80 Commonly Asked Questions

1. What is estate planning?

Estate planning is the accumulation, the preservation, and the distribution of your assets. It is accomplishing your personal family goals and easing the management of your estate, as well as minimizing taxes.

2. What will happen to my property if I die without a will or trust?

If you die without a will or trust, the state determines who will be your ultimate heirs. This distribution plan can be found in the intestacy statute of each state. The applicable state can be either the location of your legal residence (personal property), or the state in which your assets are located (real property).

3. How is my property transferred if I die intestate?

If you die intestate, the transfer of your property is accomplished through a court-supervised proceeding called probate that generally takes a minimum of six months, typically a year or more. These proceedings generally are expensive and time-consuming and tie up your property for several months. Probate can be avoided with proper estate planning.

4. What is probate?

Probate is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the living beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties who have a complaint regarding the deceased can file their complaint (a will contest). Even without a contest, probate can be costly and time-consuming. Probate is a public proceeding.

5. Can probate be avoided?

Probate can be avoided with careful planning. There are a number of different techniques for doing so which can be used alone or in combination.

6. How large of an estate can pass federal estate tax free?

The government allows every individual an amount free from estate tax at their death, the "Applicable Exclusion Amount," $2 million in 2007. This means that in 2007, estate taxes will not be owed at the time of an individual's death unless the net value of the estate exceeds $2 million.

7. What is the marital deduction?

The Internal Revenue Service allows an individual to leave any amount of assets to his or her spouse without taxation. At the death of the surviving spouse, however, all assets in the estate over $2 million will be included in the survivor's taxable estate; assets above $2 million are taxed at 45 percent in 2007.

8. How can I leave my estate to my spouse tax-free?

An outright gift at death qualifies for the unlimited marital deduction for estate taxes and, therefore, there will be no tax paid on the amount left to the surviving spouse. However, the $2 million Applicable Exclusion Amount on the estate of the first deceased spouse is lost when the second spouse dies.

9. Should I use my $2 million Applicable Exclusion Amount during my lifetime?

This is a complex question. The answer depends upon individual family circumstances and the size of your estate. However a maximum of only $1 million of the Applicable Exclusion amount may be used during life.

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