I heard that my family will get my property and my children anyway if I die without a will.
If you die without an estate plan the state has a plan for you. The state has a law that says who will get all of your property upon your death. Even if you are married, your spouse won’t necessarily get everything you own. If you have children and you and your spouse die together or your spouse predeceased you, then the state courts will decide who gets your kids. You can prevent all of this from happening with the use of a proper estate plan.
I made a will and left everything to my spouse so I won’t owe any estate taxes.
Many people think that by leaving everything they own to their spouse they will avoid estate taxes. This is partially true. A person can die and leave unlimited amounts of property to a surviving spouse and escape estate taxes. However, if the property is of a high enough value and the spouse doesn’t manage to use it all before he or she dies, there may be estate taxes due upon the surviving spouse’s death. Estate taxes due upon the death of a surviving spouse may be reduced or even eliminated with the use of advanced planning techniques.
I own property jointly with my spouse so he or she will give it to who I want
Only property that is titled jointly and the words “with right of survivorship” will pass to the joint tenant automatically. The surviving spouse or other joint tenant can pass this property to whomever they wish during life or at death. This removes any control that you may have to determine the ultimate disposition of your property. If the property has a high value, or combined with the other property of the person who dies has a high value, a potential federal or state estate tax may be owed if proper estate planning is not used. There also may be a tax due upon the death of the first joint owner and the property may be subject to tax again when the second owner dies. A proper plan can maximize an owner’s control over the disposition and minimize the estate taxes that may be paid.
I have a large amount of life insurance and I heard that this will not be subject to estate taxes when I die.
Many people equate life insurance avoidance of probate with the avoidance of estate taxes. This is false. Probate is the court supervised process to re-title assets in the name of your heirs. If you name a specific beneficiary of your life insurance death benefit this person will receive the money and avoid this process. However, both the federal and state death tax systems take the value of life insurance into account for calculating death or estate taxes. By doing the proper planning an individual may remove the entire value of a life insurance policy from his or her estate for estate tax purposes.
My kids know what I want to be done with my property.
If you tell your family what you wish to be done, there is no guarantee. I know of many examples of siblings who fight over what seem like minor items of property, even going to such lengths as changing the locks on a house to keep each other out. In order to avoid any issues between surviving family members put your wishes in writing by establishing a proper plan.
I wrote up a will myself so that should be enough.
One of the biggest mistakes people make is to create a will for themselves and believe it is valid. This results in “intestacy” where the state will determine who gets your property and your children. There are a number of formalities that must occur with the drafting of a will to ensure that it is valid. The only way to insure that the will is drafted and executed properly is to consult and use a qualified estate planning attorney.
If I become disabled my spouse or family can make decisions for me therefore there’s no need to plan for a disability.
The Terry Schiavo case in Florida is a perfect example of why this is not true. If you become disabled the first hurdle is a federal law called HIPAA. HIPAA prohibits medical providers from discussing personal medical information about a patient even the patient’s spouse and closest family members. This means that a disabled person may linger unnecessarily while a court intervenes to give a family member access to medical information in order to assist in decision making. If that access is granted a court must also decide who will make decisions for a disabled individual. The court process could take years and become very expensive, all while the medical bills continue to accrue. This may all be avoided with properly drafted health care planning documents.
I heard the estate tax credit is now $5.4 million so I should not have a problem.
The federal estate tax credit is now $5.4 million, to be adjusted annually. The problem is that the WA state estate tax credit is a little more than $2 million. This means that persons who do not plan for this may unnecessarily pay up to a 20% estate tax to WA state. The only way to assure you avoid the most estate taxes is to work with a qualified attorney.