Isn't estate planning only necessary for the wealthy?
Some people choose not to prepare a will or a trust because they think that their own personal estate is not large enough to justify going to the trouble of creating an estate plan. Everyone can benefit from estate planning. If you want to ensure that your loved ones receive the maximum value of your estate and receive the benefit of your generosity with a minimum of delay and difficulty, it is vital to prepare an estate plan.
What is the difference between a will and a trust?
Wills and trusts both direct the distribution of your personal estate upon your death. A will details your wishes concerning who will receive what out of your estate, and it goes into effect the day you die. A trust, on the other hand, is a legal entity to which you transfer your personal assets, and from which payments are made to beneficiaries according to your directions. For example, you may direct the trust to make regular monthly payments to your heirs, or it might make a single lump-sum payment.
Do I need a will or a trust?
Generally, it depends on the size and complexity of your personal estate. If you possess a relatively modest estate, and have simple plans concerning the manner in which your assets are to be disposed, a will may meet your needs. If, on the other hand, you have a large estate, you may be better off with a trust. For example, you may wish to use a trust to minimize estate tax. We can review your personal circumstances to help determine what course of action is best suited for you.
What is probate?
Probate is the legal process of examining a will to determine its validity, followed by distributing the assets of the estate and executing the terms of the will, all under court supervision. The executor of the estate is required to gather and inventory all of the estate's assets, notify any creditors who may have a claim to the estate and notify any and all heirs to the estate.
Why should I try to avoid probate?
Probate is a complex and often lengthy process, one which can take several months or even more than a year to complete. It often places a considerable financial drain on the estate, between the financial impact of court costs and that creditors can file claims against the value of the estate. Further, it offers the opportunity for family members to file their own claims if they feel that they have not received their fair share. Finally, probate is a matter of public record, so anyone has access to the details of the case. Avoiding probate often means saving considerable amounts of time, money and stress.
What is a living will?
A living will is an estate planning document that makes your wishes known concerning medical treatment and end-of-life care in the event you are incapacitated by a serious injury or illness. Thus, instead of leaving difficult decisions to your family and doctors concerning how long to keep you on life support, for example, a living will gives clear directions. A similar document is a healthcare proxy, in which you appoint another person to speak for you if a decision must be made on a matter not covered in your living will.
What is a power of attorney?
A power of attorney is similar to a healthcare proxy, as it is used to appoint another person as your legal representative. In a power of attorney, you will name another person to make important decisions about your estate and your finances in the event that you cannot speak for yourself.
Who is entitled to a copy of the will? Anyone who is an immediate family member of the deceased, whether or not he or she is listed in the will, is legally entitled to view a copy. The same applies to anyone who is listed in the will as a beneficiary. Legal or financial advisers and professionals involved with the estate such as trustees, appointed lawyers, and probate judges or any court officials involved in its filing are also entitled to view the will. Those are the primary parties who may request access to a will, but there are other less groups of people that also have a legal right to view and receive copies of the document.
Other people who may view or obtain copies of a will include:
· Anyone named in the will, even if not as a beneficiary;
· Anyone previously named as a beneficiary in an earlier version of the will;
· Anyone who would have been entitled to receive an inheritance by law had the deceased not left a will;
· Anyone with a child who is named in the will (and is a minor);
· Anyone with a child who would have been entitled to an inheritance had the deceased not left a will (and is a minor);
· Anyone who is owed money by the deceased.
Depending on the circumstances, this list is not exclusive and other parties may be able to demonstrate they have enough of an interest in the will to request a copy of it. Anyone with connections to the deceased, the family, or a beneficiary of the assets may present an argument that they should be entitled to view the will.
How do I obtain access to a will? Typically, the easiest way to obtain access to the will is to approach one of the individuals who either has a copy or has access to one as they are obligated to give you access if you’re legally entitled to it. Another way is to approach one of the professionals involved in the estate. Talking to an attorney or adviser who has the will, and who is versed in the law, will be much more efficient than speaking to a family member or friend who might not understand your legal right to view the document. You may also make a formal request to the probate court that you should be allowed to view the will. Once the will has gone through probate, the information within it becomes public record, and is available to anyone who chooses to search for it, but up until that time access to the information is controlled.
What is a special needs trust? A special needs trust, sometimes called a supplemental needs trust, is a legal arrangement and fiduciary relationship which means one person or entity – the trustee – is charged with protecting the interest and assets for the benefit of another – the beneficiary. The trust essentially allows an individual with a disability or special needs to benefit from the income and principal of the trust without reducing their eligibility for government assistance such as Supplemental Security Income (SSI) or Medicaid. Basically, any assets held in the trust do not count for the purposes of qualifying for government assistance. However, the trustee must ensure that trust distributions are within the guidelines of the particular government benefits the beneficiary is receiving. Otherwise, the distribution could have a negative impact on the benefit. For example, a beneficiary receiving SSI should not receive trust distributions for food or shelter-related expenses.
How can a special needs trust help? The use of a special needs trust can be an important strategy for loved ones in such a situation. It protects against the reach of creditors, and provides protection for a beneficiary who may be vulnerable, susceptible to undue influence or unable to manage money if the assets were given outright. But most importantly, the special needs trust stretches each dollar contributed to the trust and allows the beneficiary to be cared for at a higher level of care than is available from government-sponsored benefit programs, and ensures the wealth transfer to a disabled individual can occur without jeopardizing the beneficiary’s benefits.
What types of special needs trusts are there? There are two types of special needs trusts – first party and third party – that are distinguished by the source of assets used to fund the trusts. With a first party trust, also referred to as a “self-settled” special needs trust, it must contain the assets of an individual under the age of 65 who is disabled. The trust, which often results from a medical malpractice or personal injury situation, can only be established by a parent, grandparent, guardian or court. The trust must also be irrevocable and can only be for the sole benefit of the beneficiary. Upon the death of the beneficiary, any remaining assets in the trust are repaid to the state up to an amount equal to any medical assistance benefits that were paid to the beneficiary while alive.
Third party special needs trusts are funded with other’s assets (a third party) like a gift or inheritance. Unlike a first party trust, a third-party trust does not require any state payback at the beneficiary’s death, and any remaining assets pass according to the grantor’s wishes.
What can a special needs trust be used for? A special needs trust should not provide money directly to the beneficiary as it could interfere with eligibility for Supplemental Security Income and Medicaid. The trustee can however spend trust assets to buy a wide variety of goods and services to assist the loved one with special needs. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles and physical rehabilitation. Most important, a special needs trust helps to enrich the beneficiary’s life and make it more enjoyable.
What about managing a special needs trust? Given the complexity and longevity of administering a special needs trust, it’s important to consider the best-qualified person or a corporate trust company to serve as trustee. Properly managing a special needs trust means understanding the disabilities of the loved one and being able to effectively communicate with a parent, caregiver or guardian, which can require a significant time commitment on the part of the trustee.
They must be able to prudently manage the assets held for the loved one’s benefit and understand the governmental regulations and how to work about them. The trustee, whether an individual or corporate institution, should be knowledgeable about what can be paid from the trust and what shouldn’t, as well as be able to prepare and retain records of earnings and disbursements for tax purposes.
A corporate trustee is often better positioned than an individual trustee to effectively administer a special needs trust in a way that is compliant with state and federal laws. In summary, a special needs trust established for the benefit of a disabled individual can help fund a lifetime of care even if the family is unable to. Governmental support is designed to only provide for the very basic necessities, such as food and shelter. The funds in a special needs trust supplement government benefits and can be used for those many extras that will make the life of an individual with a disability or special needs more rewarding and fulfilling.
Who is a minor under Georgia probate law? A minor is anyone who is under the age of 18. When a minor is an heir of an estate under Georgia law, or beneficiary of an estate under the terms of a will, it can complicate the process. If someone is a minor at the beginning of the process, but turns 18 during the process, then they will be considered an adult at the time of their 18th birthday. So, it is possible to start an estate with minors involved, and end without any minors.
What complications arise from having minors involved in an estate? Having minors involved will cause a number of different complications at various stages of the process of settling an estate. For example, in the first phase of the process someone needs to be appointed as administrator or executor of the estate. In an uncontested situation, the other family members will typically sign a consent agreeing not to challenge the administrator or executor to prevent them from serving, and to make the process easier.
A minor heir may not sign one of these consents, and the minor’s parent or guardian may not sign on the minor’s behalf. Instead, the probate court will appoint a guardian ad litem to represent the minor’s interest. The guardian ad litem is usually an attorney and his or her only job is to look at the entire situation from the point of view of the minor, and report to the Probate Court whether it is in the minor’s best interest. Having a guardian ad litem involved in a case will usually cause increased delays and costs.
What complications arise when trying to get expanded powers granted when minors are involved in an estate? After someone is appointed as administrator or executor, the estate will be in the administration phase. Unless there is a will that specifically provides expanded powers to the executor, a court will generally not grant expanded powers to an administrator or executor when a minor is involved in an estate. As a result, the executor or administrator will need to file a petition and seek court permission before performing many actions on behalf of the estate, such as selling property. Each time one of these petitions is filed, a guardian ad litem will need to be appointed to review the situation from the minor’s perspective.
How much money/property can a minor receive without a conservator? When the time comes to make distributions, a minor may not receive more than $15,000 in property or money unless a conservator has been appointed for the minor. It is important to remember that if there is a will that directs that the minor’s inheritance be placed in trust, then a conservator will not be required because the property is not going to the minor, it is going to the trust.
What is the role of a conservator? When property does go to the minor, however, a conservatorship will need to be established. A conservatorship is an ongoing, court supervised proceeding that will last until the minor becomes an adult. An adult, typically a parent or other relative, will file a petition with the court asking to establish the conservatorship. The conservator will need to post a bond with the court, and all of the property that would go to the minor will go into the conservatorship. The rules for a conservatorship are very strict. For example, the conservator will need to report to the court each year and show what has happened with the money or property. In addition, the conservator may not use any of the money without court permission. Once the minor turns 18, all of the property and money in the conservatorship will be turned over to the minor.
What about settling an estate with a minor heir?Finally, in the last phase of settling an estate, the goal is to have the administrator or executor discharged so that the estate may be considered closed. Typically, the administrator or executor will want to be discharged from office and liability. When that petition is filed, a guardian ad litem will need to be appointed to investigate the actions of the executor or administrator and determine what is in the best interest of the minor. As you can imagine, there is a lot of additional work involved in settling an estate when there is a minor heir. Georgia Probate law takes the protection of a minor’s interest in an estate very seriously.
How much does Georgia probate law say an executor should get paid by the estate? There are a couple of factors that go into whether and how much an executor is paid. An executor may serve with or without compensation, as directed in the will. If the will does not say anything about executor compensation, then the executor will be compensated according to the default rules of Georgia probate law.
What if executor pay is mentioned in the will? If executor compensation is mentioned in the will, it may set a specific amount of compensation, or identify a formula or other method of calculating the executor’s compensation. If that is the case, then the executor will be compensated as the will directs, and usually may not receive additional compensation under Georgia probate law. The will may also state that the executor will serve without compensation. If that is the case, then the executor will not receive any compensation at all.
What if executor pay is not mentioned in the will?Finally, the will may be silent regarding executor compensation or it may direct that the executor be compensated according to Georgia probate law. An executor is entitled to receive 2 1/2 percent of all money brought into the estate, and 2 1/2 percent of all money paid or distributed out of an estate. This amount does not include the value of real estate or stocks and bonds. The executor may receive 10 percent of any interest earned by the estate. The executor may receive additional compensation of up to 3 percent of the value of non-money property (such as real estate, stocks, and bonds) that is distributed to the beneficiaries without being sold.
(b) If the personal representative's compensation is not specified in the will or any separate written agreement, the personal representative for services rendered shall be entitled to compensation equal to:
(1) Two and one-half percent commission on all sums of money received by the personal representative on account of the estate, except on money loaned by and repaid to the personal representative, and 2 1/2 percent commission on all sums paid out by the personal representative, either for debts, legacies, or distributive shares;
(2) Ten percent commission on the amount of interest made if, during the course of administration, the personal representative shall receive interest on money loaned by the personal representative in that capacity and shall include the same on the return to the probate court so as to become chargeable therewith as a part of the corpus of the estate.
What are the duties of an executor? An executor has an absolute duty to always act in the best interests of the estate and the beneficiaries of the will. That means that an executor should never put his or her personal interests ahead of the interests of the beneficiaries or the estate. In addition, an executor has a duty to the beneficiaries to settle an estate as expeditiously as reasonably possible considering the particular circumstances of the estate. These are considered fiduciary duties under Georgia law, which are the highest duties that the law recognizes. Violating these duties is taken very seriously by the probate court, and can result in an executor’s removal from office along with other sanctions.
What does Georgia probate law say about an executor who lived with the deceased prior to death and continues to live in the estate home while administering the estate? In this situation, the fact the executor lived with the deceased prior to death does not give the executor any right to continue living in the estate home after the deceased’s death. In fact, as an executor, the executor has a duty to move out of the estate home if remaining in the estate home would cause harm to the estate (such as causing the home to be harder to sell) or would delay completing the administration of the estate. In addition, because the home is still titled in the name of the deceased, it may make it difficult or impossible to acquire homeowner’s insurance on the property to protect it in case of fire or other disaster. Since an executor has a duty to protect estate assets, failing to secure adequate homeowners insurance would violate the executor’s duties to the beneficiaries, especially if the reason that the insurance cannot be secured is because the executor is living in the home.
What can you do if you’re a beneficiary who is getting frustrated about the lack of progress of the executor moving out of the estate? Finally, if an executor does live in the home, he or she should get the permission of all beneficiaries to do so. Even if permission is granted, the best practice is for the executor to pay a market rate rent to the estate. The theory behind paying market rent is that if the executor were not living in the home, then the home could be rented to someone else, and that person would pay rent to the estate. So, the executor should do likewise. If you are in a situation where the executor is violating any of his or her duties to the estate, the solution is to take the matter before the probate court. This may result in having the executor removed, and obtaining a new executor.