ there are will templates and websites available to help us through a will-making process, it’s important to realize that making a will is just one part of planning your estate…..(continue with script)*Estate planning is technical and complex. Most people do not have enough time to learn all they need to know to plan an estate thoroughly or to keep up with changes in state and federal laws. That's where professionals, such as attorneys, accountants, financial advisers, trust officers and life insurance underwriters, can help. An attorney with expertise and experience in property law, probate, trusts, tax law and other estate settlement issues generally serves as the key person on the team, coordinating the work of other team members. It is important that you be as knowledgeable as possible about your objectives, your situation and various estate planning alternatives and their consequences. Ask questions. Insist on understanding the plan and its implications. Can you create an Estate Plan on your own? Yes although all Estate Planning tools may not be available to you. You can hand write a will, Type one up, use a software program, go on the internet and find instructions.The bottom line is if you think there is any chance your estate plan may be contested it will more likely stand up in court if it has been prepared by a professional.
- You can save time and money by having necessary information and documents in hand for that first visit to your attorney and other estate planning professionals. Handout – Estate Planning and Will Information FormThe checklist is a condensed summary of information your attorney will need. Actual documents also may be needed, such as wills, deeds, major debt instruments, past gift tax returns, income tax returns and financial statements for the past five years, trust instruments, information relative to income tax basis of property and any other document where you are not sure (after checking the document) how the property is titled or who would be responsible for the debt. The publications HE-446, "Inventory of Important Family Records,"http://www.ag.ndsu.edu/pubs/yf/fammgmt/fe446.pdfand HE-445, "Family Records: What to Keep Where and For How Long,"http://www.ag.ndsu.edu/pubs/yf/fammgmt/fe445.pdfmay help get together some of this information.
- An estate must have a “personal representative,” who is a person who carries out the plan for the settlement of the estate. An individual, a bank with trust authority or a trust company can serve as personal representatives. The court determines whether a proposed personal representative is legally competent to serve in the position. A personal representative can be named in the decedent’s will or trust, and after a determination of legal competency, the court will appoint that person as the personal representative. If no one is named as a personal representative in the will, the court will name one. Because the settlement of a decedent’s estate involves continual contact with the court and various legal rights and responsibilities must be determined, personal representative should hire an attorney for assistance. The personal representative generally chooses the attorney, although a person can state a preference for a particular attorney to help in administration of the estate in his or her will or trust
- A will is a written document that describes how property is to be distributed after the death of the owner. The person who makes a will is called a testator (testatrix if female). A person who dies leaving a will dies testate (meaning dies with a will), and a person who dies without leaving a will dies intestate (meaning dies without a will). Fulfilling all the formalities involved in writing a valid will is called executing a will. A will can be either complex or simple, and can designate who receives property, how much each beneficiary receives, when it is distributed and, to some extent, what can be done with the property after distribution. A will only becomes effective upon death; it has no effect during the lifetime of the testator.
- To dispose of property via a will, a person must be of sound mind and possess the rights of majority. In North Dakota, unless a specific situation requires otherwise, a person attains the rights of majority at age 18.To be considered a valid will, it must be executed following certain requirements. The will must be in writing, signed by the testator or someone in the presence of the testator, and it must be signed by two disinterested witnesses who saw the testator sign the will or heard the testator acknowledge that the will is his or hers. A will is considered invalid if the testator was under “undue influence” from another person when the will was executedThe affidavit includes a statement stating that the testator and witnesses signed and acknowledged the making of the will and that the will is signed by the testator and witnesses. The acknowledgement must be made before a notary public.
- The passing of property to someone after death is a privilege granted by law, and wills must be made within the limitations North Dakota law. In North Dakota, very little restriction is placed on disposal of property through a will.In North Dakota, a surviving spouse is entitled to assets equaling not less than 50 percent of the estate, subject to certain allowances and deductions. The purpose of this restriction is to protect the financial interest of a surviving spouse . A surviving spouse may consent to receive less than his or her elective share, but that consent must be in a signed writing. If no waiver exists, and the testator leaves the surviving spouse less than statutory regulations would provide, the surviving spouse may be able to contest the will as invalid and have the estate distributed subject to the state statutes. This financial protection does not extend to children, who may be disinherited. The Joint Tenancy with Right of Survivorship controls the disposition of property at the death of one co-owner. Property owned in joint tenancy immediately passes to the surviving joint tenant(s). Wills or state intestate laws do not control property held in joint tenancy. Even if listed in a will, property held in joint tenancy with right of survivorship supersedes or bypasses instructions in a will.Your will or trust will not override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account (like an IRA or 401k plan) etc. The beneficiary designation takes precedence over the will. Property passing to a named beneficiary passes outside of a will .
- Again you may be thinking . . . do I really need a lawyer to help me with this? Can’t I do this on my own? Maybe I can just handwrite a will? Do I have to have it notorized? Online forms and templatesMany websites offer will forms or templates. Some are available for free; others have an associated cost. Generally, these consist of a simple, pre-written will on which you fill in your personal information. While this could be better than leaving your estate to pass through intestacy (without a will), this is not a great option for estate planning because conforming a Web document to your situation will be difficult. Also, states have varying rules that a general template may not take into consideration.Holographic wills (hand written wills)If you are unable to retain an attorney or want to make small changes or quickly make changes, writing a will yourself is possible. If “material portions” of a will are written in the testator’s handwriting and it is signed, that will is considered valid. However, this is not the best option to pursue because it leaves much room for error and those not benefitting as much as they would under intestacy laws to contest it.A holographic will, whether or not it is witnessed, is valid if the signature and the material portions of the will are in the handwriting of the testator, even if the document does not comply with the general requirements for a valid will.
- An estate plan can be very simple or it can be very complex, depending on what you want to accomplish there are a variety of tools that can be used.Most basic Estate Plans include A willA Durable Financial Power of Attorney – Durable meaning it will be in effect even if the person becomes disabled or incapacitatedSpringing Durable Financial Power of Attorney – A springing durable power of attorney can be used when the principal does not want the agent to take any authority until the principal is determined to be incapacitated and unable to direct his or her own affairs. An Advance Health Care Directive – also called a Living Will - allows you to express your wishes concerning life-sustaining proceduresHealth Care Power of Attorney - you to appoint someone to make health care decisions for you if you become disable or incapacitated
- There are a variety of tools to use in accomplishing what you want through your Estate Plan. Some you can do on your own, some require a professional’s help
- We can do quite a bit of Estate Planning through how we own our property and assetsEstate planning requires an understanding of property and property rights associated with its ownership. The form of property ownership has an important impact on the degree of control during life, as well as how property will be taxed and distributed after death.Property can be broadly categorized as real or personal. Real property includes land, attached structures and mineral rights. Personal property includes both tangible and intangible property. Tangible personal property encompasses such things as household goods, automobiles, business or farm equipment and stored grain. Intangible personal property includes bank deposits, life insurance policies, stocks and bonds. There are two major elements in property ownership: degree of interest in (or control over) the property and the relationship between co-owners (when there is more than one person with a present interest in the property).It is important to note that there is no such thing as absolute ownership of property. In all civilizations, governments may reserve the right to levy taxes on property, to regulate ways in which it may be used, and to appropriate private land for public use by the power of eminent domain.
- Only one name appears on the deed or title. All solely owned property becomes a part of the owner's gross estate and, upon death, passes to named beneficiaries under a will or to heirs according to North Dakota law (if there is no will).
- Co-ownership of property occurs when two or more persons hold legal title to the property. There are two types of co-ownership in North Dakota: tenancy in common and joint tenancy with right of survivorship. Tenancy in common. two or more persons hold an undivided ownership of land or other property. Each of the multiple owners has a partial, undivided interest in the property. Each has the right to enter upon the whole land and to occupy and enjoy the whole. Each can sell or gift their respective undivided interests without the permission of the other owners. Each has the right to the profits from the tenancy in proportion to their ownership interests and each has an obligation to pay the expenses of the property in proportion to their ownership interest. When a tenant in common dies, his or her undivided property share passes to the beneficiaries specified by will or, if no will exists, to heirs under state law. The property does not pass to the co-owner unless the co-owner is named as the beneficiary in the will or is considered an heir under state law. Only the portion of the property owned by the deceased tenant in common is included in the gross estate for federal and North Dakota estate tax purposes. Joint tenancy. carries with it the right of survivorship. two or more persons own property together, again with undivided interests. Each owner can terminate co-ownership by selling or transferring their interest in the property. The right of survivorship controls the disposition of property at the death of one co-owner. Property owned in joint tenancy immediately passes to the surviving joint tenant(s). Wills or state intestate laws do not control property held in joint tenancy. Even if listed in a will, property held in joint tenancy with right of survivorship supersedes or bypasses instructions in a will. Some people use joint tenancy with right of survivorship as an alternative to a will. It is a quick and convenient way to pass property to surviving joint tenants; it may provide quick access to funds or property for the surviving joint tenants; and it can save some of the delays and expense associated with probate. However, there are also several potential disadvantages. Joint ownership gives another person equal control over jointly held property.
- Define Life Tenant– present holders of a life estate as long as they are aliveDefine Remaindermen– persons designated to receive property after the death of the life tenantLife Estate are a more limited form of property interest Holders of a life estate -- or life tenants -- share property interests with "remaindermen" (persons designated to receive a transfer of the property after death of the life tenant). Life tenants manage and receive income from property during their lifetimes but cannot dispose of the property at death. Life tenants generally may not sell or mortgage the property without the permission of the remaindermen and are responsible for property taxes, mortgage payments and adequate property maintenance. It should be noted that the terms and provisions of a life estate may vary, depending on the instrument creating it.
- What is probate and do I want to avoid it? How much does it cost?Probate procedures are open to the public, if privacy is important to your estate plan you may want to find ways to avoid probate“Probate” is the legal procedure for settling an estate when someone dies owning property. The property could include real property (such as land) as well as tangible and intangible personal property (such as a car or a bank account, respectively). Probate requires a determination of what property the decedent owned and its value; what debts the decedent owed; and the distribution, or assigning the ownership, of the decedent’s property to its new rightful owners.Federal and state estate taxes also must be determined, and these must be paid even if no probate procedure is required. Notice of death must be given to creditors to allow them to make claims against the estate for debts the decedent owed them. If a decedent had no outstanding debts, or any debts are assumed and paid by other people, and the decedent had no interest in property subject to the probate process, no probate proceeding is required.The steps to the probate process are listed in the Wills and Probate handout on page 2
- Letter of Last InstructionsAnother valuable document to consider writing is a letter of last instructions, which is separate from the will, to your lawyer, personal representative or family. This letter, to be opened upon your death, can provide additional information, such as where important papers are located; funeral and burial instructions; an inventory of your savings and investments; instructions and directions concerning your business; and a listing of various advisers, their addresses and phone numbers. A letter of last instructions is not a substitute for a will, but it does eliminate uncertainty and confusion when death occurs. It enables the survivors to handle financial affairs in an orderly manner.Advance DirectivesA durable power of attorney for health care and a living will are two forms of advance directives, or legal tools that individuals can use to declare their wishes regarding health-care decisions. Unlike a will, these documents are effective during an individual’s lifetime.May personal possessions be included in a will?In North Dakota, probate law allows a person to refer in a will to a separate list disposing of tangible personal property not otherwise disposed of in the will, except money. The separate list must be signed by the testator and identify the items and who is to receive them with reasonable certainty.
- Once your estate planning is completed, you can relax -- but only temporarily. Your plan should change if your circumstances change. For example, the value or nature of your property may change; your objectives may change; recipients may marry, divorce, die or have children; or tax laws may be revised. Review of an estate plan every three to five years, or whenever there is a major change in your situation or the tax laws. First, be sure that you have completed all of the items that you planned to do. Use the checklist to be sure that you didn't forget anything.